LODGIAN INC.

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Lodgian Inc. has prepared this Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-113410) for the purpose of filing with the Securities and Exchange Commission certain exhibits to the Registration Statement. Amendment No. 3 does not modify any provision of the Prospectus that forms a part of the Registration Statement and accordingly such Prospectus has not been included herein.

As permitted by Section 102 of the Delaware General Corporation Law, the amended and restated certificate of incorporation of Lodgian, eliminates its directors’ personal liability to Lodgian or its stockholders for monetary damages for a breach of fiduciary duty as a director of Lodgian, except:


	•	For any breach of the director’s duty of loyalty to Lodgian or its stockholders;

	•	For acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

	•	For payment of dividends or stock purchases or redemptions by the corporation in violation of Section 174 of the Delaware General Corporation Law; or

	•	For any transaction from which the director derived an improper personal benefit.

As a result of this provision, Lodgian and its stockholders may be unable to obtain monetary damages from a director for certain breaches of his or her fiduciary duty to Lodgian. This provision does not, however, eliminate the directors’ fiduciary responsibilities and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. The provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.

The amended and restated certificate further provides that Lodgian must indemnify its directors, officers, employees and agents to the fullest extent permitted by the Delaware General Corporation Law. Under Section 145 of the Delaware General Corporation Law, a Delaware corporation has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, officer, employee or agent of the corporation. The corporation may indemnify such a person against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of an action by or in the right of the corporation, judicial approval is required for indemnification in respect of any claim, issue or matter as to which the person was adjudged to be liable to the corporation. To the extent that a present or former director or officer of a corporation is successful on the merits or otherwise in the defense of any such action, suit or proceeding, the corporation must indemnify him or her against the expenses (including attorney’s fees) he or she actually and reasonably incurred. Under Delaware law, the expenses

of an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by a Delaware corporation in advance of the final disposition of the action, suit or proceeding after delivery to the corporation of an undertaking by or on behalf of the director or officer to repay such amounts if it is ultimately determined that the director or officer is not entitled to be indemnified. Expenses incurred by former directors and officers or other employees and agents may be so paid on such terms and conditions, if any, as the corporation deems appropriate.

The form of Purchase Agreement (to be filed as Exhibit 1.1 to this registration statement) provides for indemnification by the underwriters of Lodgian and its officers and directors for certain liabilities arising under the Securities Act of 1933, as amended, or otherwise.

The indemnification provision in Lodgian’s amended and restated certificate of incorporation and the Purchase Agreement may be sufficiently broad to permit indemnification of Lodgian’s directors and executive officers for liabilities arising under the Securities Act of 1933, as amended.

Lodgian may purchase and maintain an insurance policy insuring its directors, officers, employees and agents against liability for certain acts and omissions while acting in their official capacity.

During the past three years, we have issued the securities set forth below that were not registered under Section 5 of the Securities Act of 1933, as amended:

Pursuant to the Joint Plan of Reorganization, upon our emergence from reorganization proceedings on November 25, 2002:


	•	5,000,000 shares of Preferred Stock, par value $0.01, with an initial liquidation value $25 per share, were issued or reserved for issuance in satisfaction of outstanding debt and other obligations;

	•	2,333,333 shares of common stock, par value $0.01 per share, were issued or reserved for issuance in satisfaction of outstanding debt and other obligations;

	•	Class A warrants to purchase an aggregate of 503,546 shares of common stock at $54.87 per share were made available for issuance in satisfaction of outstanding debt and other obligations;

	•	Class B warrants to purchase an aggregate of 343,122 shares of common stock at $76.32 per share were made available for issuance in satisfaction of outstanding debt and other obligations;

	•	Our previous equity, consisting of an aggregate of 28,479,837 shares, was cancelled, and in exchange our stockholders received their pro rata share of 69,300 shares of common stock, plus class A warrants to purchase an aggregate of 83,941 shares of common stock and class B warrants to purchase an aggregate of 259,434 shares of common stock;

	•	Our CRESTS were cancelled and the holders received their pro rata share of 289,333 shares of the common stock, plus class A warrants to purchase 419,605 shares of common stock and class B warrants to purchase 83,687 shares of common stock;

	•	Our 12.25% Senior Subordinated Notes were cancelled and the holders of the notes received their pro rata share of 4,690,600 shares of Preferred Stock and 1,852,503 shares of common stock; and

	•	The holders of allowed general unsecured claims became entitled to 309,400 shares of Preferred Stock and 122,196 shares of common stock, referred to as the “disputed claims reserve.” Until distributed, these shares are part of the disputed claims reserve for the pre-bankruptcy petition general unsecured creditors. These shares are periodically distributed as the disputed claims are resolved.

On November 21, 2003, our first dividend payment date, we issued 594,299 shares of Preferred Stock as dividends, fractional shares which were paid in cash of approximately $18,500.

As set forth in Section 7.11 of the Joint Plan of Reorganization, all issuances of our common stock, Preferred Stock, Class A warrants and Class B warrants pursuant to the Joint Plan of Reorganization were exempt from any securities laws registration requirements to the fullest extent permitted by section 1145 of the Bankruptcy Code.

(a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.


	(i) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the Registration Statement as of the time it was declared effective.

	(ii) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on the 17th day of June, 2004.


	By:	/s/ W. THOMAS PARRINGTON



	W. Thomas Parrington
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act, the following persons in the capacities and on the dates indicated have signed this Registration Statement.

† Previously filed EX-5.1 2 g87458a3exv5w1.txt EX-5.1 LEGAL OPINION OF MORRIS, MANNING & MARTIN EXHIBIT 5.1 MORRIS, MANNING & MARTIN LETTERHEAD A LIMITED LIABILITY PARTNERSHIP ATTORNEYS AT LAW 1600 ATLANTA FINANCIAL CENTER 3343 PEACHTREE ROAD, N.E. ATLANTA, GEORGIA 30326 TELEPHONE (404) 233-7000 June 17, 2004 Lodgian, Inc. 3445 Peachtree Road, NE Suite 700 Atlanta, GA 30326 Re: Registration Statement on Form S-1 Gentlemen: We have acted as counsel for Lodgian, Inc., a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended, pursuant to a Registration Statement on Form S-1 (the "Registration Statement"), of a proposed offering of an aggregate of up to an aggregate value of $297,045,000 of shares of the Company's common stock, $0.01 par value per share (the "Common Stock"), inclusive of any amount that may be sold to the underwriters to cover over-allotments. We have examined such documents, corporate records, and other instruments as we have considered necessary and advisable for purposes of rendering this opinion. In making the foregoing examinations, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or photostatic copies. As to various questions of fact material to this opinion, we have relied, to the extent we deem reasonably appropriate, upon representations or certificates of officers or directors of the Company and documents, records and instruments furnished to us by the Company, without independent check or verification of their accuracy. Based upon and subject to the foregoing, we are of the opinion that the Common Stock being sold, when issued, sold and delivered as contemplated in the Registration Statement, will be duly authorized and validly issued and fully paid and nonassessable. The opinions set forth herein are limited to the laws of the State of Delaware and applicable federal laws. We hereby consent to the filing of this Opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus contained in the Registration Statement. Very truly yours, MORRIS, MANNING & MARTIN a Limited Liability Partnership By:/s/ Jeffrey L. Schulte Jeffrey L. Schulte, Partner EX-10.21.1 3 g87458a3exv10w21w1.txt EX-10.21.1 LOAN & SECURITY AGREEMENT EXHIBIT 10.21.1 FORM OF LOAN AND SECURITY AGREEMENT (FLOATING RATE) DATED AS OF JUNE __, 2004 BETWEEN THE BORROWERS LISTED ON SCHEDULE 1 HERETO AS BORROWERS AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER --------------------------- TABLE OF CONTENTS

i Section 4.15 Broker's Fees............................................................ 44 Section 4.16 Intentionally Deleted.................................................... 44 Section 4.17 Solvency................................................................. 44 Section 4.18 Disclosure............................................................... 45 Section 4.19 Use of Proceeds and Margin Security...................................... 45 Section 4.20 Insurance................................................................ 45 Section 4.21 Separate Tax Lots........................................................ 45 Section 4.22 Investments.............................................................. 45 Section 4.23 Bankruptcy............................................................... 46 Section 4.24 Defaults................................................................. 46 Section 4.25 No Plan Assets........................................................... 46 Section 4.26 Governmental Plan........................................................ 46 Section 4.27 Not Foreign Person....................................................... 46 Section 4.28 No Collective Bargaining Agreements...................................... 46 Section 4.29 Condominium Property Documents........................................... 46 Section 4.30 Ground Leases............................................................ 47 Section 4.31 No Prohibited Persons.................................................... 47 ARTICLE V COVENANTS OF BORROWER PARTIES Section 5.1 Financial Statements and Other Reports................................... 48 Section 5.2 Existence; Qualification................................................. 53 Section 5.3 Payment of Impositions and Claims........................................ 53 Section 5.4 Maintenance of Insurance................................................. 54 Section 5.5 Operation and Maintenance of the Properties; Casualty.................... 58 Section 5.6 Inspection............................................................... 61 Section 5.7 O&M Plan................................................................. 61 Section 5.8 Intentionally Deleted.................................................... 61 Section 5.9 Compliance with Laws and Contractual Obligations......................... 61 Section 5.10 Further Assurances....................................................... 61 Section 5.11 Performance of Agreements and Leases..................................... 62 Section 5.12 Leases................................................................... 62 Section 5.13 Management; Franchise Agreement.......................................... 63 Section 5.14 Material Agreements...................................................... 65 Section 5.15 Deposits; Application of Receipts........................................ 66 Section 5.16 Estoppel Certificates.................................................... 66 Section 5.17 Indebtedness............................................................. 66 Section 5.18 No Liens................................................................. 67 Section 5.19 Contingent Obligations................................................... 67 Section 5.20 Restriction on Fundamental Changes....................................... 67 Section 5.21 Transactions with Related Persons........................................ 67 Section 5.22 Bankruptcy, Receivers, Similar Matters................................... 68 Section 5.23 ERISA.................................................................... 68 Section 5.24 Press Release............................................................ 69 Section 5.25 Ground Leases............................................................ 69 Section 5.26 Condominium Property..................................................... 72

ii Section 5.27 Lender's Expenses........................................................ 74 Section 5.28 Distributions............................................................ 74 Section 5.29 Completion of Required Capital Improvements.............................. 73 Section 5.30 Cancellation of Indebtedness; Settlement of Claims....................... 74 ARTICLE VI RESERVES Section 6.1 Security Interest in Reserves; Other Matters Pertaining to Reserves...... 75 Section 6.2 Funds Deposited with Lender.............................................. 75 Section 6.3 Impositions and Insurance Reserve........................................ 76 Section 6.4 FF&E Reserve............................................................. 76 Section 6.5 Capital Improvement Reserve; Required Capital Improvements............... 77 Section 6.6 Hazardous Materials Remediation Reserve.................................. 77 Section 6.7 Conditions to Disbursements from Hazardous Materials Remediation Reserve and Capital Improvement Reserve; Performance of Work................... 77 Section 6.8 Cash Trap Reserve........................................................ 82 ARTICLE VII LOCK BOX; CLEARING ACCOUNT; CENTRAL ACCOUNT; CASH MANAGEMENT Section 7.1 Establishment of Deposit Account and Lock Box Account.................... 83 Section 7.2 Application of Funds in Lock Box Account................................. 85 Section 7.3 Application of Funds After Event of Default.............................. 85 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES Section 8.1 Event of Default......................................................... 85 Section 8.2 Acceleration and Remedies................................................ 88 Section 8.3 Performance by Lender.................................................... 89 Section 8.4 Evidence of Compliance................................................... 90 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS Section 9.1 Applicable to all Primary Borrower Parties............................... 90 Section 9.2 Applicable to Borrowers, General Partner and Member...................... 92 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS Section 10.1 Secondary Market Transactions Generally.................................. 94 Section 10.2 Cooperation; Limitations................................................. 94 Section 10.3 Information.............................................................. 95 Section 10.4 Additional Provisions.................................................... 96

iii ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES Section 11.1 Restrictions on Transfer and Encumbrance................................. 97 Section 11.2 Transfers of Beneficial Interests in Borrowers........................... 97 Section 11.3 Assumability............................................................. 98 Section 11.4 Release of Properties.................................................... 99 Section 11.5 Reserved................................................................. 101 Section 11.6 Sale of Building Equipment............................................... 101 Section 11.7 Immaterial Transfers and Easements, etc.................................. 101 ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE Section 12.1 Limitations on Recourse.................................................. 102 Section 12.2 Partial Recourse......................................................... 102 Section 12.3 Miscellaneous............................................................ 103 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES Section 13.1 Waivers.................................................................. 103 ARTICLE XIV MISCELLANEOUS Section 14.1 Expenses and Attorneys' Fees............................................. 105 Section 14.2 Indemnity................................................................ 105 Section 14.3 Amendments and Waivers................................................... 106 Section 14.4 Retention of the Borrowers' Documents.................................... 106 Section 14.5 Notices.................................................................. 107 Section 14.6 Survival of Warranties and Certain Agreements............................ 108 Section 14.7 Failure or Indulgence Not Waiver; Remedies Cumulative.................... 108 Section 14.8 Marshaling; Payments Set Aside........................................... 108 Section 14.9 Severability............................................................. 108 Section 14.10 Headings................................................................. 108 Section 14.11 APPLICABLE LAW........................................................... 108 Section 14.12 Successors and Assigns................................................... 109 Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship ...... 109 Section 14.14 Reasonableness of Determinations......................................... 109 Section 14.15 Limitation of Liability.................................................. 110 Section 14.16 No Duty.................................................................. 110 Section 14.17 Entire Agreement......................................................... 110 Section 14.18 Construction; Supremacy of Loan Agreement................................ 110 Section 14.19 Consent to Jurisdiction.................................................. 110 Section 14.20 Waiver of Jury Trial..................................................... 111 Section 14.21 Counterparts; Effectiveness.............................................. 111

iv Section 14.22 Servicer................................................................. 112 Section 14.23 Obligations of Borrower Parties.......................................... 112 Section 14.24 Additional Inspections; Reports.......................................... 112

v LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amount Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plan Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate Regarding Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.29 - Condominium Property Documents Schedule 4.30 - Ground Leases Schedule 5.7 - O&M Plans Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work Schedule 6.7 - Reserve Funding Conditions

i LOAN AND SECURITY AGREEMENT This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as of June __, 2004 and entered into by and between the parties listed as Borrowers on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrowers and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT I. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCEPTABLE REPLACEMENT CAP" has the meaning set forth in Section 2.3. "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any other accounts pledged to Lender pursuant to this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, directors, managing members, or general partners of the entity. "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT D. "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Mezzanine Loan and the Loan. "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each Property as set forth on EXHIBIT D. "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7. "ARCHITECT" has the meaning set forth in Section 5.5. "ASSIGNMENT OF RATE CAP" means that certain Collateral Assignment of Interest Rate Protection Agreement of even date herewith from the Borrowers to Lender, constituting an assignment of the Cap and proceeds therefrom as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and Rents of even date herewith from each of the Borrowers to Lender, constituting assignments of each Borrower's right, title and interest in the Leases and proceeds therefrom for each of their respective Properties as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain Conditional Assignments of Hotel Management Agreements of even date herewith executed by each of the Borrowers and the applicable Manager, constituting an assignment of each Management Agreement as Collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. 2 "BEVERAGE COMPANY" means any Person (other than any of the Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property. "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Condominium Property Documents. "BORROWER" and "BORROWERS" have the meanings set forth in the preamble; provided that, following a Release, "BORROWERS" means each of the Borrowers remaining as a party to the Loan Documents, and whose Properties remain encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any of such remaining parties. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrowers, General Partner, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing offices of the Servicer, and, if the Loan becomes a "specially serviced mortgage loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAP" has the meaning set forth in Section 2.3. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1(D) hereof. "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations (including any improvements, repairs or alterations required pursuant to a Property Improvement Plan), FF&E and other capital items (whether paid in cash or property or accrued as liabilities) made by the Borrowers that, in conformity with GAAP, would not be included in the Borrowers' annual financial statements as an Operating Expense of the Properties. 3 "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5. "CAP PROVIDER" has the meaning set forth in Section 2.3. "CAP RESERVE" has the meaning set forth in Section 2.3. "CAP THRESHOLD RATE" has the meaning set forth in Section 2.3. "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank. "CASH TRAP EVENT" has the meaning set forth in Section 6.8. "CASH TRAP RESERVE" has the meaning set forth in Section 6.8. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan and the consummation of the other transactions contemplated by this Loan Agreement. "CLOSING DATE" means the date on which the Closing occurs. "COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan Documents, including without limitation the Properties and the Account Collateral. "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "COMPONENT A" means that portion of the Loan in the amount of __________ made by Lender to Borrower pursuant to this Agreement. "COMPONENT A RATE" means a rate per annum equal to the Component A Spread plus the LIBO Rate in effect for the relevant Interest Accrual Period. "COMPONENT B" means that portion of the Loan in the amount of __________ made by Lender to Borrower pursuant to this Agreement. "COMPONENT B RATE" means a rate per annum equal to the Component B Spread plus the LIBO Rate in effect for the relevant Interest Accrual Period. "COMPONENT A SPREAD" means 1.015. "COMPONENT B SPREAD" means 7.920. 4 "COMPONENTS" means, collectively, Component A and Component B. "CONDOMINIUM BORROWER" means, Servico Maryland, Inc., the Borrower that owns the Condominium Property. "CONDOMINIUM DEFAULT" has the meaning set forth in Section 4.29. "CONDOMINIUM PROPERTY" means the Property currently operated as a Holiday Inn, located in Silver Springs, Maryland. "CONDOMINIUM PROPERTY DOCUMENTS" means those certain documents identified on SCHEDULE 4.29. "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1. "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set forth in Section 7.1. "D&O INSURANCE" has the meaning set forth in Section 5.4. 5 "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the amount of interest (assuming an interest rate equal to the Test Rate) that will be required to be paid over the succeeding twelve (12) months on the Loan and the Mezzanine Loan, plus principal amortization of the Loan and the Mezzanine Loan that would be required in respect of the then outstanding principal amount of the Loan and the Mezzanine Loan over the succeeding twelve (12) months based on a twenty-five (25) year amortization schedule, calculated using the Test Rate. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. "DEBT YIELD" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the then outstanding principal balance of the Loan and the Mezzanine Loan. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1. "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1. "DEPOSIT BANK" has the meaning set forth in Section 7.1. "DETERMINATION DATE" means the day which is two (2) Eurodollar Business Days prior to the first (1st) day of an Interest Accrual Period; provided that the first (1st) Determination Date shall be two (2) Eurodollar Business Days prior to the Closing Date or, if such date is not a Eurodollar Business Day, the immediately preceding Eurodollar Business Day. The LIBO Rate set on each Determination Date shall be in effect for the Interest Accrual Period immediately following such Determination Date. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. 6 "ELIGIBLE ACCOUNT" means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations ss. 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of any of the Borrowers or any current or former ERISA Affiliate or (iii) for which any of the Borrowers or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrowers and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAWS" means all present and future local, state, federal or other governmental authority, statutes, ordinances, codes, orders, decrees, laws, rules or regulations pertaining to or imposing liability or standards of conduct concerning environmental regulation (including, without limitation, regulations concerning health and safety), contamination or clean-up or the handling, generation, release or storage of Hazardous Material affecting the Properties including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, as amended, the Hazardous Substances Transportation Act, as amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as amended, the Safe Drinking Water Act, as amended, the Occupational Safety and Health Act, as amended, any state superlien and environmental clean-up statutes and all regulations adopted in respect of the foregoing laws whether now or hereafter in effect. "ENVIRONMENTAL REPORTS" means those certain environmental reports and audits for the Properties as described on EXHIBIT B. "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6. "EO13224" has the meaning set forth in Section 4.31. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. 7 "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions and which is also a Business Day. "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning set forth in the Cash Management Agreement. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. "EXTENSION CAP THRESHOLD RATE" has the meaning set forth in Section 2.5. "EXTENSION NOTICE" has the meaning set forth in Section 2.5. "EXTENSION TERMS" has the meaning set forth in Section 2.5. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash Management Agreement. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. "FF&E RESERVE" means the reserve established pursuant to Section 6.4. 8 "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the applicable Borrower Parties as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FIRST EXTENSION TERM" has the meaning set forth in Section 2.5. "FITCH" means Fitch, Inc. "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrowers or their Affiliates, or other causes beyond the reasonable control of the Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrowers. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT C and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Borrowers, as franchisee, pursuant to which the Borrowers have the right to operate the Properties under names and hotel systems controlled by the Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to each Property or any other successor franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" means, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "FUNDING LOSSES" has the meaning set forth in Section 2.10. "FUNDING PARTY" means any bank or other entity, if any, which is indirectly or directly funding Lender with respect to the Loan, in whole or in part, including, without limitation, any direct or indirect assignee of, or participant in, the Loan. "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. "GENERAL PARTNER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which is now or hereafter becomes a general partner of any of the Borrowers under such Borrower's limited partnership agreement. 9 "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30 "GROUND LEASED PROPERTIES" means the Properties subject to the Ground Leases described on SCHEDULE 4.30 attached hereto. "GROUND LEASES" means the ground leases described on SCHEDULE 4.30 attached hereto. "GROUND LESSORS" means the lessors under the Ground Leases described on SCHEDULE 4.30 attached hereto. "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity. "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse Obligations of even date herewith from Guarantor to Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIAL" means all or any of the following: (A) substances, materials, compounds, wastes, products, emissions and vapors that are defined or listed in, regulated by, or otherwise classified pursuant to, any applicable Environmental Laws, including any so defined, listed, regulated or classified as "hazardous substances", "hazardous materials", "hazardous wastes", "toxic substances", "pollutants", "contaminants", or any other formulation intended to regulate, define, list or classify substances by reason of deleterious, harmful or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (C) any flammable substances or explosives or any radioactive materials; (D) asbestos in any form; (E) electrical or hydraulic equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G) mold; or (H) urea formaldehyde, provided, however, such definition shall not include cleaning materials and other substances commonly used in the ordinary course of the Borrowers' business, which materials exist only in reasonable quantities and are stored, contained, transported, used, released, and disposed of in accordance with all applicable Environmental Laws. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.6. 10 "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Borrowers under each of the Ground Leases and under the Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties. "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, and (v) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of General Partner, Member, any of the Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (except that such individual may be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with General 11 Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to the Borrowers, Member, General Partner or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INITIAL TERM" means the period from the Closing Date to the Scheduled Maturity Date. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Borrowers with respect to the Properties under Section 5.4. "INTEREST ACCRUAL PERIOD" means a period commencing on the first (1st) Business Day of a calendar month and ending on the day immediately prior to the first (1st) Business Day of the next calendar month; provided that the first (1st) Interest Accrual Period means the period from and including the Closing Date and including the day immediately prior to the first (1st) Business Day of the next calendar month. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. "INTEREST RATE" means the Component A Rate and/or the Component B Rate, as applicable. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. "IRS" means the Internal Revenue Service or any successor thereto. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrowers or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation or inquiry unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of each Borrower and Member, with respect to operational issues of any Property or any of the Borrowers; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) the person signing such document or certificate. 12 "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. "LENDER" is defined in the preamble. "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7 "LETTER OF CREDIT" means an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrowers shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrowers that the institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIBO RATE" means the applicable London interbank offered rate (rounded upwards, if necessary, to the nearest one hundredth (1/100th) of one percent (1%)) expressed as a percentage per annum for deposits in U.S. dollars appearing on Telerate Page 3750 as of 11:00 a.m. (London time) two business days prior to the first day of the applicable Interest Accrual Period and having a maturity equal to the duration of such Interest Accrual Period, provided that, (1) if Telerate Page 3750 is not available for any reason, LIBO Rate for the relevant Interest Accrual Period shall instead be the applicable London interbank offered rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two business days prior to the first day of such Interest Accrual Period, and having a remaining term to maturity equal to such Interest Accrual Period, and (2) if no such report is available, LIBO Rate for the relevant interest period shall instead be the rate determined by the Lender to be the rate at which it offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two business days prior to the first day of such Interest Accrual Period, in the approximate amount of its portion of the relevant loan and having a maturity equal to such Interest Accrual Period. LIBO Rate shall be adjusted for Federal Reserve Board reserve requirements. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LOAN" has the meaning set forth in Section 2.1. 13 "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the Assignments of Leases, the Assignments of Management Agreements, the Guaranty, the Assignment of Rate Cap, the Financing Statements, the Cash Management Agreement and any and all other documents and agreements from any of the Borrowers, General Partner, Member, Guarantor or Manager and accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mezzanine Loan Documents. "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT E, between each Borrower and the applicable Manager described therein, and any management agreement which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT E or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties approved by Lender in accordance with the terms and conditions hereof. "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations, properties, assets or condition (financial or otherwise) of any of the Borrowers or Guarantor, or (B) the impairment of the ability of any of the Borrowers or Guarantor to perform its obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers receives in compensation, more than $500,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers (or all the Borrowers in the aggregate) receives in compensation, not more than $1,000,000 per annum and (y) which is terminable by the Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. 14 "MATERIAL ALTERATION" means any improvement or alteration to a Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget then in effect, or as approved Work under Section 6.7 hereof. "MATERIAL LEASE" means any Lease of space in a Property which (i) is with an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other payments in an amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, or (iv) obligates the Borrowers to make any improvements to the Properties either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. "MATURITY DATE" means the Scheduled Maturity Date, as same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B)), or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. "MEMBER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the Borrowers which are limited liability companies) and any other entity which is now or hereafter becomes the managing or sole member of any of the Borrowers under such Borrower's limited liability company operating agreement. "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE BORROWER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Mezzanine Borrower". "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its successors and assigns. "MEZZANINE LENDER'S PERCENTAGE" means, at the time of determination, the ratio, expressed as a percentage, that the outstanding principal balance of the Mezzanine Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof Mezzanine Lender's Percentage is 0%. 15 "MEZZANINE LOAN" means that certain loan being made on the date hereof from Mezzanine Lender to Mezzanine Borrower. "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the Mezzanine Loan, as same may be amended, modified or restated from time to time. "MINIMUM DEBT YIELD" means (i) prior to the first (1st) anniversary of the Closing Date, 9%, (ii) from the first (1st) anniversary of the Closing Date but prior to the second (2nd) anniversary of the Closing Date, 10%, (iii) during the First Extension Term, 11%, (iv) during the Second Extension Term, 12%, and (v) during the Third Extension Term, 13%. "MINIMUM DSCR" means (i) during the Second Extension Term, 1.30:1.0; and (ii) during the Third Extension Term, 1.35:1.0. "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4. "MOODY'S" means Moody's Investors Service. "MORTGAGE LENDER'S PERCENTAGE" means, at the time of determination, the ratio, expressed as a percentage, that the outstanding principal balance of the Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof Mortgage Lender's Percentage is 100%. "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments of Leases and Security Agreements, (ii) those certain Deeds of Trust, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security Agreements, each of even date herewith from a Borrower to Lender (or deed trustee on behalf of Lender, as applicable), constituting a Lien on its respective Property as Collateral for the Loan as same may be modified or amended from time to time. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which any of the Borrowers or any Affiliate has any liability, including contingent liability. "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which Operating Revenues exceed Operating Expenses (excluding Management Fees, interest, income taxes, depreciation, amortization, FF&E reserves, and fees due to all Franchisors for such period). "NET SALES PROCEEDS" means (x) all consideration, from whatever source, for the purchase of a Sale Property pursuant to the terms of a purchase contract with an entity which is 16 not an Affiliate of the Borrowers or Guarantor less (y) actual and verifiable (i) real estate transfer taxes and recording and filing fees, (ii) out-of-pocket attorney's fees and disbursements, (iii) mortgage taxes, intangible taxes, escrow charges and title insurance premiums to the extent imposed by law or customarily paid by a seller and (iv) brokerage fees paid to bona-fide third persons, in each case to the extent incurred by the applicable Borrower and not reimbursed to any of the Borrowers, Guarantor or their respective Affiliates, which shall not exceed in the aggregate six percent (6%) of the sales price for the applicable Sale Property. "NON-FLAGGED PROPERTIES" means the Property located at 2144 Madison Avenue, Memphis, Tennessee, prior to such Property becoming subject to a Franchise Agreement. "NOTE" means, collectively, Note A and Note B. "NOTE A" means that certain Promissory Note A, dated as of the date hereof, executed by the Borrowers and payable to the order of Lender which evidences Component A of the Loan, as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise. "NOTE B" means that certain Promissory Note B, dated as of the date hereof, executed by the Borrowers and payable to the order of Lender which evidences Component B of the Loan, as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrowers under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against any of the Borrowers, and the performance of all other terms, conditions and covenants under the Loan Documents. "OFAC" has the meaning set forth in Section 4.31. "O&M PLANS" has the meaning set forth in Section 5.7. "OPERATING BUDGET" means, collectively, for any period, the Borrowers' budgets setting forth the Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties for such period, which budgets have been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" means, for any period, without duplication, all costs and expenses of operating, maintaining and managing the Properties determined in accordance with GAAP, including, without limitation, Impositions (due and payable during the applicable period of determination), Insurance Premiums, repair and maintenance costs, Management Fees and costs, fees payable to all Franchisors, utilities, accounting, legal and other professional fees, fees relating to environmental and financial audits, wages, salaries, payroll taxes and benefits, business franchise taxes, tips and gratuities paid to employees and staff and other personnel expenses, costs and expenses related to operating and maintaining all guest rooms, restaurants 17 (including inventory and supplies), retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, and all other "costs and expenses" as defined in the Uniform System; but excluding principal and interest payments on the Loan, fees and expenses of a non-operating nature and fees and expenses due and payable to or for the benefit of Lender under this Loan Agreement or any of the other Loan Documents (including, without limitation, all loan servicing fees and expenses, and expenses related to a Cap), expenses which, in accordance with GAAP, should be capitalized, any expense paid by a tenant that would otherwise be an Operating Expense, capital expenditures, tenant improvement allowances and leasing commissions, if any, asset management fees, any payment or expense for which each Borrower was or is to be reimbursed from proceeds of the Loan or insurance or by any third party, any fees or expenses paid to any partner or member of the Borrowers for services provided to any of the Borrowers and any non-cash charges such as depreciation and amortization. Operating Expenses shall not include federal, state or local income taxes or legal and other professional fees unrelated to the operation of the Properties. "OPERATING REVENUES" means, without duplication, all revenues and receipts of the Borrowers from operation of the Properties or otherwise arising in respect of the Properties which are properly allocable to the Properties for the applicable period in accordance with GAAP, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants and bars (including without limitation, service charges for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, health club membership fees, food and beverage wholesale and retail sales, service charges, convention services, special events, audio-visual services, boat cruises, travel agency fees, internet booking fees, telephone charges, laundry services, vending machines and otherwise, all rents, revenues and receipts now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the possession, use or occupancy of all or any portion of the Properties or personalty located thereon, or rendering of service by any of the Borrowers or any operator or manager of the hotel or commercial space (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores and deposits securing reservations of such space (only to the extent such deposits are not required to be returned or refunded to the depositor)), proceeds from rental or business interruption insurance relating to business interruption or loss of income for the period in question and any other items of revenue which would be included in operating revenues under the Uniform System; but excluding proceeds from the sale of FF&E, abatements, reductions or refunds of real estate or personal property taxes relating to the Properties, dividends on insurance policies relating to the Properties, condemnation proceeds arising from a temporary taking of all or a part of any Properties, security and other deposits until they are forfeited by the depositor, advance rentals until they are earned, proceeds from a sale, financing or other disposition of the Properties or any part thereof or interest therein and other non-recurring revenues as determined by Lender, insurance proceeds (other than proceeds from rental or business interruption insurance), other condemnation proceeds, capital contributions or loans to any of the Borrowers, disbursements to any of the Borrowers from the Reserves, sales, use and occupancy taxes collected from customers or patrons of the Properties to be remitted to the applicable taxing authorities, and gratuities or service charges collected on behalf of and remitted to employees or contractors of the Properties. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. 18 "PAYMENT DATE" means the date that is the last day of each calendar month occurring during the term of the Loan (or if such last day is not a Business Day, the immediately preceding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the other Liens of the Loan Documents in favor of Lender, (ii) the items shown in Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not yet due and payable or Liens arising after the date hereof which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case of Liens arising after the date hereof, statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business and discharged by the Borrowers by payment, bonding or otherwise within forty-five (45) days after the filing thereof or which are being contested in good faith in accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and customary purchase money financing of personal property and equipment leasing to the extent the same are created in the ordinary course of business in accordance with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against real property which do not materially adversely affect (A) the ability of the Borrowers to pay any of their obligations to any Person as and when due, (B) the marketability of title to the Properties, (C) the fair market value of the Properties, or (D) the use or operation of the Properties as of the Closing Date and thereafter; (vii) rights of existing and future tenants, as tenants only, pursuant to the Leases; (viii) any other Lien to which Lender may expressly consent in writing; and (ix) Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the 19 date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5. "PREPAYMENT CONSIDERATION" means (i) prior to the Payment Date in July 2005, three percent (3%) of the principal amount of the Loan being prepaid, (ii) from the Payment Date in July 2005 but prior to the Payment Date in July 2006, one percent (1%) of the principal amount of the Loan being prepaid and (iii) thereafter, none. "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General Partner and Member. "PROHIBITED PERSON" has the meaning set forth in Section 4.31. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT A, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the Borrowers and which shall be encumbered by and are more particularly described in the respective Mortgages: provided that, following a Release, "PROPERTIES" means each of the Properties that remain encumbered by the Mortgages as Collateral for the Loan. "PROPERTY CONDITION REPORTS" means those certain property condition reports for the Properties as described on EXHIBIT J. "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties described on EXHIBIT G and any future Property Improvement Plans required to be implemented by the applicable Franchisor. 20 "PROPERTY RELEASE" has the meaning set forth in Section 11.4. "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization; and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. "RATING CRITERIA" with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" means all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties received by the Borrowers or any Related Person of the Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which any of the Borrowers or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE" has the meaning set forth in Section 11.4. "RELEASE DATE" has the meaning set forth in Section 11.4. "RELEASE PRICE" means an amount equal to (x) with respect to a Sale Property, the greater of (i) one hundred percent (100%) of the Aggregate Allocated Loan Amount of the applicable Sale Property, and (ii) one hundred percent (100%) of the Net Sales Proceeds with respect to the applicable Sale Property, and (y) with respect to any Property that is not a Sale Property, one hundred twenty-five percent (125%) of the Aggregate Allocated Loan Amount of the applicable Property. "RENT ROLL" has the meaning set forth in Section 3.1. 21 "RENTS" has the meaning set forth in the Mortgages. "REPLACEMENTS" has the meaning set forth in Section 6.4. "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5. "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "RESERVES" means the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Document, including without limitation, the reserves established pursuant to Article VI. "RESTORATION" has the meaning set forth in Section 5.5. "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five percent (5%) of the Aggregate Allocated Loan amount of the applicable Property, not to exceed $500,000, per Property per occurrence. "REVPAR" means average room revenues per available room per day. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SALE PROPERTY" and "SALE PROPERTIES" means individually or collectively, the properties identified on EXHIBIT A as "Sale Properties". "SCHEDULED MATURITY DATE" shall mean the Payment Date in June 2006. "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto; which payment amounts were calculated based upon a twenty-five (25) year amortization schedule at an assumed interest rate of eight and four tenths percent (8.4%) per annum. In the event that the amount of principal prepayments on the Loan from Releases of Properties under Section 11.4 or application of casualty insurance proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in the aggregate, from the Closing Date or from the date of the last re-amortization of the Loan under this sentence, Lender shall recalculate the Scheduled Mortgage Principal Payments based upon the then remaining principal amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE 2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto in its entirety. "SECOND EXTENSION TERM" has the meaning set forth in Section 2.5(B). "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in 22 temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" means a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEE" has the meaning set forth in Section 2.11. "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the date of formation of the applicable Person in its respective jurisdiction of formation. "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period, (iii) a calculation of the Debt Service Coverage Ratio and the Debt Yield for the applicable period (which shall not be binding on Lender), and (iv) such other financial reports as the subject entity shall routinely and regularly prepare. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TEST RATE" means an interest rate equal to the greater of (x) the then current yield on the ten (10) year United States Treasury Note plus the Test Rate Spread, and (y) the then current LIBO Rate plus the Test Rate Spread. "TEST RATE SPREAD" means 3.40%. "THIRD EXTENSION TERM" has the meaning set forth in Section 2.5(B). "TIER 1 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT I. "TIER 2 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT I. "TIER 3 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT I. 23 "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart Title Insurance Company, as co-insurers, and/or such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title insurance pertaining to the Mortgages issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, (y) the failure to pay to any Franchisor any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT") and the continuance thereof beyond any applicable notice and grace period under such Franchise Agreement or the occurrence of one or more breaches or defaults (other than Franchise Payment Defaults) and the continuance thereof beyond all applicable notice and grace periods, if any, under such Franchise Agreements (or such other cure periods as may be provided by the applicable Franchisors in writing) covering Properties with Aggregate Allocated Loan Amounts of ten percent (10%) or more of the Aggregate Outstanding Principal Balance; provided, however, no Uncured Franchise Default shall be deemed to have occurred under clause (x) above with respect to any Property (excluding the Non-Flagged Properties) following the voluntary or involuntary termination of the applicable Franchise Agreement if (a) within ten (10) Business Days of the termination of the applicable Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)) the applicable Borrower delivers to Lender evidence reasonably satisfactory to Lender that such Borrower is diligently pursuing efforts to enter into a new Franchise Agreement with an Acceptable Franchisor for the applicable Property and such Borrower shall thereafter diligently and continuously pursue such efforts to enter into a new Franchise Agreement, (b) at the time of such termination not more than the lesser of (i) two (2) Properties, or (ii) Properties with Aggregate Allocated Loan Amounts of five percent (5%) of the Aggregate Outstanding Principal Balance, in either case, shall be in operation for more than five (5) consecutive days without being subject to Franchise Agreements, and (c) no Property (other than any Non-Flagged Property) shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. "WORK" has the meaning set forth in Section 6.7. "WORK RESERVES" has the meaning set forth in Section 6.7. "ZONING REPORTS" means those certain zoning and site requirements summaries for the Properties as described on Exhibit K. 24 SECTION 1.2 ACCOUNTING TERMS. For purposes of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any reference to any Person may include such Person's respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrowers contained herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to borrow from Lender, a loan in the original principal amount of ____________ (the "LOAN") comprised of Component A and Component B. (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to Lender Note A and Note B. (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be used to (i) refinance existing indebtedness; (ii) pay all recording fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable legal fees and expenses of counsel to Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) establish the Reserves required hereunder; and (iv) provide for general corporate purposes, including, without limitation, payment of transaction costs and expenses incurred by the Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrowers. 25 (D) MODIFICATION OF COMPONENTS. Lender shall have the right, at Lender's sole cost (other than each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel), any time prior to a Securitization, to modify the Loan in order to create additional components, reduce the number of Components, reallocate the principal balances of the Components, change the Interest Rates of the Components or eliminate the component structure of the Loan provided that as of the effective date of such modification (i) the total principal balance of the Loan equals the outstanding principal balance of the Loan immediately prior to such modification, (ii) the aggregate monthly interest payment does not exceed the aggregate monthly amount of the interest payment required prior to such modification and (iii) the aggregate monthly principal amortization does not exceed the aggregate monthly principal amortization required prior to such modification. Lender shall have the right to modify the Components in accordance with this Section 2.1.(D) upon notice to Borrower (in which event such modification shall then be deemed effective). If requested by Lender, Borrower shall promptly execute an amendment to this Agreement and the Note to evidence such modification. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of each Component shall bear interest at a rate per annum equal to the Interest Rate in effect for such Component. (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is four percent (4%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT RATE"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in arrears (except with respect to the number of days from the Payment Date in any Interest Accrual Period to the last day of such Interest Accrual Period, as to which interest shall be payable in advance, if any). (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan 26 Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 INTEREST RATE CAP AGREEMENT. (A) As a condition to Closing, the Borrowers shall purchase and pledge and deliver to Lender an interest rate cap agreement satisfying the criteria set forth below (the "CAP"), and the Borrowers shall maintain such Cap in the possession of Lender, in full force and effect, until all Obligations are fully and finally repaid. The Cap (i) shall have a notional amount equal to the outstanding principal balance of the Loan calculated based upon the declining principal balance of the Loan scheduled to be outstanding over the term of such Cap taking into account scheduled principal amortization hereunder, (ii) shall provide that to the extent that the LIBO Rate exceeds five percent (5%) per annum (the "CAP THRESHOLD RATE"), then the Cap Provider shall pay to Lender, on behalf of the Borrowers, not less than the amount of interest that would accrue on the Loan at a per annum rate equal to the difference between the LIBO Rate and the Cap Threshold Rate, (iii) shall be in form and substance reasonably satisfactory to Lender, (iv) shall have a term equal to the Initial Term of the Loan (or the applicable Extension Term), and (v) shall be issued by a financial institution (the "CAP PROVIDER") having a financial rating by S&P of at least "AA-" (and at least an equivalent rating from each of the other Rating Agencies). (B) If at any time the financial rating assigned to any Cap Provider by S&P shall fall below AA- (or the equivalent rating for any other Rating Agency), the Borrowers shall be required to deliver a replacement Cap in substantially the form of the Cap delivered at Closing issued by a Cap Provider meeting the rating requirements for a Cap Provider under Section 2.3(A)(v), providing for a cap "strike price" not greater than the Cap Threshold Rate (a replacement Cap meeting all of the foregoing conditions, an "ACCEPTABLE REPLACEMENT CAP") within twenty (20) Business Days after receipt of notice from Lender or Servicer of such downgrade of the Cap Provider, together with an assignment of such Cap substantially in the form of the Assignment of Rate Cap and such Financing Statements and opinions of in-house or 27 outside counsel to the Cap Provider as Lender may reasonably require each in form and substance acceptable to Lender. Notwithstanding the foregoing to the contrary, under no circumstances shall the Cap be terminated by the Borrowers prior to delivery of an Acceptable Replacement Cap, together with the required documentation with respect thereto, to Lender. If, for any reason, the Borrowers are unable to deliver a replacement Cap when required hereunder, then at or prior to the time when the replacement Cap is due hereunder, the Borrowers shall deliver to Lender cash security (such cash security together with any interest thereon, the "CAP RESERVE") in an amount sufficient to cover the amount of additional interest which Lender reasonably estimates may be incurred during the remaining term of the Loan (or remaining Extension Term then in effect) as a result of the LIBO Rate exceeding the Cap Threshold Rate, which Cap Reserve shall be held by Lender and applied to the Obligations in accordance with Section 6.1. Upon delivery of an Acceptable Replacement Cap reasonably acceptable to Lender, the remaining balance of the Cap Reserve shall be promptly returned to the Borrowers. (C) All payments made by the Cap Provider under the Cap shall be deposited directly by the Cap Provider into the Lock Box Account and applied in accordance with the Cash Management Agreement. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments of interest and principal on the Note as follows: (i) The Borrowers shall make a payment to Lender of interest only on the Closing Date for the first Interest Accrual Period; and (ii) On each Payment Date commencing with the Payment Date in July 2004 and on each Payment Date thereafter through but not including the Maturity Date, the Borrowers shall make a payment of interest on the Loan for the Interest Accrual Period corresponding to such Payment Date, and in addition shall make a payment of principal on the Loan in an amount equal to the Scheduled Mortgage Principal Payment for such Payment Date. (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrowers on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment and prepayment hereunder shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special 28 servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to have satisfied their obligations to make such payments. Provided no Event of Default has occurred and is then continuing, all principal payments on the Loan shall be applied to the outstanding principal balance of the Components pro rata. Any amounts received by Lender during the continuance of an Event of Default may be applied by Lender toward the payment of interest and/or principal on any of the Components and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. SECTION 2.5 MATURITY. (A) SCHEDULED MATURITY DATE. To the extent not sooner due and payable in accordance with the Loan Documents (and unless the Borrowers shall extend the term of the Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term upon the terms and subject to the conditions of Section 2.5(B) below), the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon (and including interest through the end of the Interest Accrual Period then in effect), and all other sums then owing to Lender hereunder and under the Note, the Mortgages and the other Loan Documents, shall be due and payable on (i) the Scheduled Maturity Date or (ii) if the Borrowers shall have extended the term of the Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term, upon the terms and subject to the conditions of Section 2.5(B) below, the applicable Maturity Date. (B) EXTENSION TERMS. The Borrowers may extend the term of the Loan for three extension terms of one year each (each, an "EXTENSION TERM", and, collectively the "EXTENSION TERMS"); (i) the first Extension Term (the "FIRST EXTENSION TERM") commencing on the day immediately following the Scheduled Maturity Date and ending (unless sooner terminated in accordance with the Loan Documents) on the first (1st) anniversary of the Scheduled Maturity Date, (ii) the second Extension Term (the "SECOND EXTENSION TERM") commencing on the day immediately following the last day of the First Extension Term and ending (unless sooner terminated in accordance with the Loan Documents) on the second (2nd) anniversary of the Scheduled Maturity Date and (iii) the third Extension Term (the "THIRD EXTENSION TERM") commencing on the day immediately following the last day of the Second Extension Term and ending (unless sooner terminated in accordance with the Loan Documents) on the third (3rd) anniversary of the Scheduled Maturity Date; subject to the following terms and conditions, provided that subsections (iii) and (iv) shall not be conditions to the exercise of the First Extension Term: (i) The Borrowers shall give Lender notice (an "EXTENSION NOTICE") of their request to extend the term of the Loan for the First Extension Term at any time not later than forty-five (45) days but not more than one hundred twenty (120) days prior to the Scheduled Maturity Date, the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be; 29 (ii) No Default or Event of Default shall have occurred and be continuing as of the date the Borrowers deliver the applicable Extension Notice or as of the first (1st) day of the applicable Extension Term; (iii) The Debt Service Coverage Ratio for the trailing twelve (12) month period ended (x) on the last day of the immediately preceding calendar quarter prior to the expiration of the First Extension Term is at least 1.30:1.0, with respect to the Second Extension Term, and (y) on the last day immediately prior to the expiration of the Second Extension Term, is at least 1.35:1.0, with respect to the Third Extension Term, and the Debt Yield for the twelve (12) month period ended on the last day of the immediately preceding calendar quarter prior to the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be, is not less than 13%; provided however, if the Debt Service Coverage Ratio and/or the Debt Yield fail to satisfy such requirements, the Borrowers shall be entitled to make a principal prepayment of a portion of the Aggregate Outstanding Principal Balance (to be applied in accordance with the terms of the Cash Management Agreement) on the then current Maturity Date in an amount, as reasonably determined by Lender, sufficient to cause the Debt Service Coverage Ratio and/or the Debt Yield, as applicable, to satisfy such requirements based upon a recalculation thereof assuming that the prepayment amount were applied to reduce the Aggregate Outstanding Principal Balance (on a pro-rata basis between the Loan and the Mezzanine Loan) as of the last day of the immediately preceding calendar quarter (and provided that the Prepayment Consideration shall be payable in connection with such prepayment); (iv) Prior to the date the applicable Extension Term commences, the Borrowers shall deliver to Lender an extension fee equal to one quarter of one percent (.25%) of the outstanding principal balance of the Loan as of the date the applicable Extension Term commences for each of the Second Extension Term and the Third Extension Term; (v) The Borrowers shall execute all such documents and other agreements as Lender shall reasonably request; and (vi) The Borrowers shall deliver to Lender an extension of the Cap or a replacement Cap in form substantially the same as the Cap delivered at Closing covering the term of the applicable Extension Term, providing for a cap "strike price" (such "strike price", the "EXTENSION CAP THRESHOLD RATE") not greater than five percent (5%) per annum and otherwise satisfying the requirements of Section 2.3 together with an assignment of such replacement Cap substantially in the form of the Assignment of Rate Cap and such Financing Statements and opinions of in-house or outside counsel to the Cap Provider as Lender may reasonably require each in form and substance reasonably acceptable to Lender. The Borrowers shall be required to pay any and all reasonable out-of-pocket costs and expenses 30 (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender (and by any Servicer and trustee in connection with any Securitization backed in whole or in part by the Loan) in connection with delivery of such extension or replacement Cap and all related documentation and opinions required above. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrowers may prepay the Loan in whole, or, to the extent expressly provided herein, in part (in amounts of at least $1,000,000), at any time, provided that (i) the Borrowers shall provide to Lender not less than fifteen (15) days prior written notice of such prepayment, (ii) together with such prepayment the Borrowers also shall pay all accrued and unpaid interest and all other Obligations then due and owing, (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith the Borrowers also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to the end of such Interest Accrual Period, and (iv) the Borrowers shall pay the applicable Prepayment Consideration. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur on account of acceleration of the Loan (whether or not due to an Event of Default), or otherwise, then except only as expressly provided in this Loan Agreement or the other Loan Documents to the contrary, the Borrowers shall pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due as to a prepayment of the Loan in connection with (i) application of insurance or condemnation proceeds required by Lender pursuant to this Loan Agreement or the Mortgages in the absence of an Event of Default, (ii) Scheduled Mortgage Principal Payments, (iii) in connection with prepayments made in connection with any Release of a Sales Property (it being agreed that the Prepayment Consideration will be due with respect to all other Releases (other than Releases effectuated pursuant to Section 5.5(E)), or (iv) upon prepayment of the Loan in full or in part during any Extension Term (provided the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment through the end of the current Interest Accrual Period shall be payable with such prepayment). The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrowers; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrowers' obligation to pay the Obligations. SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto 31 arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrowers shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 FUNDING LOSSES/CHANGE IN LAW ETC. (A) The Borrowers hereby agree to pay to Lender any amount necessary to compensate Lender and any Funding Party for any losses or costs (including, without limitation, the costs of breaking any "LIBOR" contract, if applicable, or funding losses determined on the basis of Lender's or such Funding Party's reinvestment rate and the interest rate on the Loan) (collectively, "FUNDING LOSSES") sustained by Lender or any Funding Party: (i) if the Note, or any portion thereof, is repaid for any reason whatsoever on any date other than a Payment Date (including, without limitation, from condemnation or insurance proceeds); or (ii) as a consequence of (x) any increased cost of funds that Lender or any Funding Party may sustain in maintaining the borrowing evidenced hereby or (y) the reduction of any amounts received or receivable from the Borrowers, in either case, due to the introduction of, or any change in, law or applicable regulation or treaty adopted after the date hereof (including the administration or interpretation thereof), whether or not having the force of law, or due to the compliance by Lender or the Funding Party, as the case may be, with any directive, whether or not having the force of law, or request from any central bank or domestic or foreign governmental authority, agency or instrumentality having jurisdiction made as of the date hereof, to the extent Lender reasonably determines that such Funding Losses are allocable to the Loan. (B) If Lender or any Funding Party shall have determined that the applicability of any law, rule, regulation or guideline adopted pursuant to or arising out of the July 1988 report of the 32 Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards", or the adoption of any other law, rule, regulation or guideline (including but not limited to any United States law, rule, regulation or guideline) regarding capital adequacy, or any change becoming effective in any of the foregoing or in the enforcement or interpretation or administration of any of the foregoing by any court or any domestic or foreign governmental authority, central bank or comparable agency charged with the enforcement or interpretation or administration thereof, or compliance by Lender or its holding company or a Funding Party or its holding company, as the case may be, with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency made after the date hereof, has or would have the effect of reducing the rate of return on the capital of Lender or its holding company, or of the Funding Party's or its holding company, as the case may be, then, upon demand by Lender, the Borrowers shall pay to Lender, from time to time, such additional amount or amounts as will compensate Lender or such Funding Party for any such reduction suffered. (C) Any amount payable by the Borrowers under Section 2.10(A) or 2.10(B) shall be paid to Lender within fifteen (15) Business Days after receipt by the Borrowers of a certificate signed by an officer of Lender setting forth the amount due and the basis for the determination of such amount in reasonable detail and the computations made by Lender to determine the amount due, which statement shall be conclusive and binding upon the Borrowers, absent manifest error. Failure on the part of Lender to demand payment from the Borrowers for any such amount attributable to any particular period shall not constitute a waiver of Lender's right to demand payment of such amount for any subsequent or prior period. Lender shall use reasonable efforts to deliver to the Borrowers prompt notice of any event described in Sections 2.10(A) or 2.10(B) above and of the amount to be paid as a result thereof, provided, however, any failure by Lender to so notify the Borrowers shall not affect the Borrowers' obligation to make the payments to be made under this Section as a result thereof. All amounts which may become due and payable by the Borrowers in accordance with the provisions of this Section shall constitute additional interest under the Loan and shall be secured by the Mortgages and the other Loan Documents. (D) If Lender or any Funding Party requests compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of clause (ii) of Sections 2.10(A) or 2.10(B), then, upon request of the Borrowers, Lender or such Funding Party shall use reasonable efforts in a manner consistent with such institution's practice in connection with loans like the Loan to eliminate, mitigate or reduce amounts that would otherwise be payable by the Borrowers under the foregoing provisions, provided that such action would not be otherwise prejudicial to Lender or such Funding Party, including, without limitation, by designating another of Lender's or such Funding Party's offices, branches or affiliates; the Borrowers hereby agreeing to pay all reasonably incurred costs and expenses incurred by Lender or any Funding Party in connection with any such action. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths of one percent (.05%) per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrowers and 33 shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrowers be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to fund the Loan are subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrowers and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender a certificate duly executed by the Borrowers stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. (B) DEPOSITS. The deposits required herein, including without limitation, the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrowers' option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower Party and all other Persons executing any agreement on behalf of any Borrower Party shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of each Borrower by the chief financial officer (or similar officer of the Borrowers) stating that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrowers or the projected cash flow of the Borrowers or the Properties, in each case taken as a whole, has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, 34 specifying such change in detail), and that, to the Borrowers' Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operations of the Borrowers and the Properties, in each case taken as a whole, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrowers' Knowledge, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Morris, Manning & Martin, LLP or other legal counsel for the Borrowers satisfactory to Lender, written legal opinions, each in form and substance acceptable to Lender, as to such matters as Lender shall request, including opinions to the effect that (i) each of the Borrower Parties is duly formed, validly existing, and in good standing in its state of organization and, in the case of each Borrower, in each state where its Property is located, (ii) this Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Deposit Account Agreement and Cash Management Agreement have been duly authorized, executed and delivered by Borrower and Manager and are enforceable in accordance with their terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) no Borrower, Member or General Partner would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrowers' local counsel in each state where the Properties are located as to the enforceability of, and the creation and perfection of Liens under, the Mortgages and the Assignments of Leases and such other matters as Lender may reasonably request; (b) an opinion of counsel to the Cap Provider (which may be in-house counsel) that the Cap has been duly authorized, executed and delivered by the Cap Provider and is enforceable in accordance with its terms and such other matters as Lender may reasonably request; (c) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for each Borrower that is a single member limited liability company formed under the laws of the State of Delaware that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous written consent of the board of directors of Member including the Independent Directors, or the unanimous prior written consent of the board of managers' of each Borrower, including the Independent Directors') would be required for a voluntary bankruptcy filing by each such Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors) would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law the bankruptcy or dissolution of Member would not cause the dissolution of any of the Borrowers and the bankruptcy or dissolution of the sole shareholder or member would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of any of the Borrowers and creditors of Guarantor shall have no legal or equitable remedies with respect 35 to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of each Borrower and Member; and (d) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received and approved pro forma Title Policies for the Mortgages, and as of the Closing, each Title Company shall be irrevocably committed and prepared immediately to issue the Title Policies or binding commitments. The Title Policies shall be in form and substance satisfactory to Lender. Without limitation, each Title Policy shall be issued on an ALTA form acceptable to Lender by each Title Company or if an ALTA form is not available in the applicable jurisdiction, another form acceptable to Lender, together with such reinsurance and direct access agreements as Lender may require, insuring that the Mortgages are valid first and prior enforceable liens on each Borrower's fee simple interest or ground leasehold interest, as the case may be, in the applicable Property (including any easements appurtenant thereto) subject only to such exceptions to coverage as are acceptable to Lender, including the Permitted Exceptions. Each Title Policy shall contain such endorsements as Lender may require (to the extent available in the state where the Properties is located) in form acceptable to Lender, including deletion of the creditors' rights exception and affirmative endorsement coverage for creditors' rights risks. (G) SURVEY. Lender shall have received a survey of each of the Properties, certified to Lender and its successors, assigns and designees and to each Title Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or Lender shall have received both (x) a "no change" affidavit from each Borrower with respect to such Borrower's most recent Survey sufficient to cause the Title Company to provide current survey coverage to Lender in the applicable Title Policy without exception for matters that would be revealed by a current and accurate survey of the applicable Property, except for matters specifically shown on such most recent Survey, and (y) a reliance letter (to the extent any such surveys are not currently addressed to Lender) in form and substance satisfactory to Lender, permitting Lender to rely on the Survey (and any certification thereof) as if originally addressed and certified to Lender. Each Survey shall contain the minimum detail for land surveys as most recently adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall contain Lender's standard form certification, and shall show no state of facts or conditions reasonably objectionable to Lender. (H) ZONING. On or before the Closing Date, Lender shall have received evidence reasonably satisfactory to Lender as to the zoning and subdivision compliance of each of the Properties. (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business (including without limitation, each state in which the Properties are located for the applicable Borrower(s) and, to the extent required by law, Member and General Partner). Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the 36 secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to Lender for each Borrower Party (including for Guarantor) and for the Properties. If any such statements are not available for the Properties, then the Borrowers shall provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year. (M) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the applicable Borrower. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements (including any Property Improvement Plan) and Franchisor Letters for each of the Properties duly executed by the applicable Franchisors. (O) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL") in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases, and the amount of security deposit being held by the Borrowers under each Material Lease, if any. 37 (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases, as amended. (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender shall have received copies of the final, unconditional certificates of occupancy issued with respect to each of the Properties, together with all other applicable licenses (including, without limitation, each liquor license and beer permit), permits and approvals required for each Borrower to own, use, occupy, operate and maintain each of the Properties as a hotel. (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date, Lender shall have received copies of certificates of insurance (dated not more than twenty (20) days prior to the Closing Date) regarding insurance required to be maintained under this Loan Agreement and the other Loan Documents, together with endorsements satisfactory to Lender naming Lender as an additional insured and loss payee, as required by this Loan Agreement, under such policies. In addition, as to any insurance matters arising under Environmental Laws or pertaining to any environmental insurance that any of the Borrowers has with respect to any Property, the same shall be endorsed to Lender as required by this Loan Agreement and shall name Lender as an insured, additional insured and/or loss payee, as applicable. (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to each of the Properties, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender shall have received a property condition report for each of the Properties, which shall be prepared by an engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion. Each such report shall set forth any items of deferred maintenance at the applicable Property. (U) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of each of the Properties from a state certified appraiser engaged by Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search reports with respect to the Borrowers, Guarantor, Managers, General Partner and Member, all dated not more than thirty (30) days prior to the Closing Date. (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days prior to the Closing Date, Lender shall have received payoff demand letters and wiring instructions from each lender or other obligee of any existing indebtedness which is required to be repaid pursuant to this Loan Agreement. 38 (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (Z) OTHER REVIEW. Lender shall have completed all other review of the Borrower Parties, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrower Parties shall have satisfied such other reasonable criteria as Lender may reasonably specify. (AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date, Lender shall have received (i) true and complete copies of each of the Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements acceptable to Lender, duly executed by each Ground Lessor. (BB) CONDOMINIUM PROPERTY AGREEMENTS. On or before the Closing Date, Lender shall have received an estoppel and agreement of the Board of Managers with respect to the Condominium Property Documents in form and substance reasonably acceptable to Lender. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, each Borrower represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrowers, General Partners and Members. 39 SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower Party of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower Party; (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower Party; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower Party or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower Party or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or imposition of any material Lien (other than the Lien of the Loan Documents) upon the Properties or assets of any Borrower Party; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower Party, which approvals or consents have been obtained on or before the dates required under such material Contractual Obligation, but in no event later than the Closing Date. (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower Party that is a party thereto, enforceable against each of the Borrower Parties, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No Borrower Party has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower Party has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the Borrowers, their Affiliates and the Properties which have been furnished by or on behalf of the Borrowers to Lender pursuant to this Loan Agreement present fairly the financial condition of the Persons covered thereby as of the dates thereof and the results of their operations for the periods then ended, and, to the Borrowers' Knowledge after due inquiry, have been prepared in accordance with GAAP consistently applied (except as disclosed therein). Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements. 40 SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the Borrowers shall have no outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to the Properties, free and clear of all Liens except for the Permitted Encumbrances. The Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Borrowers as permitted hereunder), subject only to the Permitted Encumbrances. The Mortgages, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) a valid, perfected first lien on each of the Properties, subject only to the Permitted Encumbrances, and (ii) perfected first priority security interests in and to, and perfected collateral assignments of, all personalty (including the Rents, the Leases, and the FF&E ), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. Lender will have a perfected first priority security interest in and to the FF&E owned by the Borrowers, if any, not located at the Properties. To the Borrowers' Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual Knowledge of the Borrowers, none is threatened. Except as set forth on SCHEDULE 4.5(A), no Person has any option or other right to purchase all or any portion of any of the Properties or any interest therein. To the Borrowers' Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties which are or will be liens prior to, or equal or coordinate with, the lien of any of the Mortgages. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgages and this Loan Agreement, materially and adversely affect the value of any of the Properties, impair the use or operations of the Properties or impair the Borrowers' ability to pay its obligations in a timely manner. SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrowers' Knowledge, there are no illegal activities relating to controlled substances on any of the Properties. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, all material permits, licenses and certificates for the lawful use, occupancy and operation of each component of each of the Properties in the manner in which it is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, in the event that all or any part of the Improvements located on any Property is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of 41 obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrowers' Knowledge, no legal proceedings are pending or threatened with respect to the zoning of any Property. To the Borrowers' Knowledge, except as set forth in the Title Policies and/or the Surveys, neither the zoning nor any other right to construct, use or operate any Property is in any way dependent upon or related to any real estate other than such Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Borrowers with respect to any Property without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and complete copies (in all material respects) of all (i) Leases for more than five hundred (500) square feet of space at any Property and (ii) Material Agreements affecting the operation and management of the Properties, and such Leases and Material Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Except for the rights of each of the current Managers pursuant to the existing Management Agreements, no Person has any right or obligation to manage any of the Properties or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the Properties, or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, none of the Properties are subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrowers' Knowledge, (i) the Material Leases are in full force and effect; (ii) the Borrowers have not given any notice of default to any tenant under any Material Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Material Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrowers, threatened) against the Borrowers by any tenant or former tenant. No rental in excess of one month's rent has been prepaid under any of the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. (C) NO RESIDENTIAL UNITS. There are no residential units in any of the Properties and, to each Borrower's Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Properties for dwelling purposes other than on a transient basis. 42 (D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true and complete copy of each of the Management Agreements to which they are a party that will be in effect on the Closing Date, and such Management Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. The Management Agreements are in full force and effect and no default by any of the Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have delivered to Lender a true and complete copy of each of the Franchise Agreements to which they are a party, and such Franchise Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material default by the Borrowers, Manager or the applicable Franchisor exists thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the aggregate, do not and will not have a Material Adverse Effect. Except for the Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no other property improvement plans or similar capital improvement plans or obligations required by any Franchisor pursuant to any Franchise Agreement, in effect for any of the Properties. SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as set forth in the Property Condition Reports for the Properties delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in good condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrowers are not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of each of the Properties (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of each of the Properties as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of each of the Properties as now used or presently contemplated. Except as may be shown on the applicable Survey, to the Borrowers' Knowledge no part of any of the Properties is within a flood plain and none of the Improvements create encroachments over, across or upon the Properties' boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each of the Properties for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrowers' Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at any of the Properties is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, there are no judgments outstanding against any Borrower Party, or affecting any of the Properties or any property of any Borrower, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the Borrowers' 43 Knowledge, threatened against any Borrower Party that could reasonably be expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each Primary Borrower Party required to be filed have been timely filed (or each Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon such Person and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrowers' Knowledge, there is not presently pending any special assessment against any of the Properties or any part thereof. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Primary Borrower Parties is a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no Primary Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of any Primary Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from any Borrower Parties' actions. SECTION 4.16 INTENTIONALLY DELETED. SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving 44 effect to the Loan, the aggregate fair saleable value of the Borrowers' assets exceed and will, immediately following the making of the Loan, exceed the Borrowers' total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The aggregate fair saleable value of the Borrowers' assets is and will, immediately following the making of the Loan, be greater than the Borrowers' probable total liabilities, including the maximum amount of their Contingent Obligations on their debts as such debts become absolute and matured. Each Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond their ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrowers and the amounts to be payable on or in respect of obligations of the Borrowers). SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrowers that has had or could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrowers. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrowers or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate description of all policies of insurance for each Borrower that are in effect as of the Closing Date. No notice of cancellation has been received with respect to such policies, and, to each Borrower's Knowledge, the Borrowers are in compliance with all conditions contained in such policies. SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1) or more parcels which constitute separate tax lots. No part of any of the Properties is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lots or parcels comprising any of the Properties. SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person (other than Beverage Companies), or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. 45 SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including any Property) is property of the estate, in any voluntary or involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law now or hereafter in effect. No Borrower Party and no property of any of them is under the possession or control of a receiver, trustee or other custodian. No Borrower Party has made any assignment for the benefit of creditors. No such assignment or bankruptcy or similar case or proceeding is now contemplated. SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to Lender in writing herein or in any of the Loan Documents, no Default exists. SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrowers have assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers are not and will not be subject to state statutes applicable to the Borrowers' regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining agreement. SECTION 4.29 CONDOMINIUM PROPERTY DOCUMENTS. (A) The Borrowers have delivered true and correct copies of each of the Condominium Property Documents to Lender and same have not been modified, amended or assigned except as set forth on SCHEDULE 4.29, and to the Borrowers' Knowledge, there are no other material documents or agreements affecting the Condominium Borrower's interest in the Condominium Property. (B) Each of the Condominium Property Documents is in full force and effect and, to the Condominium Borrower's Knowledge, no breach or default, or event that, with the giving of notice or the passage of time or both would constitute a breach or default, under any of the Condominium Property Documents (a "CONDOMINIUM DEFAULT") exists or has occurred on the 46 part of the Condominium Borrower or on the part of any other party to any of the Condominium Property Documents. The Condominium Borrower has not received any written notice that a default under the Condominium Property Documents has occurred or exists, or that the Board of Managers or any third party alleges the same to have occurred or exist. SECTION 4.30 GROUND LEASES (A) Each Ground Lease contains the entire agreement of the Ground Lessor and the applicable Borrower pertaining to each Ground Leased Property covered thereby. The Borrowers have no estate, right, title or interest in or to the Ground Leased Properties except under and pursuant to the Ground Leases. The Borrowers have delivered true and correct copies of each of the Ground Leases to Lender and the Ground Leases have not been modified, amended or assigned except as set forth on SCHEDULE 4.30. (B) To the Knowledge of the Borrowers, each Ground Lessor is the exclusive fee simple owner of its Ground Leased Property, subject only to the Ground Lease and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the lessor's interest in the applicable Ground Lease. (C) There are no rights to terminate any Ground Lease other than any Ground Lessor's right to terminate by reason of default, casualty, condemnation or other reasons, in each case as expressly set forth in the applicable Ground Lease. (D) Each Ground Lease is in full force and effect and to the Borrowers' Knowledge, no breach or default or event that with the giving of notice or passage of time would constitute a breach or default under any Ground Lease (a "GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or on the part of any Ground Lessor under any Ground Lease. All base rent and additional rent due and payable under the Ground Leases has been paid through the date hereof and the Borrowers are not required to pay any deferred or accrued rent after the date hereof under any of the Ground Leases. The Borrowers have not received any written notice that a Ground Lease Default has occurred or exists, or that any Ground Lessor or any third party alleges the same to have occurred or exist. (E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive owner of the lessee's interest under and pursuant to the applicable Ground Lease and has not assigned, transferred, or encumbered its interest in, to, or under any Ground Lease (other than assignments that will terminate on or prior to Closing), except in favor of Lender pursuant to this Loan Agreement and the other Loan Documents. SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective officers, directors, partners, members, Affiliates or, to the knowledge of the Borrowers, shareholders is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or 47 supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED PERSON"). ARTICLE V COVENANTS OF BORROWER PARTIES The Borrowers covenant and agree that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrowers shall perform and comply with all covenants in this Article V applicable to such Person. SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrowers (on a consolidated basis), and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of their Financial Statements for such year to Lender. All such Financial Statements shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information for such calendar year. The annual Financial Statements for the Borrowers (on a consolidated basis) and Guarantor shall also be accompanied by a certification executed by the entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days after the end of each calendar quarter, the Borrowers on a consolidated basis (other than with respect to income statements, which shall be on an individual property basis) shall provide copies of their Financial Statements for such quarter to Lender, together with a certification executed on behalf of each of the Borrowers by their respective chief executive officers or chief financial officers (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after the end of each calendar year, each Borrower shall provide to Lender a certified Rent Roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after the end of each calendar year, each Borrower shall 48 also provide to Lender (a) a schedule of any retail Material Leases that expired during such calendar year and a schedule of retail Material Leases scheduled to expire within the next calendar year and (b) to the extent the Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar year. Within ninety (90) days after the end of each calendar year, each Borrower shall provide to Lender a statement of income and expenses for all retail space at each of the Properties owned and operated by the Borrowers and, to the extent provided to the Borrowers and not subject to confidentiality restrictions, sales reports for retail tenants for such year. (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, each Borrower shall provide, or cause Manager to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for each of the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly and year to date operating statements prepared for such calendar month and for the trailing twelve (12) month period then ended, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of each of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a detailed explanation for any material deviations from budget) and setting forth that all disbursements and/or withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E Reserve have been made with respect to items of Capital Improvement only (as opposed to items that, in accordance with GAAP, would be included as an Operating Expense); (e) monthly and year to date detailed reports of Operating Expenses for each of the Properties, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement) for which Lender has approved a disbursement from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently available "OSI", or similar quality index, scores (including detailed information regarding criteria and thresholds); (g) prior to Securitization of the Loan, market segmentation reports for the trailing twelve (12) month period for each of the Properties; and (h) a report setting forth (i) the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has continued beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the original Aggregate Allocated Loan Amount represented by such Properties), (iii) a summary report establishing that the Borrowers are diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. All of the above statements, reports and information shall be provided to Lender by 49 email in Microsoft Excel format or other spreadsheet format reasonably acceptable to Lender (in the case of any statements, reports or information provided by third parties that are not Affiliates of the Borrowers, to the extent same are available in such format). Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of such Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to Lender such further documents and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice to the Borrowers. (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender by or on behalf of the Borrowers or Guarantor under this Section, the Borrowers or Guarantor also shall deliver to Lender a certification to Lender, executed on behalf of the Borrowers or Guarantor by their respective chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of the Borrowers, Guarantor and/or the Properties for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating (a) that, to their Knowledge after due inquiry, there does not exist any Default or Event of Default under the Loan Documents (or if any exists, specifying the same in detail), and (b) the Borrowers and Guarantor have complied with the applicable reporting requirements of this Section 5.1. (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and that of the Guarantor ends on December 31, and agrees that no change shall be made to each such fiscal year, without Lender's prior written consent. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business 50 operations of such Borrower made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, each Borrower shall deliver to Lender a copy of its Federal income tax returns (or the return of the applicable Person into which such Borrower's Federal income tax return is consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of each calendar year, each Borrower shall deliver to Lender for its review for its Property a proposed Operating Budget and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap Event or Event of Default exists, the Borrowers may make changes to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Borrower, provided no such modification (together with all prior modifications taken as a whole) shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without Lender's prior written approval, which approval shall not be unreasonably withheld; provided, however, notwithstanding the foregoing, during a Cash Trap Event, increases to the Operating Budget for any Property (not to exceed ten percent (10%) of the Operating Budget for such Property as a whole) will be permitted without Lender's consent for actual verifiable increases in utilities, water and sewer assessments and charges and real property taxes for the applicable Property over the amounts therefor set forth in the Operating Budget for the prior period. Notice of any modifications to the Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating Budget shall identify and set forth each Borrower's reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and the Borrowers shall promptly amend and resubmit for approval revised budgets or plans, as applicable, making such changes as are necessary to comply with the reasonable requirements of Lender. Until any such budget or plan for any year requiring Lender's approval has been approved or deemed approved, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is approved or deemed approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second 51 notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. (E) MATERIAL NOTICES. (i) The Borrowers shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of any Borrower, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrowers shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plan received from a Franchisor related to such Borrower's Property. (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining knowledge of any of the following events or conditions, such Borrower shall deliver a certificate executed on its behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action such Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrowers or any of the Properties not previously disclosed in writing by the Borrowers to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrowers or the Properties which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect, the Borrowers will give notice thereof to Lender and, upon request from Lender, provide such other information as may be reasonably available to them to enable Lender and its counsel to evaluate such matter. (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Borrowers, the Borrowers will deliver certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Borrowers and all material insurance coverage planned to be maintained by the Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. 52 (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver such other information and data with respect to such Person and its Affiliates or the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full force and effect their existence as a limited partnership, limited liability company, or corporation, as the case may be, and all rights and franchises material to its business, including their qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, each Borrower and, to the extent required by applicable law, General Partner and Member, shall at all times be qualified to do business in each of the states where the Properties are located. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) Except for those matters being contested pursuant to clause (B) below, the Borrowers will pay (i) all Impositions; (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrowers on their business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrowers shall not be required to pay, discharge or remove any Imposition or Claim relating to a Property so long as the Borrowers contest in good faith such Imposition, Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Property or any portion thereof, and so long as: (i) no Event of Default shall have occurred and be continuing, (ii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have given Lender prior written notice of their intent to contest said Imposition or Claim; (iii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have deposited with Lender (or with a court of competent jurisdiction or other appropriate body reasonably approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss of any interest in the applicable Property or any part thereof arises, in Lender's reasonable judgment, during the pendency of such contest; (v) such contest does not, in Lender's reasonable determination, have a Material Adverse Effect; and (vi) such contest is based on bona fide, material, and reasonable claims or defenses. Any such contest shall be prosecuted with due diligence, and the Borrowers shall promptly pay the amount of such Imposition or Claim as finally determined, together with all interest and penalties payable in connection therewith. Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture of the applicable Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Claim for which 53 a deposit was made shall be promptly repaid to the Borrowers unless an Event of Default shall have occurred, in which case said surplus may be retained by Lender to be applied to the Obligations. Notwithstanding any provision of this Section to the contrary, the Borrowers shall pay any Imposition or Claim which they might otherwise be entitled to contest if an Event of Default shall occur and be continuing, or if, in the reasonable determination of Lender, the applicable Property is in danger of being forfeited or foreclosed. If the Borrowers refuse to pay any such Imposition or Claim, Lender may (but shall not be obligated to) make such payment and the Borrowers shall reimburse Lender on demand for all such advances. SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrowers will continuously maintain the following described policies of insurance on each of the respective Properties without cost to Lender (the "INSURANCE POLICIES"): (i) Property insurance against loss and damage by all risks of physical loss or damage, including fire, sprinkler leakage, windstorm, hurricane, terrorism, and other risks covered by the so-called extended coverage endorsement covering the Improvements and personal property in amounts not less than the full insurable replacement value of all Improvements (less building foundations and footings) and personal property from time to time on the Properties and without sublimits, and bearing a replacement cost agreed-amount endorsement; (ii) Commercial general liability insurance, including death, bodily injury, innkeeper legal liability and broad form property damage coverage with a combined single limit in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate for any policy year; (iii) If any of the Properties are in an area prone to geological phenomena, including, but not limited to, sinkholes, mine subsidence or earthquakes, insurance covering such risks in an amount equal to 100% of the full replacement cost of all improvements (without any deductions for depreciation) and with a maximum permissible deductible equal to the lesser of $25,000 or 10% of the face value of the policy; (iv) For each Property located in whole or in part in a federally designated "special flood hazard area", flood insurance in the maximum available amount; (v) An umbrella excess liability policy with a limit of not less than Twenty Million Dollars ($20,000,000) over primary insurance, which policy shall include coverage for so-called assumed and contractual liability coverage and automobile liability coverage, and coverage for safeguarding of personalty and shall also include such additional coverages and insured risks which are acceptable to Lender; (vi) Business interruption and/or rent loss insurance with an aggregate limit equal to at least the gross income from the Properties for an indemnity period commencing on the date of such casualty and ending at least six (6) months after completion of the Restoration (such amount being adjusted annually); 54 (vii) Crime protection insurance covering all employees with access to funds and located in Guarantor's corporate offices with a limit of not less than One Million Dollars ($1,000,000) and with the same coverages and deductibles as currently in place at the Properties; (viii) Steam boiler, machinery and pressurized vessel insurance insuring against breakdown or explosion of such equipment on a replacement cost value basis, which shall not contain any exclusions for testing procedures; (ix) Worker's Compensation Insurance in statutory amounts, if any, at all times; (x) Insurance against loss or damage from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), in an amount at least equal to the Aggregate Allocated Loan Amount; (xi) During any period of construction, repair or restoration, builder's "all risk" insurance in an amount equal to not less than the full insurable value of the Properties (excluding building foundations and footings) against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may reasonably request; (xii) If the Properties are or become a "non-conforming use" under applicable zoning and building ordinances, or other requirements of the applicable Governmental Authority, law or ordinance coverage to compensate for the cost of demolition and the increased cost of construction, if available; (xiii) If the Borrowers, Manager or any of their respective Affiliates holds a liquor license for the Properties, liquor liability insurance (including "dram shop" liability) in an amount not less than $1,000,000 for each common cause and $3,000,000 in the aggregate; provided that if such liquor license is held by any tenant under a Lease, the Borrowers shall cause such tenant to cause liquor liability insurance in an amount not less than the limits set forth above to be carried in such tenant's name, and shall include the Borrowers and Lender as additional insureds thereunder; (xiv) If reasonably required by Lender as a result of the release, disposal or existence of any Hazardous Materials on or about any Property after the date hereof (or as to which Lender obtains knowledge after the date hereof) or if such insurance is then customarily required by institutional lenders for securitized loans, environmental insurance, including mold coverage, in form and with coverages (including business interruption coverage) reasonably satisfactory to Lender; provided, however, without limiting or affecting Lender's right to require such environmental insurance with respect to any other Properties after the date hereof, Lender acknowledges that, as of the date hereof, environmental insurance shall only be required with respect to the Property known as the Holiday Inn Express, located at 801 Cleveland Avenue, Attalla, Alabama; 55 (xv) Fiduciary liability insurance and directors and officers liability insurance ("D&O INSURANCE") with coverages at levels in effect as of the Closing Date; (xvi) Insurance against acts of terrorism, or insurance policies without an exclusion for damages resulting from acts of terrorism on terms consistent with the commercial property insurance policies required under subsection (i), (ii), (v) and (vi) above; (xvii) Such other insurance as may from time to time be reasonably required by Lender and which is then customarily required by institutional lenders for securitized loans secured by similar properties similarly situated, against other insurable hazards, including, but not limited to, malicious mischief, vandalism, windstorm and or earthquake, due regard to be given to the size and type of the Properties, Improvements, fixtures and equipment and their location, construction and use. Additionally, the Borrowers shall carry such insurance coverage as Lender may from time to time require if the failure to carry such insurance would result in a downgrade, qualification or withdrawal of any class of securities issued in connection with a Securitization. All Insurance Policies shall be in content (including, without limitation, endorsements or exclusions, if any), form, and amounts, and issued by companies, satisfactory to Lender from time to time and shall name Lender and its successors and assignees as their interests may appear as (x) an "additional insured" for each of the liability policies under this Section 5.4 hereof, and (y) a "mortgagee" for each of the property and casualty policies under this Section hereof, and shall (except for Worker's Compensation Insurance) contain a waiver of subrogation clause reasonably acceptable to Lender. Other than with respect to D&O Insurance, an insurance company shall not be satisfactory unless such insurance company (a) is licensed or authorized to issue insurance in the State where the applicable Property is located and (b) has a claims paying ability rating by the Rating Agencies of AA- (or its equivalent). Notwithstanding the foregoing, a carrier which does not meet the foregoing ratings requirement shall nevertheless be deemed acceptable hereunder provided that such carrier is reasonably acceptable to Lender and the Borrowers shall obtain and deliver to Lender a Rating Confirmation with respect to such carrier from each of the Rating Agencies, provided, however, that: (a) if any insurance coverage required under this Section 5.4 is maintained by a syndicate of insurers, the preceding ratings requirements shall be deemed satisfied (without any required Rating Confirmation) as long as at least seventy five percent (75%) of the coverage (if there are four or fewer members of the syndicate) or at least sixty percent (60%) of the coverage (if there are five or more members of the syndicate) is maintained with carriers meeting the claims-paying ability ratings requirements by S&P and Moody's (if applicable) set forth above and all carriers in such syndicate have a claims-paying ability rating by S&P of not less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier providing the insurance described in clause (ii) above, so long as such carrier maintains a claims paying ability of not less than A- by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby) and (c) until the expiration of the current term of the applicable policies, Lender hereby approves Landmark American as the carrier providing the insurance described in clauses (i), (iv) and (vi) above (covering losses over the first $25,000,000 of coverage), so long as thereafter such carrier or any other carrier providing the above coverages maintains a claims paying ability of not less than A by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby). All Insurance Policies under 56 Sections 5.4 (i), (iv), (vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438 BFU NS), or their equivalents (such endorsements shall entitle Lender to collect any and all proceeds payable under all such insurance, with the insurance company waiving any claim or defense against Lender for premium payment, deductible, self-insured retention or claims reporting provisions). All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Lender without ten (10) days' advance written notice to Lender. The Borrowers may obtain any insurance required by this Section through blanket policies; provided, however, that such blanket policies shall separately set forth the amount of insurance in force with respect to the Properties (which shall not be reduced by reason of events occurring on property other than the Properties) and shall afford all the protections to Lender as are required under this Section. Except as may be expressly provided above, all policies of insurance required hereunder shall contain no annual aggregate limit of liability, other than with respect to liability insurance. If a blanket policy is issued, a certified copy of said policy shall be furnished, together with a certificate indicating that Lender is an additional insured (and, if applicable, loss payee) under such policy in the designated amount. The Borrowers will deliver duplicate originals of all Insurance Policies, premium prepaid through the current expiration dates of such Insurance Policies, to Lender and, in case of Insurance Policies about to expire, the Borrowers will deliver duplicate originals of replacement policies satisfying the requirements hereof to Lender not less than ten (10) days prior to the date of expiration; provided, however, if such replacement policy is not yet available, the Borrowers shall provide Lender with an insurance certificate executed by the insurer or its authorized agent evidencing that the insurance required hereunder is being maintained under such policy, which certificate shall be acceptable to Lender on an interim basis until the duplicate original of the policy is available. The Borrowers shall furnish Lender receipts for the payment of premiums on such insurance policies or other evidence of such payment reasonably satisfactory to Lender in the event that such premiums have not been paid by Lender pursuant to the Loan Agreement. The requirements of this Section 5.4 shall apply to any separate policies of insurance taken out by the Borrowers concurrent in form or contributing in the event of loss with the Insurance Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure to act or negligence of the Borrowers or their agents or employees, Lender or any other insured party which might, absent such agreement, result in a forfeiture or all or part of such insurance payment, other than the willful misconduct of Lender knowingly in violation of the conditions of such policy, (2) the occupation or use of the Properties or any part thereof for purposes more hazardous than permitted by the terms of such policy, (3) any foreclosure or other action or proceeding taken pursuant to this Loan Agreement or (4) any change in title to or ownership of the Properties or any part thereof. The property insurance and the boiler and machinery insurance described in Sections 5.4(i) and (x) hereof shall include "underground hazards" coverage; "time element" coverage by which Lender shall be assured payment of all amounts due under the Note, this Loan Agreement and the other Loan Documents; "extra expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage; and "expediting expense" coverage to facilitate rapid repair or restoration of the Properties. The Insurance Policies shall not contain any deductible in excess of $250,000. 57 SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrowers will operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Borrowers, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each Borrower, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, each Borrower will operate and maintain its Property substantially in accordance with the applicable Operating Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrowers may, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Borrowers shall not perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the Properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Borrowers may perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrowers deliver notice to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Borrowers have cash available for payment of the cost of such Material Alteration or, if the Borrowers fail to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an amount equal to 125% of the cost of such Material Alteration as reasonably estimated by Lender. Cash deposited by the Borrowers with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the conditions for disbursement of amounts from the Capital Improvement Reserve under Section 6.5 (including the requirements set forth under Section 6.7). Upon completion of the Material Alteration, the Borrowers shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other 58 than those which depend on the performance of tenant improvement work) have been issued. The Borrowers shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrowers shall give immediate written notice of the same to the insurance carrier and to Lender and shall promptly commence and diligently prosecute to completion, in accordance with the terms hereof, the repair and restoration of the Property as nearly as possible to the Pre-Existing Condition (a "RESTORATION"). The Borrowers hereby authorize and empower Lender as attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event of Default has occurred and is continuing), or any of them, to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this Section shall require Lender to incur any expense or take any action hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to hold the balance of such proceeds to be used to reimburse the Borrowers for the cost of Restoration of any of the Properties or (ii) subject to Subsection 5.5(C), to apply such proceeds to payment of the Obligations whether or not then due, in any order. Notwithstanding the foregoing, in the event of a casualty where the loss does not exceed the Restoration Threshold, the Borrowers may settle and adjust such claim; provided that (a) no Event of Default has occurred and is continuing and (b) such adjustment is carried out in a commercially reasonable and timely manner. (C) Lender shall not exercise Lender's option to apply insurance proceeds to payment of the Obligations if all of the following conditions are met: (i) no Event of Default then exists; (ii) Lender reasonably determines that there will be sufficient funds to complete the Restoration of the Property to at least substantially the Pre-Existing Condition and to timely make all payments due under the Loan Documents during the Restoration of the affected Property; (iii) Lender reasonably determines that the Net Operating Income of the Properties (including rental income or business interruption insurance) will be sufficient to pay principal and interest on the Loan and the Mezzanine Loan and Operating Revenues of the Properties, after the Restoration thereof to the Pre-Existing Condition, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Note and the Mezzanine Loan; (iv) Lender determines that the Restoration of the affected Property to the Pre-Existing Condition will be completed not later than five (5) months prior to the expiration of any business interruption insurance, but in no event later than six (6) months prior to the Maturity Date; (v) less than fifty percent (50%) of the total floor area of the Improvements has been damaged, destroyed or rendered unusable as a result of such fire or other casualty; and (vi) such Property can be restored and repaired substantially to the condition it was in immediately prior to such casualty and in compliance with all applicable zoning, building and other laws and codes (the "PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to payment of the Obligations, such application shall be made on the Payment Date immediately following such election in accordance with the terms of the Cash Management Agreement. 59 (D) If Lender elects or is obligated to make the insurance proceeds available for the Restoration of any Property and Lender is holding such proceeds, the Borrowers agree that, if at any time during the Restoration, the cost of completing such Restoration, as reasonably determined by Lender, exceeds the undisbursed insurance proceeds, the Borrowers shall, within ten (10) Business Days following the written demand by Lender, deposit the amount of such excess with Lender, and Lender shall first disburse such deposit to pay for the costs of such Restoration on the same terms and conditions as the insurance proceeds are disbursed. If the Borrowers deposit such excess with Lender and if, after completion of the Restoration, any funds remain from the combination of insurance proceeds and the funds so deposited with Lender by the Borrowers, and if no Event of Default shall have occurred and be continuing, then Lender shall promptly disburse to the Borrowers such remaining funds. (E) Lender may, at Lender's option, condition disbursement of any insurance proceeds on Lender's approval (which approval shall not be unreasonably withheld) of plans and specifications of an independent architect licensed in the state where the Property is located and reasonably satisfactory to Lender (the "ARCHITECT"), any and all contractors, subcontractors and materialmen engaged in the Restoration and the contracts under which they have been engaged, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. Lender shall not be obligated to disburse insurance proceeds more frequently than once every calendar month. If insurance proceeds are applied to the payment of the Obligations and provided no Event of Default exists, any such application of proceeds to principal shall be without any Prepayment Consideration and shall not extend or postpone the due dates of the monthly payments due under the Note or otherwise under the Loan Documents, or change the amounts of such payments. If Lender elects to apply all of such insurance proceeds toward the repayment of the Obligations, the Borrowers shall (subject to compliance with clauses (A), (B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property Release (without representation or warranty) of the applicable Property from the Lien of the Mortgage relating to such Property (in which event the Borrowers shall not be obligated to restore the applicable Property pursuant to Section 5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by which the Release Price for such Property exceeds the insurance proceeds received by Lender and applied to repayment of the Obligations. If any proceeds are applied to reduce the Obligations under this Section 5.5, provided that no Event of Default has occurred and is continuing, no Prepayment Consideration shall be due and payable in connection with such application. Any amount of insurance proceeds remaining in Lender's possession after full and final payment and discharge of all Obligations shall be refunded to, or as directed by, the Borrowers or otherwise paid in accordance with applicable law. If the Property is sold at foreclosure or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of the applicable Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to such Property prior to such sale or acquisition. (F) In no event shall Lender be obligated to make disbursements of insurance proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Architect, less a retainage equal to the lesser of (x) the actual retainage required pursuant to the permitted contract, or (y) ten percent 60 (10%) of such costs incurred until the Restoration has been completed. The retainage shall in no event be less than the amount actually held back by the Borrowers from contractors, subcontractors and materialmen engaged in the Restoration. The retainage shall not be released until the Architect certifies to Lender, or, if no Architect has been retained by Lender, Lender is reasonably satisfied, that the Restoration has been completed in accordance with the provisions of this Section 5.5 and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental authorities, and Lender receives final lien waivers and such other evidence reasonably satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the retainage. SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized representatives designated by Lender to visit and inspect during normal business hours its Property and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with such Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice of at least three (3) Business Days prior to visiting or inspecting any Property or such Borrower's offices. SECTION 5.7 O&M PLAN. Each Borrower that is the owner of a Property set forth on SCHEDULE 5.7 shall cause to be prepared and delivered to Lender an operations and maintenance program (the "O&M PLANS") with respect to suspected asbestos, asbestos-containing materials, and/or mold located in its Property as set forth in the applicable Environmental Reports. Each Borrower shall at all times implement and carry out the O&M Plan in accordance with its terms. Lender's requirement that the Borrowers develop and comply with the O&M Plan shall not be deemed to constitute a waiver or modification of any covenants or agreements of the Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws as set forth in the Environmental Indemnity. SECTION 5.8 INTENTIONALLY DELETED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the operation or value of any Property, (B) maintain all licenses and permits now held or hereafter acquired by any Borrower, the loss, suspension, or revocation of which, or failure to renew, could have a material adverse effect on the operation or value of any Property and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. 61 SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party shall duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a material adverse effect on the operation or value of any Property. SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrowers shall not, nor shall the Borrowers authorize Manager or any other Person to, (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrowers shall furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. 62 Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Borrowers shall not under any circumstances collect any such rent more than one month in advance. The Borrowers, at Lender's request, shall furnish Lender with executed copies of all Material Leases hereafter made. Each new Material Lease or a separate agreement with the tenant of such Material Lease shall be in recordable form and shall specifically provide that such Material Lease (i) is subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; (iii) that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; (iv) that the attornment of the tenant shall not be terminated by foreclosure; (v) that in no event shall Lender, as holder of the Mortgages or as successor landlord, be liable to the tenant for any act or omission of any prior landlord or for any liability or obligation of any prior landlord occurring prior to the date that Lender or any subsequent owner acquire title to the Property; and (vi) that Lender may, at Lender's option, accept or reject such attornment. SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS. (A) The Borrowers shall cause each Manager to manage the Properties in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and types customary for hotels comparable to each Property. The Borrowers shall (i) perform and observe all of the material terms, covenants and conditions of the Management Agreement on the part of each Borrower to be performed and observed, and (ii) promptly notify Lender of any notice to any of the Borrowers of any material default under the Management Agreement of which it is aware. If any of the Borrowers shall default in the performance or observance of any material term, covenant or condition of the applicable Management Agreement on the part of the Borrowers to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrowers from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrower, but shall be under no obligation, to pay any sums and to perform any act as may be reasonably appropriate to cause such material conditions of the applicable Management Agreement on the part of the Borrowers to be performed or observed. (B) The Borrowers shall not surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager, or consent to the assignment by the Manager of its interest under the Management Agreement, in each case without (i) prior to a Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies. The Borrowers shall cause any new Manager with respect to any Property to execute and deliver a subordination of management agreement in substantially the form delivered in connection with the closing of the Loan. (C) Lender shall have the right to require any of the Borrowers to replace any Manager with a Person chosen by the Borrowers and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the 63 following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrowers if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrowers shall not terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. Notwithstanding the foregoing, the following changes to Franchise Agreements shall be permitted without Lender's prior written consent: (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with another Franchisor within the same Category, provided that the Borrowers shall not replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(ii) with respect to more than the lesser of (x) three (3) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided that the Borrowers shall not replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(iii) with respect to more than the lesser of (x) two (2) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of three percent (3%) (in each case under clauses (x) or (y), exclusive of the Franchise Agreement for the Holiday Inn, located at 5252 New Jessup Highway, Brunswick, Georgia 31525, which is in the process of being reflagged as a "Park Inn"); (iv) Entering into a new Franchise Agreement in form substantially similar to a form previously approved by Lender with an Acceptable Franchisor for any of the Non-Flagged Hotels, at which time the applicable Property shall be deemed to be within the Category determined by the applicable Franchise Agreement; (v) Entering into a new Franchise Agreement in form substantially similar to a form previously approved by Lender with Park Hospitality LLC under the "Park Inn" brand for the hotel located at 5252 New Jessup Highway, Brunswick, Georgia 31525 at which time the applicable Property shall be deemed to be a Tier 3 Hotel; and 64 (vi) Entering into new Franchise Agreements (or amendments or addenda to existing Franchise Agreements) with the existing Franchisors for the applicable Properties for the same franchise brand, each in form substantially similar to the forms previously approved for the respective Properties by Lender, as required by the existing Franchisors under the respective Franchise Agreements in connection with the transfers of the applicable Properties and the direct and indirect ownership interests in the Borrowers made by the Borrower Parties and their Affiliates in connection with the Closing of the Loan. In connection with the replacement of any Franchisors permitted hereunder, the applicable Borrower shall, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender a Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, each Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants required to be performed and observed by the Franchisor under the Franchise Agreement. In addition, the Borrowers shall not, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become obligated under any Material Agreement pertaining to any Property without Lender's prior written 65 approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) any Lease that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13 hereof (provided, however, that the foregoing shall not affect Borrowers' obligation to deliver Rating Confirmations with respect to any such Management Agreement if required under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all Receipts from the Properties into, and otherwise comply with, the Accounts established from time to time hereunder. Subject to Article VII hereof and the Cash Management Agreement, each Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrowers shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Mortgages and the other Loan Documents are legal, valid and binding obligations of the Borrowers and have not been modified or amended, or if modified or amended, describing such modification or amendments. (B) Within ten (10) Business Days following a written request by the Borrowers, Lender shall provide to the Borrowers a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrowers with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): (A) The Obligations; (B) (i) Unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the 66 financing of equipment or other personal property used at any Property in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days, and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal property or otherwise referred to in clauses (i) and (ii) above (excluding therefrom utility expenses of the Properties and fees payable to the Franchisors pursuant to the terms of the Franchise Agreements) outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan; and (C) The Mezzanine Loan. In no event shall any Indebtedness other than the Loan be secured, in whole or in part, by the Properties or any portion thereof or interest therein. SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not create, incur, assume or permit to exist any Lien on or with respect to the Properties, any other Collateral or any direct or indirect ownership interest in the Borrowers, except the Permitted Encumbrances and Liens on the ownership interests in the Borrowers securing the Mezzanine Loan. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Primary Borrower Party shall directly or indirectly create or become or be liable with respect to any Contingent Obligation. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted in this Loan Agreement, no Primary Borrower Party shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of such Borrower Party's partnership agreement, certificate of limited partnership, articles of incorporation, by-laws, articles of organization, operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such Primary Borrower Party. SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to the Manager under the Management Agreement, the Borrowers shall not pay any management, consulting, director or similar fees to any Related Person of the Borrowers or to any director, officer or employee of the Borrowers. The Borrowers shall not directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of any of the Borrowers or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrowers and upon fair and reasonable terms and which are no less favorable to any of the Borrowers than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of any Borrower. The Borrowers shall not make any payment or permit any payment to be made to any Related Person of any of the Borrowers when or as to any time when any Event of Default shall exist. 67 SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of any Borrower. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which any of the Borrowers is a debtor or any portion of the Properties is property of the estate therein. The Borrowers shall not file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or support any motion (irrespective of the subject of the motion), and the Borrowers shall not file or support any plan of reorganization. The Borrowers having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrowers or any ERISA Affiliate or increase the obligation of the Borrowers, provided that the Borrower shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC. (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to 68 Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrowers regulating investments of governmental plans. SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 GROUND LEASES. (A) NO MODIFICATION. The Borrowers shall not modify or amend, or terminate or surrender any Ground Lease, in each case without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any attempted or purported modification, amendment, or any surrender or termination of any Ground Lease without Lender's prior written consent shall be null and void and of no force or effect. (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and when due each and all of its obligations under each Ground Lease in accordance with the terms of such Ground Lease, and shall not cause or suffer to occur any material breach or default in any of such obligations. The Borrowers shall keep and maintain each Ground Lease in full force and effect. The Borrowers shall exercise any option to renew or extend any Ground Lease and give written confirmation thereof to Lender within thirty (30) days after such option is exercised. Notwithstanding that certain of the obligations of the Borrowers under this Loan Agreement may be similar or identical to certain of the obligations of the Borrowers under the Ground Leases, all of the obligations of the Borrowers under this Loan Agreement are and shall be separate from and in addition to its obligations under the Ground Leases. (C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any written notice that any Ground Lease Default has occurred, then the Borrowers immediately shall notify Lender in writing of the same and immediately deliver to Lender a true and complete copy of each such notice. Further, the Borrowers shall provide such documents and information as Lender shall reasonably request concerning the Ground Lease Default. (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be continuing, or if any Ground Lessor asserts that a Ground Lease Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Ground Lease, Lender, upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary, including, without limitation, (i) performance or attempted performance of the applicable Borrower's obligations under the applicable Ground Lease, (ii) curing or attempting to cure any actual or purported Ground Lease Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and 69 (iv) entry upon the applicable Ground Leased Property for any or all of such purposes. Upon Lender's request, each Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each Ground Lease. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender, together with interest thereon from the date of expenditure at the Default Rate. (E) LEGAL ACTION. The Borrowers shall not commence any action or proceeding against any Ground Lessor or affecting or potentially affecting any Ground Lease or the Borrowers' or Lender's interest therein, the effect of which could cause an event of default or termination of any such Ground Lease, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrowers shall notify Lender immediately if any action or proceeding shall be commenced between any Ground Lessor and either Borrower, or affecting or potentially affecting any Ground Lease or either Borrower's or Lender's interest therein (including, without limitation, any case commenced by or against any Ground Lessor under the Bankruptcy Code). Lender shall have the option, exercisable upon notice from Lender to the Borrowers, to participate in any such action or proceeding with counsel of Lender's choice. The Borrowers shall cooperate with Lender, comply with the reasonable instructions of Lender, execute any and all powers, authorizations, consents or other documents reasonably required by Lender in connection therewith, and shall not settle any such action or proceeding without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the applicable Ground Lease, from time to time, at Lender's request, the Borrowers shall use commercially reasonable efforts to obtain and deliver to Lender within the time period required under the applicable Ground Lease, an estoppel certificate from each Ground Lessor setting forth (A) (i) the identities of the original lessor and lessee under the applicable Ground Lease and each of their respective successors, (ii) that the Ground Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modification), (iii) the rent payable under the Ground Lease, (iv) the dates to which all rent and other charges have been paid, (v) whether there are any alleged Ground Lease Defaults and, if so, setting forth the nature thereof in reasonable detail, and (vi) such other matters as Lender may reasonably request or (B) the matters required to be certified by the Ground Lessor under the applicable Ground Lease. The Borrowers shall not be required to request an estoppel from any Ground Lessor more than two (2) times in any calendar year. (G) BANKRUPTCY. (i) If any Ground Lessor shall reject any Ground Lease under or pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall not elect to treat the Ground Lease as terminated but shall elect to remain in possession of the applicable Ground Leased Property and the leasehold estate under such Ground Lease. The lien of the Mortgage covering such Property does and shall encumber and attach to all of the Borrowers' rights and remedies at any time arising under or pursuant to Section 365 of the Bankruptcy Code, including without 70 limitation, all of such Borrower's rights to remain in possession of such Property and the leasehold estate. (ii) The Borrowers acknowledge and agree that in any case commenced by or against the Borrowers under the Bankruptcy Code, Lender by reason of the liens and rights granted under the Mortgage covering such Property and the Loan Documents shall have a substantial and material interest in the treatment and preservation of such Borrower's rights and obligations under such Ground Lease, and that such Borrower shall, in any such bankruptcy case, provide to Lender immediate and continuous reasonably adequate protection of such interests. Each Borrower and Lender agree that such adequate protection shall include but shall not necessarily be limited to the following: (a) Lender shall be deemed a party to the Ground Lease (but shall not have any obligations thereunder) for purposes of Section 365 of the Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such action by Lender would adversely and materially affect the Borrowers' ability to prosecute, or defend, any such claims asserted therein, have standing to appear and act as a party in interest in relation to any matter arising out of or related to the Ground Lease or such Property. (b) The Borrowers shall serve Lender with copies of all notices, pleadings and other documents relating to or affecting the Ground Lease or the applicable Property. Any notice, pleading or document served by the Borrowers on any other party in the bankruptcy case shall be contemporaneously served by such Borrower on Lender, and any notice, pleading or document served upon or received by such Borrower from any other party in the bankruptcy case shall be served by such Borrower on Lender promptly upon receipt by such Borrower. (c) Upon written request of Lender, the Borrowers shall assume the Ground Lease, and shall take such steps as are necessary to preserve such Borrower's right to assume the Ground Lease, including without limitation using commercially reasonable efforts to obtain extensions of time to assume or reject the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it is applicable. (H) ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground Lessor seeks to reject any Ground Lease or have the Ground Lease deemed rejected, then prior to the hearing on such rejection Lender shall, subject to applicable law, be given no less than twenty (20) days' notice and opportunity to elect in lieu of rejection to have the Ground Lease assumed and assigned to a nominee of Lender. If Lender shall so elect to assume and assign the Ground Lease, then the Borrowers shall, subject to applicable law, continue any request to reject the Ground Lease until after the motion to assume and assign has been heard. If Lender shall not elect to assume and assign the Ground Lease, then Lender may, subject to applicable law, obtain in connection with the rejection of the Ground Lease a determination that the applicable Ground Lessor, at Lender's option, shall (1) agree to terminate the Ground Lease and enter into a new lease with Lender on the same terms and conditions as the Ground Lease, for the remaining term of the Ground Lease, or (2) treat the Ground Lease as breached and provide Lender with the rights to cure defaults under the Ground Lease and to assume the rights and benefits of the Ground Lease. 71 Each Borrower shall join with and support any request by Lender to grant and approve the foregoing as necessary for adequate protection of Lender's interests. Notwithstanding the foregoing, Lender may seek additional terms and conditions, including such economic and monetary protections as it deems reasonably appropriate to adequately protect its interests, and any request for such additional terms or conditions shall not delay or limit Lender's right to receive the specific elements of adequate protection set forth herein. Each Borrower hereby appoints Lender as its attorney in fact to act on behalf of Lender in connection with all matters relating to or arising out of the assumption or rejection of any Ground Lease, in which the other party to the lease is a debtor in a case under the Bankruptcy Code. This grant of power of attorney is present, unconditional, irrevocable, durable and coupled with an interest. SECTION 5.26 CONDOMINIUM PROPERTY. (A) NO MODIFICATION. The Condominium Borrower shall not modify or amend any material terms of, or terminate any of the Condominium Property Documents, in each case, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (B) PERFORMANCE OF CONDOMINIUM PROPERTY DOCUMENTS. The Condominium Borrower shall fully and faithfully pay when due and payable all assessments, common charges and other charges payable by the Condominium Borrower under the Condominium Property Documents and shall perform as and when due each of its material obligations under the Condominium Property Documents in substantial accordance with their respective terms, and shall not cause or suffer to occur any breach or default in any of such obligations. The Condominium Borrower shall keep and maintain each of the Condominium Property Documents in full force and effect. (C) NOTICE OF DEFAULT. If the Condominium Borrower shall receive any written notice of any Condominium Default, the Condominium Borrower immediately shall notify Lender of same and deliver to Lender a true and complete copy of each such notice, and provide such documents and information as Lender may reasonably request concerning such Condominium Default. (D) LENDER'S RIGHT TO CURE. If any Condominium Default shall occur and be continuing, or if any party to any Condominium Property Document asserts that a Condominium Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Condominium Property Documents, after notice to the Condominium Borrower, Lender upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary to cure such Condominium Default, including, without limitation, (i) performance or attempted performance of the Borrowers' obligations under the applicable Condominium Property Documents, (ii) curing or attempting to cure any actual or purported Condominium Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the Condominium 72 Property for any or all of such purposes. Upon Lender's request, the Condominium Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each of the Condominium Property Documents. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender pursuant to this Section 5.26, together with interest thereon from the date of expenditure at the Default Rate. (E) PRESERVATION OF CONDOMINIUM. The Condominium Borrower will do all things necessary to preserve and to keep unimpaired its material rights, powers and privileges under the Condominium Property Documents and to prevent the termination or expiration of the Condominium Property Documents, or the withdrawal of the Condominium Property from a condominium form of ownership under applicable law, to the end that the Condominium Borrower may enjoy all of the material rights granted to it as a party to the Condominium Property Documents. (F) NOTICE OF CONDOMINIUM DEFAULTS. The Condominium Borrower will (i) promptly notify Lender of the receipt by the Condominium Borrower of any notice from the Board of Managers, or the owner of any other unit in the condominium, covering the Condominium Property, asserting or claiming a default by the Condominium Borrower thereunder or lack of compliance by the Condominium Borrower with the Condominium Property Documents, (ii) promptly notify Lender of the receipt by the Condominium Borrower of any notice or request from the Board of Managers or owner of any unit of the termination or purported termination of the Condominium Property Documents or to withdraw the Condominium Property from condominium ownership pursuant to applicable law or to seek any action for partition, (iii) promptly notify Lender of the receipt by the Condominium Borrower of any notice or request from the Board of Managers or owner of any unit of the material modification or change or proposed material modification or change of the Condominium Property Documents and (iv) promptly cause a copy of each such notice of request received by the Condominium Borrower from the Board of Managers or any unit owner, or from a mortgagee of a mortgage on such other unit, to be delivered to Lender. The Condominium Borrower will permit Lender to participate in any such partition or withdrawal proceeding to the extent permitted by law and the Condominium Property Documents (but Lender shall not be obligated so to do). The Condominium Borrower will promptly deliver to Lender a copy of each notice, pleading, brief and preliminary, interim and final determination or decision and other papers received by it in each such partition or withdrawal proceeding. (G) STATEMENTS, NOTICES. The Condominium Borrower will, within twenty (20) days after demand from Lender (which shall not be required more than two (2) times in any calendar year), obtain, if and to the extent that the Condominium Borrower is entitled to the same under the Condominium Property Documents, and otherwise request from and make good faith efforts to obtain, from the Board of Managers and deliver to Lender a duly signed and acknowledged certificate (signed also by the Condominium Borrower) that the Condominium Property Documents are unmodified and in full force and effect (or, if the same have been modified in compliance with this Loan Agreement, that the Condominium Property Documents are in full force and effect as to modified and that there have been no other modifications), stating the dates to which the assessments, common charges and other charges payable under the Condominium 73 Property Documents have been paid and stating whether to each certifying party's knowledge, the Condominium Borrower is in compliance with the Condominium Property Documents, or, if not, specifying each default or failure of compliance of which the certifying party has knowledge. The Condominium Borrower will, promptly upon receipt thereof by the Condominium Borrower, furnish Lender with a copy of all notices and statements, however characterized, issued by the Board of Managers or relating to the Condominium Property Documents including without limitation, financial statements and projected budgets. SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrowers shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrowers. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrowers shall not cancel any indebtedness from any Person owing to any Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no Borrower Party, nor any of their respective Affiliates, officers, directors, partners or members will knowingly: (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrowers further covenants and agrees to deliver (from time to time) to Lender any such certification or other evidence as may be requested by Lender in its sole and absolute discretion, confirming that: (i) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, has to its Knowledge engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person. 74 ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrowers hereby pledge, assign and grant to Lender a security interest in and to all of the Borrowers' right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any Default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. SECTION 6.2 FUNDS DEPOSITED WITH LENDER. (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein, all funds of the Borrowers which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrowers and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After repayment of all of the Obligations, all funds held as Reserves will be promptly returned to, or as directed by, the Borrowers. (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the amounts necessary to fund each of the Reserves as set forth below. Deposits into the Reserves at Closing may occur by deduction from the amount of the Loan that otherwise would be disbursed to the Borrowers, followed by deposit of the same into the applicable Sub-Account or Account of the 75 Lock Box Account in accordance with the Cash Management Agreement on the Closing Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes to be fully disbursed at Closing. SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit with Lock Box Account Bank **[$_________]** and, pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the Payment date in July 2004, 1/12th of the annual charges (as reasonably estimated by Lender) for all Impositions and all Insurance Premiums (other than for D&O Insurance) payable with respect to the Properties hereunder (said funds, together with any interest thereon and additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made to the Impositions and Insurance Reserve from and after the date hereof is **[$__________]**. The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days of the written demand by Lender, to be added to and included within such reserve, a sum of money which Lender reasonably estimates, together with such monthly deposits, will be sufficient to make the payment of each such charge at least ten (10) Business Days prior to the date initially due. The Borrowers shall provide Lender with bills and all other documents necessary for the payment of the foregoing charges at least thirty (30) days prior to the date on which each payment shall first become subject to penalty or interest if not paid. So long as (i) no Event of Default has occurred and is continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other documents in a timely manner, and (iii) sufficient funds are held by Lender for the payment of the Impositions and Insurance Premiums relating to each of the Properties, Lender shall pay said items or disburse to the Borrowers from such Reserve an amount sufficient to pay said items. Interest shall accrue in favor of the Borrowers on funds in the Impositions and Insurance Reserve and be added to the balance thereof and disbursed in accordance with the terms hereof. SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender shall establish and maintain with Lock Box Bank an account for the purpose of creating a reserve for replacements of FF&E at or in, or used in connection with, the Properties (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget approved by Lender (said funds, together with any interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve shall be held in an Eligible Account entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account shall be under the sole dominion and control of Lender, subject to the terms of the Cash Management Agreement. Pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing with the Payment Date in [July] 2004, an amount equal to 4.0% of the Operating Revenues generated from the Properties for the prior calendar month (such amount, the "MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the Borrowers, subject in all instances to the terms of the Cash Management Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held in the FF&E Reserve shall be used in connection with the Required Capital Improvements. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than for Replacements subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d). 76 SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At Closing, the Borrowers shall deposit with Lock Box Account Bank **[$___________]** (said funds, together with any interest thereon, the "CAPITAL IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain Capital Improvements required to be made to the Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5 attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the Borrowers for purposes for which any other Reserve is established or for any other purpose other than completion of the Required Capital Improvements. The Borrowers shall promptly commence and diligently prosecute to completion, subject to Force Majeure, the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on EXHIBIT A. Funds held in the Capital Improvement Reserve shall be disbursed in accordance with Section 6.7. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Capital Improvement Reserve when all Required Capital Improvements are complete, and paid for, in accordance with the terms hereof. SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers shall deposit with Lock Box Account Bank, an amount equal to **[$___________]** (said funds, together with any interest thereon and additions thereto, the "HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials on the Properties as indicated in the Environmental Reports for the Properties prepared and delivered prior to the Closing and as such work is more particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by any applicable Governmental Authority or (y) nine (9) months after the Closing, the Borrowers shall, subject to Force Majeure, complete such Environmental Work and shall provide to Lender such closure reports, no-further-action letters, or other evidence of compliance with law as Lender may reasonably require. The funds contained in the Hazardous Materials Remediation Reserve shall be utilized by the Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrowers for purposes for which any other Reserve is established. Subject to the Borrowers' satisfaction of the applicable conditions of Section 6.7, the Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrowers for such Environmental Work, provided that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, in accordance with the terms hereof. SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK. (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to or for the account of the Borrowers (x) from the Hazardous Materials Remediation Reserve, to pay to, or pay on behalf of, the 77 Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT EXPENDITURES"; and together with the Approved Environmental Expenditures, collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or Required Capital Improvements to which any such request for disbursement relates shall be referred to as the "WORK"), upon satisfaction of each of the conditions listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's reasonable discretion: (i) Except as provided in this Section 6.7, each request for disbursement from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for completion of the Approved Expenditures for which disbursement is requested. (ii) A request for disbursement from the Work Reserves may be made after completion of a portion of the work under such contract, or for payment of deposits required in connection with the Work under such contract, provided (1) all other conditions in this Loan Agreement for disbursement have been satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve are, in Lender's reasonable judgment, sufficient to complete the Environmental Work when required and/or funds remaining in the Capital Improvement Reserve are, in Lender's reasonable judgment, sufficient to complete such item of Required Capital Improvements and any other Required Capital Improvements remaining to be performed, as the case may be, and (3) if reasonably required by Lender, each contractor or subcontractor receiving payments in excess of $100,000 under such contract shall provide a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor. (iii) To the extent the contract with the relevant contractor or supplier provides for a retainage, each disbursement from a Work Reserve, except for a final disbursement, shall be in the amount of actual costs incurred less the percentage of such costs that the contract with the relevant contractor or supplier specifies to be retained and advanced as part of the final disbursement. No funds will be advanced for materials stored at any Property unless such materials are properly stored and secured at the applicable Property in accordance with the Borrowers' customary procedures and sound construction practices as reasonably determined by Lender. No funds will be advanced for materials stored at any location other than at the Properties unless Lender determines in its reasonable discretion that Lender has a perfected first priority security interest in any such materials. (iv) The amount of all invoices in connection with the Work with respect to which a disbursement is requested and which has been approved by Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers (in which event, the Borrowers covenant and agree to promptly pay such invoices) or, if an Event of Default has occurred and is continuing, at Lender's option and in Lender's sole and absolute discretion, directly to the contractor, supplier, materialman, mechanic or subcontractor indicated on said invoices unless already paid by the Borrowers and Lender has received satisfactory evidence of such payment in which case Lender shall reimburse the Borrowers. All invoices in connection with 78 disbursements from the Capital Improvement Reserve shall be classified as requests for payment for items of Capital Improvement (as opposed to items that, in conformity with GAAP, would be included as Operating Expenses). If the Borrowers request that any amounts be disbursed directly to the Borrowers pursuant to the foregoing sentence, the Borrowers shall be required to deliver evidence reasonably acceptable to Lender of payment of all invoices for which disbursements were previously made to the Borrowers as a condition to such requested disbursement. (v) No more than two (2) disbursements will be made by Lender from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve in any calendar month, and, if made in accordance herewith or otherwise approved by Lender, requested disbursements will be made within five (5) Business Days after the request therefor. Lender shall not be required to make any disbursement from a Work Reserve with respect to the Property unless such requested disbursement is in an amount equal to or greater than $25,000 (other than the final disbursement). (vi) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrowers shall assign (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. (vii) The Borrowers shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost and expense. (viii) The Borrowers shall have delivered to Lender a certificate of the Borrowers (substantially in the form attached hereto as EXHIBIT L) certifying as to the actual costs which were incurred by the Borrowers to complete such Work, which costs shall not materially exceed the amount budgeted for such Work under the CapEx/FF&E Budget then in effect unless approved by Lender, which shall not be unreasonably withheld, delayed or conditioned (together with supporting documentation reasonably acceptable to Lender). 79 (ix) The Borrowers shall have delivered to Lender all necessary material certificates, authorizations, permits and licenses which are required to permit the construction and completion of the Work, as issued by the appropriate Governmental Authority. The Borrowers, to the full extent permitted by applicable law, hereby assigns to Lender as additional security for the payment of the Obligations and the observance and performance by the Borrowers of the terms, covenants and provisions of the Loan Documents all right, title and interest which the Borrowers may now have or may hereafter acquire in and to such certificates, authorizations, permits and licenses. (x) Lender may require an inspection of the Property prior to making a monthly disbursement from the applicable Work Reserve in order to verify completion of the Work for which disbursement is sought in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may require that such inspection be conducted by Lender's Consultant and/or may require a copy of a certificate of completion by an independent qualified architect or engineer acceptable to Lender prior to the disbursement of any amounts from the applicable Work Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such inspections as reasonably required hereunder, whether such inspections are conducted by Lender, Servicer, Lender's Consultant or by an independent qualified professional. (B) PERFORMANCE OF WORK. (i) The Borrowers shall complete all Work in a good and workmanlike manner as soon as practicable following the commencement thereof substantially in accordance with the applicable budget approved by Lender in accordance with the terms of this Loan Agreement. The insufficiency of the balance in the applicable Work Reserve shall not relieve the Borrowers from their obligations to perform and complete the related Work as herein provided or to fulfill all other preservation and maintenance covenants in the Loan Documents. (ii) If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrowers with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrowers of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrowers shall have commenced to cure such unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such unsatisfactory work, up to a maximum of an additional sixty (60) days, subject to Force Majeure, without the cure thereof), Lender may proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrowers, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. 80 (iii) In order to facilitate Lender's completion or making of any Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right to enter onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrowers and secured by the applicable Mortgage. For this purpose, the Borrowers constitute and appoint Lender their true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrowers empower said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve for the purpose of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the Borrowers which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of such Property; and (vii) to do any and every act which the Borrowers might do in their own behalf to fulfill the terms of this Loan Agreement. (iv) Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrowers additional sums to make or complete any Work. (v) The Borrowers shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.7 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may be kept at any Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The Borrowers shall use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B). (vi) All Work and all materials, equipment, fixtures and any other item comprising a part thereof shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other liens (except for the Permitted Encumbrances). (vii) All Work shall comply with all applicable legal requirements of all Governmental Authorities having jurisdiction over the Properties and applicable insurance 81 requirements, including, without limitation, applicable building codes, special use permits, environmental regulations and requirements of insurance underwriters. (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys' fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrowers shall assign to Lender all rights and claims the Borrowers may have against all Persons supplying labor or materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations in full, a Cash Trap Event shall occur, then for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Lender (or its Servicer or agent) and held in the Lock Box Account in accordance with the terms of the Cash Management Agreement (said funds, together with any interest thereon, the "CASH TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when (x) the Debt Yield is less than the Minimum Debt Yield or (y) during the Second Extension Term or Third Extension Term, the Debt Service Coverage Ratio is less than the Minimum DSCR, in each case for the trailing twelve (12) month period ending on such Calculation Date and shall continue to exist until such time as the Minimum Debt Yield and, during the Second Extension Term or Third Extension Term, the Minimum DSCR tests have been satisfied for three (3) consecutive Calculation Dates (on a trailing twelve (12) month basis) following the commencement of the applicable Cash Trap Event. Notwithstanding that the Debt Yield is less than the Minimum Debt Yield or, if applicable, the Debt Service Coverage Ratio is less than the Minimum DSCR as of any Calculation Date, no Cash Trap Event shall be deemed to have occurred as a result of such event if the Borrowers make a principal prepayment of the Aggregate Outstanding Principal Balance (which prepayment amount shall be disbursed on the next Payment Date in accordance with the terms of the Cash Management Agreement), within three (3) Business Days after the date of delivery of the financial statements disclosing the existence of such Cash Trap Event (or the date on which such financial statements are required to be delivered pursuant to Section 5.1), in an amount equal to the greater of (x) one percent (1%) of the Aggregate Outstanding Principal Balance, or (y) 120% of the amount, as determined by Lender in its reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the Minimum Debt Yield and, if applicable, the Debt Service Coverage Ratio to meet or exceed the Minimum DSCR if such calculations were recalculated as provided above assuming that such amount was applied to reduce the Aggregate Outstanding Principal Balance as of the first day of the relevant measuring period. During the continuance of a Cash Trap Event, provided that no Event of Default shall have occurred and be continuing, any funds on deposit in the Cash Trap Reserve may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be applied to (i) prepayment of the Aggregate Outstanding Principal Balance as provided above, (ii) Capital Expenditures reasonably approved by Lender, or (iii) scheduled payments (not to exceed $900,000 in the aggregate) of principal and interest under the Loan and the Mezzanine Loan (to be applied in accordance with the terms of the Cash Management Agreement). Any funds on 82 deposit in the Cash Trap Reserve shall continue to be held as additional Collateral in accordance with this Section 6.8 until the earlier of (a) the date that such funds are applied or disbursed pursuant to the foregoing sentence or (b) the date that the Minimum Debt Yield and, during the Second Extension Term or Third Extension Term, the Minimum DSCR tests have each been satisfied for three (3) consecutive months (as determined above), at which time, provided no Event of Default exists, and no Cash Trap Event has commenced, such funds, together with any and all amounts then held in the Minimum Balance Sub-Account (as defined in the Cash Management Agreement), shall be automatically released to the Borrowers without any further certification requirements on the part of the Borrowers. The existence of a Cash Trap Event shall be determined by Lender in its reasonable good faith determination. If Lender determines that a Cash Trap Event has occurred, Lender shall send the Borrowers written notice thereof. Notwithstanding any provision herein to the contrary, if an Event of Default has occurred and is continuing, all funds on deposit in the Cash Trap Reserve and any subsequent Excess Cash Flow, while such Event of Default is continuing, may be applied by Lender to payment of the Loan (including payment of any Prepayment Consideration) or other Obligations (or to the obligations of the Mezzanine Borrowers to Mezzanine Lender) as Lender may elect. ARTICLE VII DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT. (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more deposit accounts shall be established at the Borrowers' sole cost and expense in the name of Lender, as secured party hereunder (said accounts, and any accounts replacing same in accordance with this Loan Agreement and the Deposit Account Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"), pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT AGREEMENT") substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, executed and delivered by the Borrowers and the Deposit Bank. The Deposit Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer). Among other things, the Deposit Account Agreement shall provide that the Borrowers shall have no access to or control over the Deposit Account, that all available funds on deposit in the Deposit Account shall be transferred by wire transfer (or transfer via the ACH System) on each Business Day by the Deposit Bank into the Lock Box Account, for application in accordance with the Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall be directed to deliver to the Borrowers copies of bank statements and other information made available by the Deposit Bank and the Lock Box Account Bank concerning the Deposit Account and the Lock Box Account. (ii) Upon establishing the Deposit Account, (1) the Borrowers shall cause any and all Operating Revenues, including distributions or other payments made directly or indirectly to the Borrowers, Manager, or any of their respective Affiliates, from any Beverage Company, to be deposited promptly into the Deposit Account and in no event later than two (2) Business Days after the same are paid to or for the benefit of the Borrowers, and (2) the Borrowers shall obtain agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each of the 83 Persons paying or disbursing credit card receivables (the "CREDIT CARD COMPANIES"), substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, pursuant to which the Credit Card Companies agree to pay all credit card receivables into the Lock Box Account, and acknowledge and agree that Lender shall have a first priority perfected security interest in such credit card receivables. To the extent that the Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed to hold the same in trust for Lender for the protection of the interests of Lender hereunder and under the Loan Documents. The Borrowers represent and warrant that, as of the date hereof, the only Credit Card Companies paying or disbursing credit card receivables with respect to the Property are Chase Merchant Services, American Express, Discover Financial Service, Diners Club, JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter into an agreement with any other Credit Card Company pursuant to which such Credit Card Company shall pay credit card receivables with respect to the Properties, such Borrower shall promptly obtain a Credit Card Receivables Payment Direction Letter in form and substance reasonably acceptable to Lender from such Credit Card Company. (ii) The Borrowers shall pay all reasonable out-of-pocket costs and expenses incurred by Lender in connection with the transactions and other matters contemplated by this Section 7.1, including but not limited to, Lender's reasonable attorneys' fees and expenses, and all reasonable fees and expenses of the Deposit Bank and the Lock Box Account Bank, including without limitation their reasonable attorneys' fees and expenses. (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms of the Cash Management Agreement, an Eligible Account shall be established in the name of Lender, as secured party hereunder, to serve as the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement, the Borrowers shall not have the right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. Lender may elect to change any financial institution in which the Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrower. The Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement: (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the 84 "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the "Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance Sub-Account" and (g) the "Cash Trap Reserve Sub-Account". SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" means the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrowers; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrowers (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if (i) within forty-five (45) days after the filing thereof, the Borrowers shall either cause the same to be removed of record by payment, bonding or otherwise, or (ii) same is being contested in good faith in accordance with Section 5.3(B) hereof); or (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by any Borrower, Guarantor or Manager in any Loan Document or in any 85 statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan Documents and such default is not fully cured within thirty (30) days after receipt by the Borrowers of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any Borrower Party commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceeding, it shall not constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or 86 (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of their business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrowers 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) and the Borrowers do not take all actions requested by Lender to correct such defect within ten (10) days after the written request by Lender to take such action, or any Person under the control of the Borrowers or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; (ii) or any breach or default shall occur in the material obligations of the Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, that Manager shall have the right to exercise material remedies as a consequence thereof; or (P) GROUND LEASE/CONDOMINIUM PROPERTY. Any default by any of the Borrowers beyond any applicable grace period shall occur under any Ground Lease or any Condominium Property Document or any actual or attempted surrender, termination, modification or amendment of any Ground Lease or any Condominium Property Document without Lender's prior written consent. If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). 87 SECTION 8.2 ACCELERATION AND REMEDIES. (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by the Borrowers. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrowers under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against each Property and the Mortgages have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose the Mortgages in any manner and for any amounts secured by the Mortgages then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrowers default beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose the Mortgage to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose the Mortgage or any of them to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Mortgage as Lender may elect. Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Mortgage to secure payment of sums secured by the Mortgage and not previously recovered. (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided 88 hereunder. The Borrowers shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their true and lawful attorney, coupled with an interest, in their name and stead to make and execute all documents reasonably necessary to effect the aforesaid severance if the Borrowers fail to do so within ten (10) days of Lender's written request, the Borrowers ratifying all that their said attorney shall do by virtue thereof. (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrowers pursuant to this Loan Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrowers shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrowers or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if any of the Borrowers shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrowers including making protective advances on behalf of any Borrower, or, in its sole discretion, causing the obligations of any of the Borrowers to be satisfied with the proceeds of any Reserve. In such event, the Borrowers shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the Borrowers under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. 89 (B) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrowers. ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower Party hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that such Primary Borrower Party: (A) does not own and will not own any assets other than the Properties (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Borrowers, and other wholly owned subsidiaries of the Primary Borrower Parties established solely for the purpose of holding liquor licenses with respect to one or more of the Properties (collectively, the "OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties, such incidental assets as are necessary to enable it to discharge its obligations with respect to the Borrowers; (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Properties or the Ownership Interests; (C) will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of any Primary Borrower Party except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate (including the Management Agreements); (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted Indebtedness, and (iii) the Mezzanine Loan; (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), and has not acquired and will not acquire obligations or securities (other than the Ownership Interests) of any of its Affiliates other than the other Borrower Parties; (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due; 90 (G) has at all times since the SPE Effective Date done or caused to be done and will do all things necessary to preserve its existence, and will not, and no partner, member, shareholder, trustee, beneficiary, or principal will, further amend, modify or otherwise change, its partnership certificate, partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement, or other organizational documents, as modified, amended, restated or supplemented as of the date hereof, in any manner with respect to the matters set forth in this Article IX; (H) has at all times since the SPE Effective Date continuously maintained its existence and has at all times since the SPE Effective Date been qualified to do business, and shall continue to maintain its existence and be qualified to do, business in all states necessary to carry on its business, specifically including in the case of each Borrower, the state where its Property is located; (I) has at all times since the SPE Effective Date conducted and operated, and will conduct and operate its business as presently conducted and operated and otherwise contemplated with respect to the ownership of its Property, or the ownership interests in the Borrowers, as applicable; (J) has at all times since the SPE Effective Date maintained and will maintain books and records and bank accounts (other than bank accounts established hereunder, or established by Manager with respect to the operations of the Properties pursuant to the Management Agreement) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and has at all times since the SPE Effective Date maintained and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) has at all times since the SPE Effective Date been, and held itself out to the public as, and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and has at all times since the SPE Effective Date corrected and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) has at all times since the SPE Effective Date paid, and will pay, the salaries of its own employees, if any; (M) has at all times since the SPE Effective Date allocated, and will allocate, fairly and reasonably any overhead for shared office space; (N) has at all times since the SPE Effective Date used, and will use its own stationery, invoices and checks; (O) has at all times since the SPE Effective Date filed, and will file, its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; 91 (P) has at all times since the SPE Effective Date maintained, and reasonably expects to maintain adequate capital (taken as a whole with all of the other Borrowers) for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (Q) will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) will not enter into any transaction of merger or consolidation, and will not acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership (other than the Ownership Interests) of, any Person; (S) has not at any time since the SPE Effective Date commingled or permitted to be commingled, and will not commingle or permit to be commingled, its funds or other assets with those of any other Person (other than, with respect to the Borrowers, each other Borrower, or as may be held by Manager, as agent, for each Borrower pursuant to the terms of the Management Agreement, and except for funds deposited in the Accounts in accordance with the Loan Documents); (T) has at all times since the SPE Effective Date maintained, and will maintain, its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (U) does not and will not hold itself out to be responsible for the debts or obligations (other than the Obligations) of any other Person; (V) has not guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to their respective obligations under Section 9.1, each Borrower, General Partner and Member hereby represents, warrants and covenants, as of the Closing Date and until such time as all Obligations are paid and satisfied in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion: (A) each General Partner shall at all times act as the sole general partner of each Borrower that is a limited partnership, with all of the rights, powers, obligations and liabilities thereof under the limited partnership agreement of such Borrower and shall take any and all 92 actions and do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (B) Member shall at all times act as the sole member of each Borrower that is a limited liability company with all of the rights, powers, obligations and liabilities thereof under the limited liability company operating agreement of such Borrower and shall take any and all actions and will do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (C) each Borrower that is a limited liability company shall not, without the prior written consent of its Member (including the unanimous written consent of its Member's board of directors including the Independent Directors or the unanimous written consent of each of the Borrowers' board of managers including the Independent Directors), and each Borrower that is a limited partnership shall not, without the prior written consent of its General Partner (including the unanimous written consent of General Partner's Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (D) each Borrower that is a corporation shall not, without the prior unanimous written consent of its board of directors, including its Independent Directors, institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against it; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (E) no Member or any General Partner shall, without the unanimous vote of its board of directors or board of managers, as the case may be, including, in each case, its Independent Directors, institute proceedings for itself or any Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or any Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or any Borrower; or a substantial part of its or any Borrower's property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (F) except as otherwise permitted hereunder, no Member or any General Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself or any Borrower, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to 93 any Person; or (iii) amend any provisions of its or any Borrower's organizational documents containing provisions similar to those contained in this Article IX; and (G) each Member, General Partner and Borrower that is a corporation shall each promptly elect and at all times maintain at least two (2) Independent Directors on its board of directors, who shall be selected by such Member, General Partner or Borrower, as applicable, and be reasonably acceptable to Lender. Each Borrower that is a single member limited liability company shall promptly appoint and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by such Borrower, and be reasonably acceptable to Lender. ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel), to cause the Note and any Mortgage to be split into a first and a second mortgage loan, or into one or more loans evidenced by multiple notes and secured by multiple mortgages and/or by ownership interests in any of the Borrowers in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting any such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything to the contrary contained in this Article X, it is acknowledged and agreed that in no event shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's) internal costs and expenses in connection with any Secondary Market Transaction. 94 Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of each Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower Parties shall not be required to pay any third party (other than, which respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the costs and expenses of the Borrowers' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other than with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrowers' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent in substance with the opinions covered by the original opinions, addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency 95 that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrowers understand that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrowers and Guarantor shall provide in connection with each (i) preliminary and final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, prepared in connection with any Secondary Market Transaction (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor certifying that the Borrowers and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrowers, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrowers shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrowers or their Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrowers or their Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. 96 ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, Leases entered into as permitted hereunder, and pledges in connection with the Mezzanine Loan, the Borrowers shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of any Property or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in any Borrower (other than to Mezzanine Lender), irrespective of the number of tiers of ownership without Lender's consent. SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in any Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower); and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. (D) The pledge of ownership interests granted by the Mezzanine Borrowers pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan Agreement). For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving effect to such 97 Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY. (A) The Borrowers shall have the right to request that Lender consent to (i) a transfer of all of the Properties to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the obligations of the Guarantors arising from and after such date and release of the Borrowers and Guarantor from obligations arising from and after such date and (iii) the replacement of the Mezzanine Borrowers with pledgors of the ownership interests in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the conditions set forth in paragraphs (B) and (C) of this Section. Together with such written application, the Borrowers will pay to Lender a review fee of $10,000. The Borrowers also shall pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of the Rating Agencies, if any, and other outside entities, in connection with considering any proposed Assumption, whether or not the same is permitted or occurs. (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrowers shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrowers shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions; (v) The Borrowers shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; (vi) The Borrowers, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; 98 (vii) (a) The Transferee Borrower shall be a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its reasonable discretion; and (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender. (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or Borrowers, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrowers, the Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, a bankruptcy non-consolidation opinion; (iii) The Borrowers shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrowers and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (iv) The Borrowers shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Transfer and Assumption, including but not limited to Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may obtain the release (each, a "RELEASE") of one or more Properties from the Lien of the applicable Mortgage(s) in connection with a prepayment of a portion of the Loan subject to the conditions of the Note and subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrowers at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) Lender shall have received from the Borrowers on the date proposed for such Release, the Release Price (together with, except in connection with a Release of a Sale Property, 99 the applicable Prepayment Consideration and any prepayment consideration due pursuant to the terms of the Mezzanine Loan Documents) for deposit into the Lock Box Account and disbursement in accordance with the terms of the Cash Management Agreement, and following such disbursement, Lender shall have received Mortgage Lender's Percentage of the Release Price and Mezzanine Lender shall have received Mezzanine Lender's Percentage of the Release Price; (D) If required by any Rating Agency, the Borrowers at their sole cost and expense, shall have delivered to Lender, one or more endorsements to the Title Policies delivered to Lender on the date hereof in connection with the Mortgages insuring that, after giving effect to such Release, (i) the Liens created hereby and thereby and insured under the Title Policies are first priority Liens on the respective remaining Properties subject only to the Permitted Encumbrances applicable to the remaining Properties and (ii) that the Title Policies remain in full force and effect and unaffected by such Release; (E) Immediately following any Release (other than a Release of a Sale Property) both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) in effect at Closing, or immediately prior to the Release, whichever is greater; (F) Notwithstanding the foregoing, the Borrowers may not obtain the Release under this Section 11.4 of any Property or Properties (other than the Sale Properties) which individually, or in the aggregate (with all Releases of Properties other than the Sale Properties since the Closing Date), have an Aggregate Allocated Loan Amount of more than thirty percent (30%) of the Loan Amount (exclusive of the Allocated Loan Amount with respect to any Sale Property); (G) The Borrowers shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Release; and (H) Immediately following such Property Release, the Released Property will be owned by a Person other than the Borrowers. Upon satisfaction of the above conditions, Lender shall effectuate the following (hereinafter referred to as a "PROPERTY RELEASE"): the security interest of Lender under the Mortgage and other Loan Documents relating to the Released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrowers to release and terminate or reassign, at the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and financing statements as to the released Property; provided, that such release and termination or reassignment shall be without recourse to Lender and without any representation or warranty except that Lender shall be deemed to have represented that such release and termination or reassignment has been duly authorized and that it has not assigned or encumbered the Mortgage or the other Loan Documents relating to the released Property (except as contemplated hereby) and Lender shall return the originals of any Loan Documents that relate solely to the released 100 Property to the Borrowers; provided, further, that upon the release and termination or reassignment of Lender's security interest in the Mortgage relating to the released Property all references herein to the Mortgage relating to the released Property shall be deemed deleted, except as otherwise provided herein with respect to indemnities. In addition promptly after consummation of any such Property Release and Lender's receipt of the Release Price and any other sums payable to Lender, any and all Reserves designated as applicable to the released Property held by or on behalf of Lender shall be returned to the Borrowers. SECTION 11.5 RESERVED. SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may Transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Property free from the lien of the Mortgage, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or on the Properties taken as a whole, will not materially impair the utility of any individual Property or the Properties, taken as a whole, 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 building equipment acquired by the Borrowers (and not so disposed of) shall be subject to the lien of the Mortgage. Lender shall, from time to time, upon the reasonable request of any Borrower, execute a written instrument in form reasonably satisfactory to Lender to confirm that such building equipment which is to be, or has been, sold or disposed of is free from the lien of the Mortgage. SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrowers may, without the consent of Lender, (i) make immaterial Transfers of portions of the any Property to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way with respect to any Property in the ordinary course of business 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 such Property or have a Material Adverse Effect on the value of such Property taken as a whole. In connection with any Transfer permitted pursuant to this Section 11.7, Lender 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 such Property affected by such transfer from the lien of the applicable Mortgage or to subordinate the applicable Mortgage to any such easement, restriction, covenant, reservation or right of way within ten (10) days of Lender's receipt of the following: (A) Ten (10) days prior written notice thereof. (B) A copy of the instrument or instruments of transfer. (C) An officer's certificate given by the Borrowers stating that such transfer does not materially impair the utility and operation of the Property, materially reduce the value of the Property or have a Material Adverse Effect. 101 (D) Reimbursement of all of Lender's reasonable, out-of-pocket costs and expenses incurred in connection with such Transfer. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrowers to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrowers' obligations under the Note shall be limited to (i) the Properties, (ii) the rents, profits, issues, products and income of the Properties, and (iii) any other Collateral. Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Obligations secured by the Mortgages or to require that all collateral shall continue to secure all of the Obligations owing to Lender in accordance with the Loan Documents. SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not their members, partners (other than the General Partners), employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrowers or any Borrower Party or Manager and not deposited into the Deposit Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrowers or of any change in the name of any of the Borrowers or if any of the Borrowers takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrowers, or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste with respect to any of the Properties; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully recourse to the Borrowers and Guarantor upon the happening of any of the following: (i) 102 any Borrower Party's defense of any efforts by Lender to collect or enforce the Obligations following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any efforts by Lender to collect or enforce the Obligations without a good faith basis following any other Event of Default, and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents). SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against any Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of 103 exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors of all or any part of the obligations of the other Borrower Parties, and of all other circumstances bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may 104 hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person 105 which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrowers of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrowers shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrowers under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Properties by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers or other Person to any other or further notice or demand in similar or other circumstances. SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrowers to Lender (other than the Note) unless the Borrowers request in writing that same be returned. Upon such request and at the Borrowers' expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. 106 SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). Notices shall be addressed as follows: If to the Borrowers or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Morris, Manning & Martin, LLP 3343 Peachtree Rd., NE 1600 Atlanta Financial Center Atlanta, Georgia 30326 Attention: Thomas Gryboski, Esq. Facsimile: (404) 365-9532 If to Lender: c/o Merrill Lynch & Co. Four World Financial Center New York, New York 10080 Attention: Robert Spinna Facsimile: (212) 449-7684 With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn: Robert L. Boyd, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness 107 of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrowers to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its 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 and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, 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. SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED 108 AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrowers may not assign their rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties, represent, warrant and acknowledge that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrowers, on behalf of themselves and all Borrower Parties, also acknowledge and agree that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any other Person. The relationship between Lender and the Borrowers is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and any other Borrower are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any 109 case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. Each of the Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any of the Borrowers or Affiliates thereof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrowers and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN 110 DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but 111 one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrowers have been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrowers shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrowers in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, Lender shall have the right, at the Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [signatures follow on next page] 112 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWERS: [LODGIAN ENTITIES] By:________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: _________________________________ Name: Title: LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate Regarding Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.29 - Condominium Property Documents Schedule 4.30 - Ground Leases Schedule 5.7 - O&M Plans Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work Schedule 6.7 - Reserve Funding Condition List of Exhibits And Schedules EXHIBIT A PROPERTIES
CHAIN/NAME CITY ST ---------- ---- -- Holiday Inn Express Dothan (ex Hampton) AL Quality Inn Dothan AL Holiday Inn Express Gadsden (Attalla) AL Holiday Inn Sheffield AL Holiday Inn Pensacola FL Holiday Inn Express Pensacola (ex Hampton) FL Holiday Inn Winter Haven FL Holiday Inn Brunswick GA Holiday Inn Valdosta GA Fairfield Inn Valdosta GA Crowne Plaza Cedar Rapids IA Holiday Inn Florence KY Clarion Hotel Louisville KY Holiday Inn Silver Spring MD Holiday Inn Lansing MI Holiday Inn St. Louis North MO Holiday Inn Grand Island NY Holiday Inn Hamburg NY Holiday Inn Jamestown NY Holiday Inn Select Niagara Falls NY Four Points Sheraton Niagara Falls NY Holiday Inn Pittsburgh (Pkwy East) PA Fairfield Inn Jackson TN French Quarter Suites Memphis TN Holiday Inn Memphis TN Holiday Inn Austin TX Fairfield Inn Colchester VT Holiday Inn Clarksburg (Bridgeport) WV Holiday Inn Morgantown WV
Exhibit A EXHIBIT B ENVIRONMENTAL REPORTS Exhibit B EXHIBIT C FRANCHISE AGREEMENTS Exhibit C EXHIBIT D AGGREGATE ALLOCATED LOAN AMOUNT ALLOCATED LOAN AMOUNT Exhibit D EXHIBIT E MANAGEMENT AGREEMENTS Exhibit E EXHIBIT F [RESERVED] Exhibit F EXHIBIT G PROPERTY IMPROVEMENT PLANS (Describe) Exhibit G EXHIBIT H [RESERVED] Exhibit H EXHIBIT I ACCEPTABLE FRANCHISORS Exhibit I EXHIBIT J PROPERTY CONDITION REPORTS Exhibit J EXHIBIT K ZONING REPORTS Exhibit K EXHIBIT L CERTIFICATE REGARDING WORK RESERVES Exhibit L SCHEDULE 1 BORROWERS Schedule 1 SCHEDULE 2.4 AMORTIZATION SCHEDULE Schedule 2.4 SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan and Security Agreement 2. Note A 3. Note B 4. Mortgages 5. Note and Mortgage Consolidation, Spreader, Severance and Modification Agreement 6. Assignments of Leases 7. Assignments of Agreements, Licenses, Permits and Contracts 8. Assignments of Hotel Management Agreements 9. Guaranty of Recourse Obligations 10. Environmental Indemnity 11. Deposit Account Agreements 12. Assignment of Rate Cap 13. Financing Statements 14. Cash Management Agreement 15. Borrower's Closing Certificate under Section 3.1(D) 16. Closing Certificate of Lodgian, Inc. re: financial data 17. Cooperation Agreement 18. Agreement Regarding Right of First Offer 19. Contribution Agreement 20. Post Closing Agreement Schedule 3.1(A) SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES Schedule 4.1(C) SCHEDULE 4.2 CONSENTS None Schedule 4.2 SCHEDULE 4.5 CONDEMNATION PROCEEDINGS Schedule 4.5 SCHEDULE 4.5(A) RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER Schedule 4.5(A) SCHEDULE 4.7(B) RENT ROLL Schedule 4.7(B) SCHEDULE 4.7(E) FRANCHISE DEFAULTS
HOTEL CITY, STATE REASON FOR DEFAULT ----- ----------- ------------------ ~~Holiday Inn Morgantown Morgantown, WV OSI failure Fairfield Inn Jackson Jackson, TN GSS Red Zone~~
Schedule 4.7(E) SCHEDULE 4.9 LITIGATION None Schedule 4.9 SCHEDULE 4.14 ERISA PLANS 1. Lodgian, Inc. 401(k) Plan. 2. Lodgian, Inc. Employee Health & Welfare Plan. Schedule 4.14 SCHEDULE 4.20 INSURANCE Schedule 4.20 SCHEDULE 4.28 COLLECTIVE BARGAINING AGREEMENTS
HOTEL BORROWER UNION ----- -------- ----- Holiday Inn - Niagara Falls, NY Servico New York, Inc. Hotel Employees and Restaurant Employees Union Local 4 Holiday Inn - Jamestown, NY Servico Jamestown, Inc. Hotel Employees and Restaurant Employees Union, Local 4
Schedule 4.28 SCHEDULE 4.29 CONDOMINIUM PROPERTY DOCUMENTS 1. Declaration for Silver Spring Plaza Condominium, dated as of April 21, 2000, by Servico Maryland, Inc. 2. Articles of Incorporation for Council of Unit Owners of Silver Spring Plaza Condominium, Inc., dated as of June 22, 2000. 3. By-Laws of Council of Unit Owners of Silver Spring Plaza Condominium. 4. Silver Spring Plaza Condominium, Unanimous Written Consent of the Board of Directors in Lieu of the Annual Meeting, scheduled to be held on May 4, 2000. 5. Resignation and Appointment of Directors of the Counsel of Unit Owners of Silver Spring Plaza Condominium, effective as of May 4, 2000. Schedule 4.29 SCHEDULE 4.30 GROUND LEASES Schedule 4.30 SCHEDULE 5.7 O&M PLANS Schedule 5.7 SCHEDULE 5.14 MATERIAL AGREEMENTS Agreement between PFG Broadline and Lodgian, Inc. dated July 1, 2003. Agreement between Harbor Linen and Lodgian, Inc. dated March 1, 2002. Various agreements between the Borrowers and On Command Video Corporation. Guest Room Commitment between Servico New York, Inc. and Seneca Niagara Falls Gaming Corporation dated January 21, 2003. Schedule 5.14 SCHEDULE 6.5 REQUIRED CAPITAL IMPROVEMENTS Schedule 6.6 SCHEDULE 6.6 ENVIRONMENTAL WORK Schedule 6.6 SCHEDULE 6.7 RESERVE FUNDING CONDITIONS 1. The Borrowers shall have submitted to Lender a written request for disbursement at least five (5) days prior to the date on which the Borrowers request such disbursement be made, specifying the specific Work or for which the disbursement is requested and such other information (such as the price of materials and the cost of contracted labor or other services) as Lender may reasonably require, which request must be on a form specified or approved by Lender; 2. On the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured; 3. Lender shall have received a certificate from the Borrowers stating that all Work at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with any plans and specifications approved by Lender and all legal requirements of any Governmental Authority having jurisdiction over the Property, such certificate to be accompanied, in either case, by a copy of any license, permit or other approval by any Governmental Authority required to commence (only for the first advance with respect to each distinct item of work) and/or complete (only for the final advance with respect to each distinct item of work) such Work; 4. Lender shall have received a certificate from the Borrowers stating that each Person that supplied materials or labor in connection with the Work to be funded by the requested disbursement has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by copies of invoices for all items or materials purchased and all contracted labor or services provided, and, with respect to Work relating to mold, a certificate of a Certified Industrial Hygienist that the such Work has been completed in conformity with applicable mold clean-up procedures promulgated by the applicable Governmental Authority within the state in which the applicable Property is located, or, if no such procedures exist, in conformity with the New York City Department of Health or the United States Environmental Protection guidelines for mold related clean-up work; 5. Lender shall have received appropriate lien waivers (including final lien waivers) from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $10,000 for completion of its work or delivery of its materials, which lien waivers shall conform to the requirements of applicable law and shall cover all work performed and materials supplied (including equipment and fixtures) for a Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current disbursement request; and 6. At Lender's option, Lender shall have received a title search for the Property effective to the date of the disbursement, which search shows that no mechanic's or materialmen's liens or other Liens of any nature have been placed against the Property since the date of recordation of the applicable Mortgage and that title to the Property is free and clear of all Liens (other than the Permitted Encumbrances). Schedule 6.7 EX-10.21.2 4 g87458a3exv10w21w2.txt EX-10.21.2 PROMISSORY NOTE A EXHIBIT 10.21.2 FORM OF PROMISSORY NOTE A JUNE __, 2004 FOR VALUE RECEIVED, the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "BORROWER", and collectively, "BORROWERS"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"), at Four World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of ______________________________________________ _________________, representing Component A, with interest on the unpaid principal balance from the date of this Note, until paid, at the Component A Rate in effect from time to time under the Loan Agreement (hereinafter defined). This Promissory Note may be referred to herein as the "NOTE," and the loan evidenced hereby may be referred to herein as the "LOAN." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement. PAYMENTS OF PRINCIPAL AND INTEREST. Borrowers shall make payments of principal and interest on the outstanding principal balance of this Note in accordance with the terms and provisions of Sections 2.4 and 2.5 of the Loan Agreement. The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon (including interest through the end of the Interest Accrual Period then in effect) and all other amounts due hereunder and under the other Loan Documents (collectively, the "DEBT") if not sooner paid (and unless Borrowers shall extend the term of the Loan for the First Extension Term, the Second Extension Term, or all Extension Terms) shall be due and payable on June 30, 2006 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of Section 2.5(B) of the Loan Agreement, Borrowers may extend the term of the Loan for the Extension Terms. The Scheduled Maturity Date, as the same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B) of the Loan Agreement), or such other date on which the final payment of the Debt becomes due hereunder or under the Loan Agreement or the other Loan Documents, whether at such stated maturity date, by acceleration, or otherwise, shall be referred to herein as the "MATURITY DATE". Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "LOAN AGREEMENT"), among Borrowers and Lender, to which reference is hereby made for the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity accelerated. This Note is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as of the date hereof (as amended, modified or restated from time to time, collectively, the "INSTRUMENT"), executed by the Borrower named therein, encumbering such Borrower's fee simple or leasehold interest in and to certain real property as more particularly described therein (collectively, the "PROPERTY"). This Note, the Loan Agreement, the Instrument, and all other documents or instruments given by Borrowers or any one of them or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Note may be referred to as the "LOAN DOCUMENTS." PREPAYMENT; PREPAYMENT CONSIDERATION. Borrowers shall have no right to prepay the Loan in whole or in part except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the continuance of any Event of Default, at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Note or under any of the other Loan Documents shall occur, then Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late charge in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Note and all other Obligations shall bear interest until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of (i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under this Note. Borrowers agree that such late charge and Default Rate of interest are reasonable and do not constitute a penalty. INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (i) the provisions of this subsection shall govern and control; (ii) Borrowers shall not be obligated to pay any Excess 2 Interest; (iii) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (iv) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (v) Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Note, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of Borrowers or their successors or assigns to pay the outstanding principal balance of this Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Instrument or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of any Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note shall be binding upon Borrowers and their successors and assigns. EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. 3 ASSIGNMENT AND TRANSFER OF NOTE. Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Note, the Loan Agreement, the Instrument and any or all of the other Loan Documents, subject to the terms of the Loan Agreement. Lender shall be released of any obligations accruing after the date of such assignment or transfer to the extent that the same are so assigned or transferred, and the rights and obligations of "LENDER" hereunder shall become the rights and obligations of the transferee holder. Lender agrees to provide Borrowers with notice of any such assignment; provided, however, that no Borrower's consent shall be required in connection with any such assignment and no failure or delay by Lender in delivering such notice shall limit the effectiveness of such assignment. LIMITATION ON RECOURSE. The obligations of Borrowers hereunder are subject to limitations on recourse as provided in Article XII of the Loan Agreement. This provision shall not limit any rights of Lender under the Guaranty of Recourse Obligations or the Environmental Indemnity, each dated as of the date hereof. ATTORNEYS' FEES, COSTS OF COLLECTION. Borrowers shall pay to Lender on demand all reasonable out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in the State of New York and any applicable laws of the United States of America. TIME OF ESSENCE. Subject to the terms of the Loan Agreement, time shall be of the essence as to all of the terms, covenants and conditions of this Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, Borrowers shall be required to make such payment on the next succeeding Business Day. JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of Borrowers hereunder shall be joint and several. [NO ADDITIONAL TEXT ON THIS PAGE] 4 IN WITNESS WHEREOF, the undersigned Borrowers have executed this Promissory Note as of the date first written above. BORROWERS: [LODGIAN ENTITIES} By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above EX-10.21.3 5 g87458a3exv10w21w3.txt EX-10.21.3 PROMISSORY NOTE B EXHIBIT 10.21.3 FORM OF PROMISSORY NOTE B ______________ JUNE __, 2004 FOR VALUE RECEIVED, the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "BORROWER", and collectively, "BORROWERS"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"), at Four World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of __________________________________________________ __________________________________________________________________, representing Component B, with interest on the unpaid principal balance from the date of this Note, until paid, at the Component B Rate in effect from time to time under the Loan Agreement (hereinafter defined). This Promissory Note may be referred to herein as the "NOTE," and the loan evidenced hereby may be referred to herein as the "LOAN." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement. PAYMENTS OF PRINCIPAL AND INTEREST. Borrowers shall make payments of principal and interest on the outstanding principal balance of this Note in accordance with the terms and provisions of Sections 2.4 and 2.5 of the Loan Agreement. The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon (including interest through the end of the Interest Accrual Period then in effect) and all other amounts due hereunder and under the other Loan Documents (collectively, the "DEBT") if not sooner paid (and unless Borrowers shall extend the term of the Loan for the First Extension Term, the Second Extension Term, or all Extension Terms) shall be due and payable on June 30, 2006 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of Section 2.5(B) of the Loan Agreement, Borrowers may extend the term of the Loan for the Extension Terms. The Scheduled Maturity Date, as the same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B) of the Loan Agreement), or such other date on which the final payment of the Debt becomes due hereunder or under the Loan Agreement or the other Loan Documents, whether at such stated maturity date, by acceleration, or otherwise, shall be referred to herein as the "MATURITY DATE". Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "LOAN AGREEMENT"), among Borrowers and Lender, to which reference is hereby made for the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity accelerated. This Note is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as of the date hereof (as amended, modified or restated from time to time, collectively, the "INSTRUMENT"), executed by the Borrower named therein, encumbering such Borrower's fee simple or leasehold interest in and to certain real property as more particularly described therein (collectively, the "PROPERTY"). This Note, the Loan Agreement, the Instrument, and all other documents or instruments given by Borrowers or any one of them or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Note may be referred to as the "LOAN DOCUMENTS." PREPAYMENT; PREPAYMENT CONSIDERATION. Borrowers shall have no right to prepay the Loan in whole or in part except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the continuance of any Event of Default, at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Note or under any of the other Loan Documents shall occur, then Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late charge in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Note and all other Obligations shall bear interest until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of (i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under this Note. Borrowers agree that such late charge and Default Rate of interest are reasonable and do not constitute a penalty. INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (i) the provisions of this subsection shall govern and control; (ii) Borrowers shall not be obligated to pay any Excess 2 Interest; (iii) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (iv) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (v) Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Note, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of Borrowers or their successors or assigns to pay the outstanding principal balance of this Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Instrument or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of any Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note shall be binding upon Borrowers and their successors and assigns. EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. 3 ASSIGNMENT AND TRANSFER OF NOTE. Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Note, the Loan Agreement, the Instrument and any or all of the other Loan Documents, subject to the terms of the Loan Agreement. Lender shall be released of any obligations accruing after the date of such assignment or transfer to the extent that the same are so assigned or transferred, and the rights and obligations of "LENDER" hereunder shall become the rights and obligations of the transferee holder. Lender agrees to provide Borrowers with notice of any such assignment; provided, however, that no Borrower's consent shall be required in connection with any such assignment and no failure or delay by Lender in delivering such notice shall limit the effectiveness of such assignment. LIMITATION ON RECOURSE. The obligations of Borrowers hereunder are subject to limitations on recourse as provided in Article XII of the Loan Agreement. This provision shall not limit any rights of Lender under the Guaranty of Recourse Obligations or the Environmental Indemnity, each dated as of the date hereof. ATTORNEYS' FEES, COSTS OF COLLECTION. Borrowers shall pay to Lender on demand all reasonable out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in the State of New York and any applicable laws of the United States of America. TIME OF ESSENCE. Subject to the terms of the Loan Agreement, time shall be of the essence as to all of the terms, covenants and conditions of this Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, Borrowers shall be required to make such payment on the next succeeding Business Day. JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of Borrowers hereunder shall be joint and several. [NO ADDITIONAL TEXT ON THIS PAGE] 4 IN WITNESS WHEREOF, the undersigned Borrowers have executed this Promissory Note as of the date first written above. BORROWERS: [LODGIAN ENTITIES] By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above EX-10.21.4 6 g87458a3exv10w21w4.txt EX-10.21.4 GUARANTY OF RECOURSE OBLIGATIONS EXHIBIT 10.21.4 FORM OF GUARANTY OF RECOURSE OBLIGATIONS This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of June __, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"), having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at 4 World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "LENDER"). R E C I T A L S: A. Pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as the same may be amended, modified, supplemented or restated from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein (each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has agreed to make a loan to Borrowers in the aggregate original principal amount of up to ______________________________________________________ (the "LOAN"), subject to the terms and conditions of the Loan Agreement; B. As a condition to Lender's making the Loan, Lender is requiring that Guarantor execute and deliver to Lender this Guaranty; and C. Guarantor hereby acknowledges that Guarantor holds a direct and/or indirect ownership interest in each Borrower and that Guarantor will materially benefit from Lender's agreeing to make the Loan. NOW, THEREFORE, in consideration of the premises set forth herein and as an inducement for and in consideration of the agreement of Lender to make the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor hereby agrees, covenants, represents and warrants to Lender as follows: SECTION 1. DEFINITIONS. All capitalized terms used and not defined herein shall have the respective meanings given such terms in the Loan Agreement. SECTION 2. GUARANTY. (a) Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) hereby irrevocably, absolutely and unconditionally assumes liability for, guarantees payment to Lender of, and agrees to pay, protect, defend, indemnify and save harmless Lender from and against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter defined). The obligations which are the subject of the guaranty referred to in this Section 2 are hereinafter collectively referred to as the "GUARANTEED OBLIGATIONS". (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used in this Guaranty shall mean all obligations and liabilities of Borrowers for which Borrowers shall be personally liable under the provisions of Section 12.2 of the Loan Agreement. (c) All sums payable to Lender under this Guaranty shall be payable on demand and without reduction for any offset, claim, counterclaim or defense. SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to Lender as follows (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Guaranty): (a) DUE EXECUTION. This Guaranty has been duly executed and delivered by Guarantor. (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, or application of general principles of equity in any legal proceeding. (c) NO VIOLATION. The execution, delivery and performance by Guarantor of its obligations under this Guaranty do not violate any law, regulation, order, writ, injunction or decree of any court or governmental body, agency or other instrumentality applicable to Guarantor, or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the assets of Guarantor pursuant to the terms of any mortgage, indenture, agreement or instrument to which Guarantor is a party or by which it or any of its properties is bound. Guarantor is not in default under any other guaranty which it has provided to Lender. (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan Agreement, there are no actions, suits or proceedings at law or at equity, pending or, to Guarantor's knowledge, threatened against or affecting Guarantor or which involve or could reasonably be expected to involve the validity or enforceability of this Guaranty or which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. Guarantor is not in default beyond any applicable grace or cure period with respect to any order, writ, injunction, decree or demand of any Governmental Authority which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. (e) CONSENTS. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities (collectively, the "CONSENTS") that are required in connection with the valid execution, delivery and performance by Guarantor of this Guaranty have been obtained and Guarantor agrees that all Consents required in connection with the carrying out or performance of any of Guarantor's obligations under this Guaranty will be obtained when required. (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial statements of Guarantor heretofore delivered to Lender fairly present the financial condition of Guarantor as of 2 the respective dates thereof, and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. None of the aforesaid financial statements or any certificate or statement furnished to Lender by or on behalf of Guarantor in connection with the transactions contemplated hereby, and none of the representations and warranties in this Guaranty contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading. Guarantor is not insolvent within the meaning of the Bankruptcy Code or any other applicable law, code or regulation and the execution, delivery and performance of this Guaranty will not render Guarantor insolvent. SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the benefit of Lender that Guarantor will deliver to Lender each of the financial statements required to be delivered pursuant to Section 5.1 of the Loan Agreement. SECTION 5. INTENTIONALLY DELETED. SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR. (a) The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Deeds of Trust or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any Borrower, Guarantor or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrowers under the Note, the Loan Agreement, the Deeds of Trust or any other Loan Documents or Guarantor under this Guaranty, or any setoff, counterclaim, and irrespective of any other circumstances which might otherwise limit recourse against Guarantor by Lender or constitute a legal or equitable discharge or defense of a guarantor or surety. Lender may enforce the obligations of Guarantor under this Guaranty by a proceeding at law, in equity or otherwise, independent of any loan foreclosure or similar proceeding or any deficiency action against Borrowers or any other Person at any time, either before or after an action against the Properties or any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION. Guarantor waives diligence, notice of acceptance of this Guaranty, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Deeds of Trust or any other Loan Documents, against Guarantor, Borrowers or any other Person, any right to require a proceeding first against Borrowers or any other Person, or to exhaust any security (including, without limitation, the Properties or any of them or any part thereof) for the performance of the Guaranteed Obligations or any other obligations of Borrowers or any other Person, or any protest, presentment, notice of default (except as may be expressly required under the Loan Documents) or other notice or demand whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not be discharged of its obligations hereunder. (b) The obligations of Guarantor under this Guaranty, and the rights of Lender to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: 3 (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower, any Property or any part thereof, Guarantor or any other Person; (ii) any failure by Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Loan Agreement, or any other Loan Documents, or any document or instrument relating thereto; (iii) except (A) with respect to activities occurring after the date of a Permitted Assumption or, (B) activities relating to a Released Property after the date of a Release with respect thereto, the sale, transfer or conveyance of any Property or any interest therein to any Person, whether now or hereafter having or acquiring an interest in any Property or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against any Borrower or any Property or any interest therein; (iv) the conveyance to Lender, any Affiliate of Lender or Lender's nominee of any Property or any interest therein by a deed-in-lieu of foreclosure; (v) the release of any Borrower or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise; (vi) the release in whole or in part of any collateral for any or all Guaranteed Obligations or for the Loan or any portion thereof; or (vii) the exercise by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan Documents, including, without limitation, foreclosure or similar remedies under any pledge agreement encumbering Mezzanine Borrower's interest in any General Partner, any Member, and/or any Borrower except with respect to actions taken by the Mezzanine Lender following the Mezzanine Lender succeeding to the interests of the Mezzanine Borrowers in and to the Borrowers. (c) Except as otherwise specifically provided in this Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an action brought by Lender to enforce this Guaranty based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise. (d) Lender may deal with Borrowers and Affiliates of Borrowers in the same manner and as freely as if this Guaranty did not exist and shall be entitled, among other things, to grant Borrowers or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Lender, at any time and from time to time, without terminating, affecting or impairing the validity of this Guaranty or the obligations of Guarantor hereunder. (e) No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with 4 respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Loan Agreement, the Deeds of Trust or the other Loan Documents or any amendment, modification or other change of any legal requirement shall in any way alter, impair or affect any of the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan Documents are modified with Lender's consent, the Guaranteed Obligations shall automatically be deemed modified to include such modifications. (f) Lender may proceed to protect and enforce any or all of its rights under this Guaranty by suit in equity or action at law, whether for the specific performance of any covenants or agreements contained in this Guaranty or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Guarantor. Each and every remedy of Lender shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. (g) No waiver shall be deemed to have been made by Lender of any rights hereunder unless the same shall be in writing and signed by Lender, and any such waiver shall be a waiver only with respect to the specific matter involved and shall in no way impair the rights of Lender or the obligations of Guarantor to Lender in any other respect or at any other time. (h) At the option of Lender, Guarantor may be joined in any action or proceeding commenced by Lender against Borrowers in connection with or based upon the Note, the Loan Agreement, the Deeds of Trust or any other Loan Documents and recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor to the extent of Guarantor's liability hereunder, without any requirement that Lender first assert, prosecute or exhaust any remedy or claim against Borrowers or any other Person, or any security for the obligations of Borrowers or any other Person. (i) Guarantor agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Borrowers or Guarantor to Lender and such payment is rescinded or must otherwise be returned by Lender (as determined by Lender in its sole and absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower or Guarantor, all as though such payment had not been made. (j) In the event that Guarantor shall advance or become obligated to pay any sums under this Guaranty or in connection with the Guaranteed Obligations or in the event that for any reason whatsoever any Borrower or any subsequent owner of any Property or any part thereof is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to the lien, the time of payment and in all other respects to all sums, including principal and interest and other amounts, at any time owed to Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive payment thereof until all principal, interest and other sums due pursuant to the Loan Documents have been paid in full. Nothing herein contained is intended or shall be construed to give Guarantor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Lender 5 in or to any collateral for the Loan, notwithstanding any payments made by Guarantor under this Guaranty, until the actual and irrevocable receipt by Lender of payment in full of all principal, interest and other sums due with respect to the Loan or otherwise payable under the Loan Documents. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when any such sums due and owing to Lender shall not have been fully paid, such amount shall be paid by Guarantor to Lender for credit and application against such sums due and owing to Lender. The foregoing shall not prohibit Borrowers from using the proceeds of the Loan for any permitted use under the Loan Agreement, including, without limitation, the making of distributions to Guarantor. (k) Guarantor's obligations hereunder shall survive a foreclosure, delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or similar proceeding involving any Property or any part thereof and the exercise by Lender of any of all of its remedies pursuant to the Loan Documents. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Guarantor under this Guaranty shall survive for a period of two (2) years following payment in full of the Obligations in accordance with the terms of the Loan Documents, provided, however, in the event that any Guaranteed Obligations or liabilities of the Guarantor under this Guaranty shall have arisen prior to the expiration of such period, then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Guarantor hereunder shall survive. SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED, AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN INSTRUMENT SIGNED BY LENDER AND GUARANTOR. SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor, and its successors and assigns, may not be assigned or delegated by Guarantor and shall inure to the benefit of Lender and its successors and assigns. Lender shall have the right to assign this Guaranty and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. All references to "Lender" hereunder shall be deemed to include the successors and assigns of Lender and the parties hereto acknowledge that actions taken by Lender hereunder may be taken by Lender's agents and by the agents of the successors and assigns of Lender. SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the City and County of New York or in the Courts of the United States of America located in the Southern District of New York, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Guarantor at its address set forth on the first page hereof. Nothing in this Section 9, however, shall affect the right of Lender to serve legal process in any other manner permitted by law or affect the 6 right of Lender to bring any suit, action or proceeding against Guarantor or its property in the courts of any other jurisdictions. SECTION 10. SECTION HEADINGS. The headings of the sections and paragraphs of this Guaranty have been inserted for convenience of reference only and shall in no way define, modify, limit or amplify any of the terms or provisions hereof. SECTION 11. SEVERABILITY. Any provision of this Guaranty which may be determined by any competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Guarantor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH. SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL LIABILITY. (a) The obligations of Guarantor hereunder are separate and distinct from, and in addition to, the obligations of Guarantor now or hereafter arising under the other guaranties pursuant to which Guarantor has guaranteed the payment and performance of certain other obligations of Borrowers described therein. (b) If there is more than one entity comprising Guarantor, all references to Guarantor herein shall be to Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) or any one or more of them. All obligations and liabilities of Guarantor hereunder are in addition to, not in lieu of and are independent of: (i) all obligations of Borrowers under any other Loan Document, including the Note and the Loan Agreement; and (ii) any obligation of Guarantor under any other Loan Document to which Guarantor is a party. (c) If there is more than one entity comprising Guarantor, all obligations of Guarantor hereunder shall be joint and several. SECTION 14. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder to Lender or Guarantor or which are given to Lender or Guarantor with respect to this Guaranty shall be in writing and shall be delivered to Lender at the address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the address set forth on the first page hereof, each in the manner provided in Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less than ten (10) days' prior written notice of any change in the location of Guarantor's principal place of business. SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its execution hereof acknowledges receipt of true copies of all of the Loan Documents, the terms and conditions of which are hereby incorporated herein by reference. 7 SECTION 16. INTEREST; EXPENSES. (a) If Guarantor fails to pay all or any sums due hereunder within ten (10) days of demand by Lender, the amount of such sums payable by Guarantor to Lender shall bear interest from the date of demand until paid at the Default Rate in effect from time to time. (b) Guarantor hereby agrees to pay all reasonable out of pocket costs, charges and expenses, including, without limitation, reasonable attorneys' fees and disbursements, that may be incurred by Lender in enforcing the covenants, agreements, obligations and liabilities of Guarantor under this Guaranty. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written. GUARANTOR: LODGIAN, INC., a Delaware corporation By:________________________ Name: Daniel E. Ellis Title: Secretary EX-10.22.1 7 g87458a3exv10w22w1.txt EX-10.22.1 MEZZANINE LOAN AGREEMENT EXHIBIT 10.22.1 FORM OF MEZZANINE LOAN AGREEMENT (FLOATING RATE POOL) DATED AS OF JUNE ___, 2004 BETWEEN LODGIAN MEZZANINE FLOATING, LLC AS BORROWER AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS.................................................................... 1 Section 1.1 Certain Defined Terms.......................................... 1 Section 1.2 Accounting Terms............................................... 21 Section 1.3 Other Definitional Provisions.................................. 21 ARTICLE II TERMS OF THE LOAN............................................................. 22 Section 2.1 Loan........................................................... 22 Section 2.2 Interest....................................................... 22 Section 2.3 Interest Rate Cap Agreement.................................... 23 Section 2.4 Payments....................................................... 24 Section 2.5 Maturity....................................................... 25 Section 2.6 Prepayment..................................................... 27 Section 2.7 Outstanding Balance............................................ 28 Section 2.8 Taxes.......................................................... 28 Section 2.9 Reasonableness of Charges...................................... 28 Section 2.10 Funding Losses/Change in Law Etc............................... 28 Section 2.11 Servicing/Special Servicing.................................... 30 Section 2.12 Mortgage Loan Event of Default................................. 30 Section 2.13 Mezzanine Lender Approvals..................................... 30 ARTICLE III CONDITIONS TO LOAN........................................................... 31 Section 3.1 Conditions to Funding of the Loan on the Closing Date.......... 31 ARTICLE IV REPRESENTATIONS AND WARRANTIES................................................ 35 Section 4.1 Organization, Powers, Capitalization, Good Standing, Business.. 35 Section 4.2 Authorization of Borrowing, etc................................ 36 Section 4.3 Financial Statements........................................... 37 Section 4.4 Indebtedness and Contingent Obligations........................ 37 Section 4.5 Title to the Properties and Collateral......................... 37 Section 4.6 Zoning; Compliance with Laws................................... 37 Section 4.7 Leases; Agreements............................................. 38 Section 4.8 Condition of the Properties.................................... 39 Section 4.9 Representations and Warranties of the Mortgage Borrowers....... 40 Section 4.10 Payment of Taxes............................................... 40 Section 4.11 Adverse Contracts.............................................. 40 Section 4.12 Performance of Agreements...................................... 40 Section 4.13 Governmental Regulation........................................ 40 Section 4.14 Employee Benefit Plans......................................... 40 Section 4.15 Broker's Fees.................................................. 40
i Section 4.16 Litigation; Adverse Facts.............................. 41 Section 4.17 Solvency............................................... 41 Section 4.18 Disclosure............................................. 41 Section 4.19 Use of Proceeds and Margin Security.................... 41 Section 4.20 Security Interests..................................... 42 Section 4.21 Investments............................................ 42 Section 4.22 Defaults............................................... 42 Section 4.23 No Plan Assets......................................... 42 Section 4.24 Governmental Plan...................................... 42 Section 4.25 Not Foreign Person..................................... 42 Section 4.26 No Collective Bargaining Agreements.................... 42 Section 4.27 Bankruptcy............................................. 42 Section 4.28 No Prohibited Persons.................................. 43 ARTICLE V COVENANTS OF BORROWER PARTIES.......................................... 43 Section 5.1 Financial Statements and Other Reports................. 43 Section 5.2 Existence; Qualification............................... 48 Section 5.3 Payment of Impositions and Claims...................... 48 Section 5.4 Maintenance of Insurance............................... 48 Section 5.5 Operation and Maintenance of the Properties; Casualty.. 49 Section 5.6 Inspection............................................. 50 Section 5.7 O&M Plan............................................... 51 Section 5.8 Intentionally Deleted.................................. 51 Section 5.9 Compliance with Laws and Contractual Obligations....... 51 Section 5.10 Further Assurances..................................... 51 Section 5.11 Performance of Agreements and Leases................... 51 Section 5.12 Leases................................................. 51 Section 5.13 Management; Franchise Agreements....................... 52 Section 5.14 Material Agreements.................................... 55 Section 5.15 Deposits; Application of Receipts...................... 55 Section 5.16 Estoppel Certificates.................................. 55 Section 5.17 Indebtedness........................................... 56 Section 5.18 No Liens............................................... 56 Section 5.19 Contingent Obligations................................. 56 Section 5.20 Restriction on Fundamental Changes..................... 56 Section 5.21 Transactions with Related Persons...................... 57 Section 5.22 Bankruptcy, Receivers, Similar Matters................. 57 Section 5.23 ERISA.................................................. 57 Section 5.24 Press Release.......................................... 58 Section 5.25 Ground Leases.......................................... 58 Section 5.26 Mortgaged Condominium Property......................... 61 Section 5.27 Lender's Expenses...................................... 62 Section 5.28 Distributions.......................................... 62 Section 5.29 Cancellation of Indebtedness; Settlement of Claims..... 62 Section 5.30 Modification of Mortgage Documents..................... 62 Section 5.31 Prohibited Persons..................................... 63

ii ARTICLE VI RESERVES............................................................................ 63 Section 6.1 Security Interest in Reserves; Other Matters Pertaining to Reserves.. 63 Section 6.2 Funds Deposited with Lender.......................................... 64 Section 6.3 FF&E Reserve......................................................... 64 Section 6.4 Capital Improvement Reserve; Required Capital Improvements........... 64 Section 6.5 Hazardous Materials Remediation Reserve.............................. 64 Section 6.6 Conditions to Disbursements from Hazardous Materials Remediation Reserve, Capital Improvement Reserve; Performance of Work............ 65 Section 6.7 Cash Trap Reserve.................................................... 67 Section 6.8 Substitute Cash Management Agreement................................. 67 ARTICLE VII LOCK BOX; CASH MANAGEMENT.......................................................... 67 Section 7.1 Establishment of Lock Box Account.................................... 67 Section 7.2 Application of Funds in Lock Box Account............................. 68 Section 7.3 Application of Funds After Event of Default.......................... 68 Section 7.4 Mortgage Loan Lock Box............................................... 68 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES...................................................... 68 Section 8.1 Event of Default..................................................... 68 Section 8.2 Acceleration and Remedies............................................ 71 Section 8.3 Performance by Lender................................................ 73 Section 8.4 Evidence of Compliance............................................... 74 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS......... 74 Section 9.1 Applicable to the Borrower........................................... 74 Section 9.2 Applicable to the Borrower and Member................................ 76 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS.................................... 77 Section 10.1 Secondary Market Transactions Generally.............................. 77 Section 10.2 Cooperation; Limitations............................................. 78 Section 10.3 Information.......................................................... 78 Section 10.4 Additional Provisions................................................ 79 ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES............... 80 Section 11.1 Restrictions on Transfer and Encumbrance............................. 80 Section 11.2 Transfers of Beneficial Interests in the Borrower.................... 80 Section 11.3 Assumability......................................................... 81 Section 11.4 Release of Collateral................................................ 82 Section 11.5 Intentionally Omitted................................................ 84 Section 11.6 Sale of Building Equipment........................................... 84 Section 11.7 Immaterial Transfers and Easements, etc.............................. 84

iii ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE................................................. 84 Section 12.1 Limitations on Recourse............................................. 84 Section 12.2 Partial Recourse.................................................... 85 Section 12.3 Miscellaneous....................................................... 85 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES................................... 86 Section 13.1 Waivers............................................................. 86 ARTICLE XIV MISCELLANEOUS..................................................................... 88 Section 14.1 Expenses and Attorneys' Fees........................................ 88 Section 14.2 Indemnity........................................................... 88 Section 14.3 Amendments and Waivers.............................................. 89 Section 14.4 Retention of the Borrower's Documents............................... 89 Section 14.5 Notices............................................................. 89 Section 14.6 Survival of Warranties and Certain Agreements....................... 90 Section 14.7 Failure or Indulgence Not Waiver; Remedies Cumulative............... 91 Section 14.8 Marshaling; Payments Set Aside...................................... 91 Section 14.9 Severability........................................................ 91 Section 14.10 Headings............................................................ 91 Section 14.11 APPLICABLE LAW...................................................... 91 Section 14.12 Successors and Assigns.............................................. 92 Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship.. 92 Section 14.14 Reasonableness of Determinations.................................... 92 Section 14.15 Limitation of Liability............................................. 92 Section 14.16 No Duty............................................................. 93 Section 14.17 Entire Agreement.................................................... 93 Section 14.18 Construction; Supremacy of Loan Agreement........................... 93 Section 14.19 Consent to Jurisdiction............................................. 93 Section 14.20 Waiver of Jury Trial................................................ 93 Section 14.21 Counterparts; Effectiveness......................................... 94 Section 14.22 Servicer............................................................ 94 Section 14.23 Obligations of Borrower Parties..................................... 94 Section 14.24 Additional Inspections; Reports..................................... 94

iv LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - [Reserved] Exhibit K - Zoning Reports Schedule 2.4 - Scheduled Mezzanine Principal Payments Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 - ERISA Plans Schedule 4.26 - Collective Bargaining Agreements Schedule 5.14 - Material Agreements i MEZZANINE LOAN AGREEMENT This MEZZANINE LOAN AGREEMENT (this "LOAN AGREEMENT") is dated as of June ___, 2004 and entered into by and between LODGIAN MEZZANINE FLOATING, LLC, a Delaware limited liability company (the "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrower and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. All terms not otherwise defined herein shall have the meaning given such terms in the Mortgage Loan Agreement. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT I. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Mortgage Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCEPTABLE REPLACEMENT CAP" has the meaning set forth in Section 2.3. "ACCOUNT COLLATERAL" means all of the Borrower's right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves, if any, and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the Lock Box Account, all accounts maintained by or for the benefit of Mortgage Lender pursuant to the terms of the Mortgage Loan Documents and any other accounts pledged to Lender pursuant to this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, directors, managing members, or general partners of the entity. "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the Mortgage Loan and the Loan allocated to each Property as set forth on EXHIBIT D. "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Loan and the Mortgage Loan. "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each Property as set forth on EXHIBIT D. "APPLICABLE SPREAD" means 3.4%. "APPROVAL PROCEDURES" has the meaning set forth in Section 2.13(A). "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "ASSIGNMENT OF RATE CAP" means that certain Collateral Assignment of Interest Rate Protection Agreement of even date herewith from the Borrower to Lender, constituting an assignment of the Cap and proceeds therefrom as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain Conditional Assignments of Hotel Management Agreements of even date herewith executed by the Borrower and the applicable Manager, constituting an assignment of each Management Agreement as Collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "BEVERAGE COMPANY" means any Person (other than the Borrower and the Mortgage Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property. "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Condominium Property Documents. 2 "BORROWER" has the meaning set forth in the preamble. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrower, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing offices of the Servicer, and, if the Loan becomes a "specially serviced loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAP" has the meaning set forth in Section 2.3. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1(D) hereof. "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations (including any improvements, repairs or alterations required pursuant to a Property Improvement Plan), FF&E and other capital items (whether paid in cash or property or accrued as liabilities) made by the Mortgage Borrowers that, in conformity with GAAP, would not be included in the Mortgage Borrowers' annual financial statements as an Operating Expense of the Properties. "CAP PROVIDER" has the meaning set forth in Section 2.3. "CAP RESERVE" has the meaning set forth in Section 2.3. "CAP THRESHOLD RATE" has the meaning set forth in Section 2.3. "CASH MANAGEMENT AGREEMENT" means the Mezzanine Cash Management Agreement of even date herewith among the Borrower, Lender, Manager, and Lock Box Account Bank. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. 3 "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan and the consummation of the other transactions contemplated by this Loan Agreement. "CLOSING DATE" means the date on which the Closing occurs. "COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Pledge Agreement, the Cash Management Agreement or the other Loan Documents, including the Account Collateral. "COLLATERAL RELEASE" has the meaning set forth in Section 11.4. "COLLATERAL RELEASE PRICE" has the meaning set forth in Section 11.4. "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "CONDOMINIUM BORROWER" has the meaning given such term in the Mortgage Loan Agreement. "CONDOMINIUM DEFAULT" has the meaning set forth in the Mortgage Loan Agreement. "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. 4 "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. "DEBT SERVICE COVERAGE RATIO" or "DSCR" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the amount of interest (assuming an interest rate equal to the Test Rate) that will be required to be paid over the succeeding twelve (12) months on the Loan and the Mortgage Loan plus principal amortization of the Loan and the Mortgage Loan that would be required in respect of the then outstanding principal amount of the Loan and the Mortgage Loan over the succeeding twelve (12) months based on a twenty-five (25) year amortization schedule, calculated using the Test Rate. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. "DEBT YIELD" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the then outstanding principal balance of the Loan and the Mortgage Loan. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning given such term in the Cash Management Agreement. "DETERMINATION DATE" means the day which is two (2) Eurodollar Business Days prior to the first (1st) day of an Interest Accrual Period; provided that the first (1st) Determination Date shall be two (2) Eurodollar Business Days prior to the Closing Date or, if such date is not a Eurodollar Business Day, the immediately preceding Eurodollar Business Day. The LIBO Rate set on each Determination Date shall be in effect for the Interest Accrual Period immediately following such Determination Date. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. 5 "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "ELIGIBLE ACCOUNT" means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of the Borrower or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of the Borrower or any current or former ERISA Affiliate or (iii) for which the Borrower or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrower and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAWS" shall have the meaning given such term in the Mortgage Loan Agreement. "ENVIRONMENTAL REPORTS" means those certain environmental reports and audits for the Properties as described on EXHIBIT B. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions and which is also a Business Day. "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning given such term in the Mortgage Loan Cash Management Agreement. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. 6 "EXTENSION CAP THRESHOLD RATE" has the meaning set forth in Section 2.5. "EXTENSION NOTICE" has the meaning set forth in Section 2.5. "EXTENSION TERMS" has the meaning set forth in Section 2.5. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning given such term in the Mortgage Loan Cash Management Agreement. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Mortgage Borrowers, or in which the Mortgage Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature whatsoever owned by the Mortgage Borrowers, or in which Mortgage Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. "FF&E RESERVE" means the reserve established pursuant to Section 6.4 of the Mortgage Loan Agreement. "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the Borrower as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FIRST EXTENSION TERM" has the meaning set forth in Section 2.5. "FITCH" means Fitch, Inc. 7 "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrower or its Affiliates, or other causes beyond the reasonable control of the Borrower and/or its Affiliates, but the Borrower's lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrower. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT C and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Mortgage Borrowers, as the case may be, as franchisee, pursuant to which the Mortgage Borrowers, as the case may be, have the right to operate the Properties under names and hotel systems controlled by the applicable Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to any of the Properties or any other successor franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" means, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Mortgage Lender and Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "FUNDING LOSSES" has the meaning set forth in Section 2.10. "FUNDING PARTY" means any bank or other entity, if any, which is indirectly or directly funding Lender with respect to the Loan, in whole or in part, including, without limitation, any direct or indirect assignee of, or participant in, the Loan. "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GROUND LEASE DEFAULT" has the meaning given such term in the Mortgage Loan Agreement. "GROUND LEASED PROPERTIES" has the meaning given such term in the Mortgage Loan Agreement. 8 "GROUND LEASES" has the meaning given such term in the Mortgage Loan Agreement. "GROUND LESSOR" means each of the lessors under the Ground Leases. "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity. "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse Obligations of even date herewith from Guarantor to Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.6 of the Mortgage Loan Agreement. "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Mortgage Borrowers under each of the Ground Leases and under the Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Mortgage Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Mortgage Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3 of the Mortgage Loan Agreement. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties. "INDEBTEDNESS" or "INDEBTEDNESS" means, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, and (v) all obligations of such Person under interest rate swaps, 9 caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of Member, the Borrower, the Mortgage Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of Member, Guarantor, the Borrower, the Mortgage Borrowers or any Affiliate of any of them (except that such individual may be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with Member, Guarantor, the Borrower, the Mortgage Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to Member, the Borrower, the Mortgage Borrowers or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INITIAL TERM" means the period from the Closing Date to the Scheduled Maturity Date. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Mortgage Borrowers pursuant to Section 5.4. "INTEREST ACCRUAL PERIOD" means a period commencing on the first (1st) Business Day of a calendar month and ending on the day immediately prior to the first (1st) Business Day of the next calendar month; provided that the first (1st) Interest Accrual Period means the period from and including the Closing Date to and including the day immediately prior to the first Business Day of the next calendar month. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. "INTEREST RATE" has the meaning set forth in Section 2.2. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. 10 "IRS" means the Internal Revenue Service or any successor thereto. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrower or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation or inquiry unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of the Borrower and Member, with respect to operational issues of any of the Mortgage Borrowers, any of the Properties, or the Borrower; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) the person signing such document or certificate. "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. "LENDER" is defined in the preamble. "LENDER'S CONSULTANT" has the meaning set forth in Section 6.6. "LETTER OF CREDIT" means an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrower shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrower that the institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIBO RATE" means the applicable London interbank offered rate (rounded upwards, if necessary, to the nearest one hundredth (1/100th) of one percent (1%)) expressed as a percentage per annum for deposits in U.S. dollars appearing on Telerate Page 3750 as of 11:00 a.m. (London time) two business days prior to the first day of the applicable Interest Accrual Period and having a maturity equal to the duration of such Interest Accrual Period, provided that, (1) if Telerate Page 3750 is not available for any reason, LIBO Rate for the relevant Interest Accrual Period shall instead be the applicable London interbank offered rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. 11 (London time) two business days prior to the first day of such Interest Accrual Period, and having a remaining term to maturity equal to such Interest Accrual Period, and (2) if no such report is available, LIBO Rate for the relevant interest period shall instead be the rate determined by the Lender to be the rate at which it offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two business days prior to the first day of such Interest Accrual Period, in the approximate amount of its portion of the relevant loan and having a maturity equal to such Interest Accrual Period. LIBO Rate shall be adjusted for Federal Reserve Board reserve requirements. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LLC INTERESTS" has the meaning given such term in the Pledge Agreement. "LOAN" has the meaning set forth in Section 2.1. "LOAN AGREEMENT" means this Mezzanine Loan Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Assignments of Management Agreements, the Pledge Agreement, the Guaranty, the Assignment of Rate Cap, the Financing Statements, the Cash Management Agreement and any and all other documents and agreements from the Borrower, Member, Guarantor or Manager accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mortgage Loan Documents. "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. "LP INTERESTS" has the meaning given such term in the Pledge Agreement. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT E, between each Mortgage Borrower, and the applicable Manager described therein and any management agreement which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT E or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties approved by Lender in accordance with the terms and conditions hereof. "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations, properties, assets or condition (financial or otherwise) of the Borrower, the 12 Mortgage Borrowers or Guarantor, or (B) the impairment of the ability of the Borrower, the Mortgage Borrowers or Guarantor to perform their respective obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due or of Mortgage Lender to enforce or collect any of the obligations under the Mortgage Loan Documents as such obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Mortgage Borrowers, in the aggregate, to pay, or under which any Mortgage Borrower receives in compensation, more than $500,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Mortgage Borrowers, in the aggregate, to pay, or under which any Mortgage Borrower (or all of the Mortgage Borrowers, in the aggregate) receives in compensation, not more than $1,000,000 per annum and (y) which is terminable by the Mortgage Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. "MATERIAL ALTERATION" means any improvement or alteration to any Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget then in effect or which otherwise does not constitute Work. "MATERIAL LEASE" means any Lease of space in a Property which (i) is with an Affiliate of the Mortgage Borrowers, (ii)(a) either provides for annual rent or other payments in an amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, or (iv) obligates the Mortgage Borrowers to make any improvements to the Property either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. "MATURITY DATE" means the Scheduled Maturity Date, as same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B)), or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. 13 "MEMBER" means, as of the date hereof, Lodgian Financing Mezzanine, LLC, a Delaware limited liability company, and thereafter any other entity which hereafter becomes the managing member or sole member of the Borrower under its limited liability company operating agreement. "MEMBERSHIP CERTIFICATES" has the meaning given such term in the Pledge Agreement. "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE LENDER'S PERCENTAGE" means, if the Mortgage Loan remains outstanding at the time of determination, the ratio, expressed as a percentage, that the then outstanding principal balance of the Loan bears to the Aggregate Outstanding Principal Balance, and following satisfaction of the Mortgage Loan, 100%. As of the date hereof Mezzanine Lender's Percentage is 0%. "MINIMUM DEBT YIELD" means (i) prior to the first (1st) anniversary of the Closing Date, 9%, (ii) from the first (1st) anniversary of the Closing Date but prior to the second (2nd) anniversary of the Closing Date, 10%, (iii) during the First Extension Term, 11%, (iv) during the Second Extension Term, 12%, and (v) during the Third Extension Term, 13%. "MINIMUM DSCR" means (i) during the Second Extension Term, 1.30:1.0; and (ii) during the Third Extension Term, 1.35:1.0. "MOODY'S" means Moody's Investors Service. "MORTGAGE BORROWERS" means, collectively, each of the entities identified as owners of Properties set forth on SCHEDULE 4.1(C), provided that, following a Property Release, "MORTGAGE BORROWERS" shall mean each of the Mortgage Borrowers remaining as a party to the Mortgage Loan Agreement and whose Property remains subject to the Mortgages. "MORTGAGE LENDER" means Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as lender under the Mortgage Loan Documents. "MORTGAGE LOAN" means that certain loan in the amount of ___________ from Mortgage Lender to the Mortgage Borrowers. "MORTGAGE LOAN AGREEMENT" means the Loan and Security Agreement between the Mortgage Borrowers and Mortgage Lender. "MORTGAGE LOAN CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even date herewith among Mortgage Borrowers, Mortgage Lender, Manager, and Mortgage Loan Lock Box Account Bank and any replacement thereof entered into with a successor Agent in accordance with the terms thereof. "MORTGAGE LOAN DOCUMENTS" means the documents executed and delivered by the Mortgage Borrowers and certain Affiliates thereof to Mortgage Lender in connection with the Mortgage Loan. 14 "MORTGAGE LOAN LOCK BOX ACCOUNT" means the Lock Box Account established pursuant to the terms of the Mortgage Loan Cash Management Agreement. "MORTGAGE LOAN LOCK BOX ACCOUNT BANK" has the meaning given such term in the Mortgage Loan Agreement for the term "Lock Box Account Bank." "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments of Leases and Security Agreements, (ii) those certain Deeds of Trust, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security Agreements of even date herewith from the applicable Mortgage Borrowers to Mortgage Lender (or deed trustee on behalf of Mortgage Lender, as applicable), constituting Liens on their respective Properties as collateral for the Mortgage Loan as same may be modified or amended from time to time. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA to which the Borrower or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which the Borrower or any Affiliate has any liability, including contingent liability. "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" or "NOI" has the meaning given such term in the Mortgage Loan Agreement. "NON-FLAGGED PROPERTIES" means the Property located at 2144 Madison Avenue, Memphis, Tennessee, prior to such Property becoming subject to a Franchise Agreement. "NOTE" has the meaning set forth in Section 2.1. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrower under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against the Borrower, and the performance of all other terms, conditions and covenants under the Loan Documents. "OPERATING BUDGET" means, collectively, for any period, the Mortgage Borrowers' budgets setting forth the Mortgage Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties for such period, which budgets have been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" has the meaning given such term in the Mortgage Loan Agreement. 15 "OPERATING REVENUES" has the meaning given such term in the Mortgage Loan Agreement. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. "PAYMENT DATE" means the date that is the last day of each calendar month occurring during the term of the Loan (or if such last day is not a Business Day, the immediately preceding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" has the meaning given such term in the Mortgage Loan Agreement. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning given such term in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, 16 (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PLEDGE AGREEMENT" means, that certain Pledge and Security Agreement dated as of the date hereof given by the Borrower, as pledgor, in favor of Lender, as secured party, with respect to 100% of the LLC Interests, 100% of the LP Interests, and 100% of the Stock Interests. "PREPAYMENT CONSIDERATION" means (i) prior to the Payment Date in July 2005, three percent (3%) of the principal amount of the Loan being prepaid, (ii) from the Payment Date in July 2005 but prior to the Payment Date in July 2006, one percent (1%) of the principal amount of the Loan being prepaid and (iii) thereafter, none. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT A, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the applicable Mortgage Borrowers and which shall be encumbered by and are more particularly described in the respective Mortgages; provided that, following a Property Release, "PROPERTIES" and "PROPERTY" means each of the Properties or the Property, as applicable, that remain encumbered by the Mortgages as Collateral for the Mortgage Loan. "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties described on EXHIBIT G and any future Property Improvement Plans required to be implemented by the applicable Franchisor. "PROPERTY RELEASE" has the meaning given such term in the Mortgage Loan Agreement. "RATING AGENCY" means, prior to a Securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization; and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that 17 would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. "RATING CRITERIA" with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" means all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties, received by the Mortgage Borrowers or any Related Person of the Mortgage Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which the Borrower or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE PRICE" has the meaning given such term in the Mortgage Loan Agreement. "RENT ROLLS" has the meaning set forth in Section 3.1. "RENTS" has the meaning given such term in the Mortgages. "REPLACEMENTS" has the meaning given such term in Section 6.4 of the Mortgage Loan Agreement. "RESERVE SUB-ACCOUNTS" has the meaning given such term in Section 7.1 of the Mortgage Loan Agreement. "RESERVES" means the reserves established by or on behalf of Mortgage Lender pursuant to the Mortgage Loan Documents including the reserves established pursuant to Article VI of the Mortgage Loan Agreement, and the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Documents. "RESTORATION" has the meaning given such term in the Mortgage Loan Agreement. "REVPAR" means average room revenues per available room per day. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SALE PROPERTY" and "SALE PROPERTIES" have the meanings given such terms in the Mortgage Loan Agreement. "SCHEDULED MATURITY DATE" means the Payment Date in June 2006. 18 "SCHEDULED MEZZANINE PRINCIPAL PAYMENTS" means the monthly payments of principal for each Payment Date as set forth on Schedule 2.4 attached hereto; which payment amounts were calculated based upon a twenty-five (25) year amortization schedule at an assumed interest rate of eight and four tenths percent (8.4%) per annum. In the event that the amount of principal prepayments on the Loan from Collateral Releases under Section 11.4 or application of casualty insurance proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in the aggregate, from the Closing Date or from the date of the last re-amortization of the Loan under this sentence, Lender shall recalculate the Scheduled Mezzanine Principal Payments based upon the then remaining principal amount of the Loan and the foregoing assumptions and deliver a revised Schedule 2.4 to the Borrower, which revised schedule shall replace Schedule 2.4 hereto in its entirety. "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" has the meaning given such term in the Mortgage Loan Agreement. "SECOND EXTENSION TERM" has the meaning set forth in Section 2.5(B). "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" means a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer or servicers selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEE" has the meaning set forth in Section 2.11. "SPECIFIED APPROVAL" means any request for Lender approval required to be submitted by the Borrower under Section 5.1(D) [Budgets]; Section 5.5(A) [Material Alterations]; Section 5.12 [Leases]; Section 5.13 [Management/Franchise Agreements]; Section 11.1 [Transfers]; or Section 11.3 [Assumptions]. "STOCK INTERESTS" has the meaning given such term in the Pledge Agreement. "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period and (iii) a calculation of the Debt Service Coverage Ratio and the Debt Yield for the applicable period (which shall not be 19 binding on Lender), and (iv) such other financial reports as the subject entity shall routinely and regularly prepare. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TEST RATE" means an interest rate equal to the greater of (x) the then current yield on the ten (10) year United States Treasury Note plus the Test Rate Spread and (y) the then current LIBO Rate plus the Test Rate Spread. "TEST RATE SPREAD" means 3.40%. "THIRD EXTENSION TERM" has the meaning set forth in Section 2.5(B). "TIER 1 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT I. "TIER 2 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT I. "TIER 3 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT I. "TITLE COMPANIES" means LandAmerica Title Insurance Company, Stewart Title Company of New York and/or such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means the mezzanine title insurance policy, or similar title insurance policy, issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, (y) the failure to pay to any Franchisor any amount due under any Franchise Agreement (a "FRANCHISE PAYMENT Default") and the continuance thereof beyond any applicable notice and grace period under such Franchise Agreement or the occurrence of one or more breaches or defaults (other than Franchise Payment Defaults), and the continuance thereof beyond all applicable notice and grace periods, if any, under such Franchise Agreements (or such other cure periods as may be provided by the applicable Franchisors in writing) covering Properties with Aggregate Allocated Loan Amounts of ten percent (10%) or more of the Aggregate Outstanding Principal Balance; provided, however, no Uncured Franchise Default shall be deemed to have occurred under clause (x) above with respect to any Property (excluding 20 the Non-Flagged Properties) following the voluntary or involuntary termination of the applicable Franchise Agreement if (a) within ten (10) Business Days of the termination of such Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)) the Borrower delivers to Lender evidence reasonably satisfactory to Lender that the applicable Mortgage Borrower is diligently pursuing efforts to enter into a new Franchise Agreement with an Acceptable Franchisor for the applicable Property and shall thereafter diligently and continuously pursue such efforts to enter into a new Franchise Agreement, (b) at the time of such termination not more than the lesser of (i) two (2) Properties, or (ii) Properties with Aggregate Allocated Loan Amounts of five percent (5%) of the Aggregate Outstanding Principal Balance, in either case, shall be in operation for more than five (5) consecutive days without being subject to Franchise Agreements, and (c) no Property (other than any Non-Flagged Property) shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. "WORK" has the meaning given such term in the Mortgage Loan Agreement. "WORK RESERVES" has the meaning given such term in Section 6.7 of the Mortgage Loan Agreement. "ZONING REPORTS" means those certain zoning and site requirements summaries for the Properties as described on EXHIBIT K. SECTION 1.2 ACCOUNTING TERMS. For purposes of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any 21 reference to any Person may include such Person's respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrower contained herein, Lender agrees to lend to the Borrower, and the Borrower agrees to borrow from Lender, a loan in the original principal amount of $_______ (the "LOAN"). (B) NOTE. On the Closing Date, the Borrower shall execute and deliver to Lender a Mezzanine Note, dated of even date herewith (as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise, collectively, the "NOTE"), made by the Borrower to the order of Lender, in the original principal amount of $_______. (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing may be used to (i) refinance existing indebtedness; (ii) pay all recording and filing fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender and Mortgage Lender, including reasonable legal fees and expenses of counsel to Lender and Mortgage Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) provide for general corporate purposes, including, without limitation, payment of transaction costs and expenses incurred by the Borrower and capital contributions to the Mortgage Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrower. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall bear interest at a rate per annum equal to the Interest Rate in effect for each Interest Accrual Period during the term hereof. The "INTEREST RATE" for any Interest Accrual Period shall be the rate of interest per annum equal to the sum of (i) the Applicable Spread plus (ii) the LIBO Rate in effect for such Interest Accrual Period. (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is four percent (4.0%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT RATE"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in 22 arrears (except with respect to the number of days from the Payment Date in any Interest Accrual Period to the last day of such Interest Accrual Period, as to which interest shall be payable in advance). (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrower shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrower shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrower shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrower shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 INTEREST RATE CAP AGREEMENT. (A) As a condition to Closing, the Borrower shall purchase and pledge and deliver to Lender an interest rate cap agreement satisfying the criteria set forth below (the "CAP"), and the Borrower shall maintain such Cap in the possession of Lender, in full force and effect, until all Obligations are fully and finally repaid. The Cap (i) shall have a notional amount equal to the outstanding principal balance of the Loan calculated based upon the declining principal balance of the Loan scheduled to be outstanding over the term of such Cap taking into account scheduled principal amortization hereunder, (ii) shall provide that to the extent that the LIBO Rate exceeds 23 five percent (5.0%) per annum (the "CAP THRESHOLD RATE"), then the Cap Provider shall pay to Lender, on behalf of the Borrower, not less than the amount of interest that would accrue on the Loan at a per annum rate equal to the difference between the LIBO Rate and the Cap Threshold Rate, (iii) shall be in form and substance reasonably satisfactory to Lender, (iv) shall have a term equal to the Initial Term of the Loan (or the applicable Extension Term), and (v) shall be issued by a financial institution (the "CAP PROVIDER") having a financial rating by S&P of at least "AA-" (and at least an equivalent rating from each of the other Rating Agencies). (B) If at any time the financial rating assigned to any Cap Provider by S&P shall fall below AA- (or the equivalent rating for any other Rating Agency), the Borrower shall be required to deliver a replacement Cap in substantially the form of the Cap delivered at Closing issued by a Cap Provider meeting the rating requirements for a Cap Provider under Section 2.3(A)(v), providing for a cap "strike price" not greater than the Cap Threshold Rate (a replacement Cap meeting all of the foregoing conditions, an "ACCEPTABLE REPLACEMENT CAP") within twenty (20) Business Days after receipt of notice from Lender or Servicer of such downgrade of the Cap Provider, together with an assignment of such Cap substantially in the form of the Assignment of Rate Cap and such Financing Statements and opinions of in-house or outside counsel to the Cap Provider as Lender may reasonably require each in form and substance acceptable to Lender. Notwithstanding the foregoing to the contrary, under no circumstances shall the Cap be terminated by the Borrower prior to delivery of an Acceptable Replacement Cap, together with the required documentation with respect thereto, to Lender. If, for any reason, the Borrower is unable to deliver a replacement Cap when required hereunder, then at or prior to the time when the replacement Cap is due hereunder, the Borrower shall deliver to Lender cash security (such cash security together with any interest thereon, the "CAP RESERVE") in an amount sufficient to cover the amount of additional interest which Lender reasonably estimates may be incurred during the remaining term of the Loan (or remaining Extension Term then in effect) as a result of the LIBO Rate exceeding the Cap Threshold Rate, which Cap Reserve shall be held by Lender and applied to the Obligations in accordance with Section 6.1. Upon delivery of an Acceptable Replacement Cap reasonably acceptable to Lender, the remaining balance of the Cap Reserve shall be promptly returned to the Borrower. (C) All payments made by the Cap Provider under the Cap shall be deposited directly by the Cap Provider into the Lock Box Account and applied in accordance with the Cash Management Agreement. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrower shall make payments of interest and principal on the Note as follows: (i) The Borrower shall make a payment to Lender of interest only on the Closing Date for the first Interest Accrual Period; and (ii) On each Payment Date commencing with the Payment Date in July 2004, and on each Payment Date thereafter through the Maturity Date, the Borrower shall make a payment of interest on the Loan for the Interest Accrual Period corresponding to such Payment 24 Date, and in addition, shall make a payment of principal on the Loan in an amount equal to the Scheduled Mezzanine Principal Payment for such Payment Date. (B) DATE AND TIME OF PAYMENT. The Borrower shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrower promises to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrower on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or a Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account, if any, on such Payment Date, the Borrower shall be deemed to have satisfied its obligation to make such payments. Upon the occurrence and during the continuance of an Event of Default, payments shall be applied to the Obligations in such order as Lender shall determine in its sole and absolute discretion. SECTION 2.5 MATURITY. (A) SCHEDULED MATURITY DATE. To the extent not sooner due and payable in accordance with the Loan Documents (and unless the Borrower shall extend the term of the Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term upon the terms and subject to the conditions of Section 2.5(B) below), the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon (and including interest through the end of the Interest Accrual Period then in effect), and all other sums then owing to Lender hereunder and under the Note, the Pledge Agreement and the other Loan Documents, shall be due and payable on (i) the Scheduled Maturity Date or (ii) if the Borrower shall have extended the term of the Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term, upon the terms and subject to the conditions of Section 2.5(B) below, the applicable Maturity Date. (B) EXTENSION TERMS. The Borrower may extend the term of the Loan for three extension terms of one year each (each, an "EXTENSION TERM", and, collectively the "EXTENSION TERMS"); (i) the first Extension Term (the "FIRST EXTENSION TERM") commencing on the day immediately following the Scheduled Maturity Date and ending (unless sooner terminated in accordance with the Loan Documents) on the first (1st) anniversary of the Scheduled Maturity Date, (ii) the second Extension Term (the "SECOND EXTENSION TERM") commencing on the day immediately following the last day of the First Extension Term and ending (unless sooner 25 terminated in accordance with the Loan Documents) on the second (2nd) anniversary of the Scheduled Maturity Date and (iii) the third Extension Term (the "THIRD EXTENSION TERM") commencing on the day immediately following the last day of the Second Extension Term and ending (unless sooner terminated in accordance with the Loan Documents) on the third (3rd) anniversary of the Scheduled Maturity Date; subject to the following terms and conditions, provided that subsections (iii) and (iv) shall not be conditions to the exercise of the First Extension Term: (i) The Borrower shall give Lender notice (an "EXTENSION NOTICE") of their request to extend the term of the Loan for the First Extension Term at any time not later than forty-five (45) days but not more than one hundred twenty (120) days prior to the Scheduled Maturity Date, the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be; (ii) No Event of Default shall have occurred and be continuing as of the date the Borrower delivers the applicable Extension Notice or as of the first (1st) day of the applicable Extension Term; (iii) The Debt Service Coverage Ratio for the trailing twelve (12) month period ended (x) on the last day of the immediately preceding calendar quarter prior to the expiration of the First Extension Term is at least 1.30:1.0, with respect to the Second Extension Term and (y) on the last day immediately prior to the expiration of the Second Extension Term is at least 1.35:1.0, with respect to the Third Extension Term, and the Debt Yield for the twelve (12) month period ended on the last day of the immediately preceding calendar quarter prior to the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be, is not less than 13%; provided however, if the Debt Service Coverage Ratio and/or the Debt Yield fail to satisfy such requirements, the Borrower shall be entitled to make a principal prepayment of a portion of the Aggregate Outstanding Principal Balance (to be applied in accordance with the terms of the Mortgage Loan Cash Management Agreement or the Cash Management Agreement, as applicable), on the then current Maturity Date in an amount, as reasonably determined by Lender, sufficient to cause the Debt Service Coverage Ratio and/or the Debt Yield, as applicable, to satisfy such requirements based upon a recalculation thereof assuming that the prepayment amount were applied to reduce the Aggregate Outstanding Principal Balance (on a pro-rata basis between the Loan and the Mortgage Loan) as of the last day of the immediately preceding calendar quarter (and provided that the Prepayment Consideration shall be payable in connection with such prepayment); (iv) Prior to the date the applicable Extension Term commences, the Borrower shall deliver to Lender an extension fee equal to one quarter of one percent (.25%) of the outstanding principal balance of the Loan as of the date the 26 applicable Extension Term commences for each of the Second Extension Term and the Third Extension Term; (v) The Borrower shall execute all such documents and other agreements as Lender shall reasonably request; and (vi) The Borrower shall deliver to Lender an extension of the Cap or a replacement Cap in form substantially the same as the Cap delivered at Closing covering the term of the applicable Extension Term, providing for a cap "strike price" (such "strike price", the "EXTENSION CAP THRESHOLD RATE") not greater than five percent (5.0%) per annum and otherwise satisfying the requirements of Section 2.3 together with an assignment of such replacement Cap substantially in the form of the Assignment of Rate Cap and such Financing Statements and opinions of in house or outside counsel to the Cap Provider as Lender may reasonably require each in form and substance reasonably acceptable to Lender. The Borrower shall be required to pay any and all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender (and by any Servicer and trustee in connection with any Securitization backed in whole or in part by the Loan) in connection with delivery of such extension or replacement Cap and all related documentation and opinions required above. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrower may prepay the Loan in whole, or, to the extent expressly provided herein, in part (in amounts of at least $1,000,000), at any time, provided that (i) the Borrower shall provide to Lender not less than fifteen (15) days prior written notice of such prepayment, (ii) together with such prepayment the Borrower also shall pay all accrued and unpaid interest and all other Obligations then due and owing, (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith the Borrower also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to the end of such Interest Accrual Period, and (iv) the Borrowers shall pay the applicable Prepayment Consideration. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur on account of acceleration of the Loan (whether or not due to an Event of Default), or otherwise, then except only as expressly provided in this Loan Agreement or the other Loan Documents to the contrary, the Borrower shall pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due as to a prepayment of the Loan in connection with (i) application of insurance or condemnation proceeds required by Lender pursuant to this Loan Agreement in the absence of an Event of Default, (ii) Scheduled Mezzanine Principal Payments, (iii) in connection with prepayments made in connection with any Release of a Sales Property, or Collateral Releases related thereto (it being agreed that the 27 Prepayment Consideration will be due with respect to all other Collateral Releases), or (iv) upon prepayment of the Loan in full or in part during any Extension Term (provided the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment through the end of the current Interest Accrual Period shall be payable with such prepayment). The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrower; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrower's obligation to pay the Obligations. SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrower shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrower shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 FUNDING LOSSES/CHANGE IN LAW ETC. (A) The Borrower hereby agree to pay to Lender any amount necessary to compensate Lender and any Funding Party for any losses or costs (including, without limitation, the costs of breaking any "LIBOR" contract, if applicable, or funding losses determined on the basis of 28 Lender's or such Funding Party's reinvestment rate and the interest rate on the Loan) (collectively, "FUNDING LOSSES") sustained by Lender or any Funding Party: (i) if the Note, or any portion thereof, is repaid for any reason whatsoever on any date other than a Payment Date (including, without limitation, from condemnation or insurance proceeds); or (ii) as a consequence of (x) any increased cost of funds that Lender or any Funding Party may sustain in maintaining the borrowing evidenced hereby or (y) the reduction of any amounts received or receivable from the Borrower, in either case, due to the introduction of, or any change in, law or applicable regulation or treaty adopted after the date hereof (including the administration or interpretation thereof), whether or not having the force of law, or due to the compliance by Lender or the Funding Party, as the case may be, with any directive, whether or not having the force of law, or request from any central bank or domestic or foreign governmental authority, agency or instrumentality having jurisdiction made as of the date hereof, to the extent Lender reasonably determines that such Funding Losses are allocable to the Loan. (B) If Lender or any Funding Party shall have determined that the applicability of any law, rule, regulation or guideline adopted pursuant to or arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards", or the adoption of any other law, rule, regulation or guideline (including but not limited to any United States law, rule, regulation or guideline) regarding capital adequacy, or any change becoming effective in any of the foregoing or in the enforcement or interpretation or administration of any of the foregoing by any court or any domestic or foreign governmental authority, central bank or comparable agency charged with the enforcement or interpretation or administration thereof, or compliance by Lender or its holding company or a Funding Party or its holding company, as the case may be, with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency made after the date hereof, has or would have the effect of reducing the rate of return on the capital of Lender or its holding company, or of the Funding Party's or its holding company, as the case may be, then, upon demand by Lender, the Borrower shall pay to Lender, from time to time, such additional amount or amounts as will compensate Lender or such Funding Party for any such reduction suffered. (C) Any amount payable by the Borrower under Section 2.10(A) or 2.10(B) shall be paid to Lender within fifteen (15) Business Days after receipt by the Borrower of a certificate signed by an officer of Lender setting forth the amount due and the basis for the determination of such amount in reasonable detail and the computations made by Lender to determine the amount due, which statement shall be conclusive and binding upon the Borrower, absent manifest error. Failure on the part of Lender to demand payment from the Borrower for any such amount attributable to any particular period shall not constitute a waiver of Lender's right to demand payment of such amount for any subsequent or prior period. Lender shall use reasonable efforts to deliver to the Borrower prompt notice of any event described in Sections 2.10(A) or 2.10(B) above and of the amount to be paid as a result thereof, provided, however, any failure by Lender to so notify the Borrower shall not affect the Borrower's obligation to make the payments to be made under this Section as a result thereof. All amounts which may become due and payable by the Borrower in accordance with the provisions of this Section shall constitute additional interest under the Loan and shall be secured by the Pledge Agreement and the other Loan Documents. 29 (D) If Lender or any Funding Party requests compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of clause (ii) of Sections 2.10(A) or 2.10(B), then, upon request of the Borrower, Lender or such Funding Party shall use reasonable efforts in a manner consistent with such institution's practice in connection with loans like the Loan to eliminate, mitigate or reduce amounts that would otherwise be payable by the Borrower under the foregoing provisions, provided that such action would not be otherwise prejudicial to Lender or such Funding Party, including, without limitation, by designating another of Lender's or such Funding Party's offices, branches or affiliates; the Borrower hereby agreeing to pay all reasonably incurred costs and expenses incurred by Lender or any Funding Party in connection with any such action. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrower, on prior written notice to the Borrower. The Borrower expressly acknowledges and agrees that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths of one percent (.05%) per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrower and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrower be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. SECTION 2.12 MORTGAGE LOAN EVENT OF DEFAULT. Notwithstanding anything to the contrary contained herein or the other Loan Documents, if compliance by the Borrower with the provisions of this Loan Agreement would cause an Event of Default (as such term is defined in the Mortgage Loan Agreement) to occur, after the giving of notice or passage of any grace periods provided for in the Mortgage Loan Agreement, the Borrower shall notify the Lender in writing and the Borrower shall not be in default hereunder or under the other Loan Documents by reason of its failure to comply with such provisions. Lender reserves the right to modify any such provisions to prevent the occurrence of an Event of Default under the Mortgage Loan Agreement, in which case failure to comply with such modified provisions shall not be excused hereby. Furthermore, the Borrower acknowledges and agrees that this Section 2.12 shall in no way relieve the Borrower from the obligation to perform any obligation under the Loan Agreement or the other Loan Documents that may be performed by the payment of a sum of money. SECTION 2.13 MEZZANINE LENDER APPROVALS. (A) Lender and the Borrower acknowledge and agree that both Mortgage Lender and Lender have certain approval rights with respect to the operation of the Properties and other matters pursuant to the Mortgage Loan Documents and the Loan Documents, including approval of Managers, Franchisors, Leases, alterations and annual budgets. Notwithstanding anything to the contrary contained herein or in the other Loan Documents, until such time as the Mortgage Loan has been satisfied, and to the extent Lender and Mortgage Lender shall have approval rights covering the same matters, the Borrower shall submit such requests for approval in the following manner and shall be subject to the following procedures (the "APPROVAL PROCEDURES"): (i) the Borrower shall (x) with respect to any Specified Approval, deliver to Lender any such request for any Specified Approval at least fifteen (15) days prior to the date a corresponding request for approval shall be submitted by the Mortgage Borrowers to the Mortgage Lenders under the Mortgage Loan Agreement (it being 30 agreed that the Borrower shall not permit the Mortgage Borrowers to submit a corresponding request for approval to the Mortgage Lenders until such fifteen (15) day period has expired), and (y) with respect to all other requests for approval, shall deliver such requests simultaneously to both Lender and Mortgage Lender, (ii) following the initial submission requesting any Specified Approval to Lender, the Borrower shall cooperate with Lender during such fifteen (15) day period and respond to any comments or suggested changes recommended by Lender prior to the Mortgage Borrowers submitting a corresponding request for approval to Mortgage Lender, (iii) if the Borrower or the Mortgage Borrowers intend to submit a request for approval to the Mortgage Lender that differs in any respect from the matters as approved (or disapproved) by Lender, the Borrower shall, or shall cause the Mortgage Borrowers to, submit to Mortgage Lender with any such request, a copy of all correspondence and materials from Lender relating to Lender's approval or disapproval of the request for the Specified Approval, and (iv) provided the Borrower complies, and causes the Mortgage Borrowers to comply, with the foregoing, the Borrower shall be entitled to rely on the approval or requirements given by the Mortgage Lender in accordance with the terms of the Mortgage Loan Documents. (B) Until such time as the Mortgage Loan has been satisfied, if and to the extent the consent or approval of the Mortgage Lender is required in order for the Borrower to perform its obligations under the Loan Documents without violating the provisions of the Mortgage Loan Documents, the Borrower shall not be deemed in default hereunder, but shall seek all consents and approvals of the Lender in accordance with the terms and provisions of this Loan Agreement and the other Loan Documents and shall seek all required consents or approvals of the Mortgage Lender under the Mortgage Loan Documents to permit the Borrower to comply with its obligations under the Loan Documents; and the Borrower shall not be in default if Mortgage Lender does not grant such approval or consent. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to fund the Loan is subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrower and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrower shall deliver to Lender a certificate duly executed by the Borrower stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrower shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A) to which it is a party, together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly 31 executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. (B) DEPOSITS. The deposits required pursuant to the terms of the Mortgage Loan Agreement and this Loan Agreement, including without limitation, the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrower's option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower Party and all other Persons executing any agreement on behalf of any Borrower Party shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of the Borrower by the chief financial officer (or similar officer of the Borrower) stating that: (i) on such date, to the Borrower's Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrower, Mortgage Borrowers or the projected cash flow of either of them or of the Properties, in each case taken as a whole, has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, specifying such change in detail), and that, to the Borrower's Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operations of the Borrower, the Mortgage Borrowers, and the Properties, in each case taken as a whole, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrower's Knowledge after due inquiry, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Morris, Manning & Martin, LLP or other legal counsel for the Borrower satisfactory to Lender, written legal opinions, each in form and substance acceptable to Lender, as to such matters as Lender shall request, including opinions to the effect that (i) each of the Borrower Parties is duly formed, validly existing, and in good standing in its state of organization, (ii) this Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Cash Management Agreement has been duly authorized, executed and delivered by the Borrower and is enforceable in accordance with its terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) neither Borrower nor Member would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the 32 Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrower's counsel as to the enforceability of, and the creation and perfection of Liens under, the Pledge Agreement and such other matters as Lender may reasonably request; (b) an opinion of counsel to the Cap Provider (which may be in house counsel) that the Cap has been duly authorized, executed and delivered by the Cap Provider and is enforceable in accordance with its terms and such other matters as Lender may reasonably request; (c) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for the Borrower that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous written consent of the board of directors of Member including the Independent Directors, or the unanimous prior written consent of the board of managers' of the Borrower, including the Independent Directors) would be required for a voluntary bankruptcy filing by the Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors) would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law, the bankruptcy or dissolution of Member would not cause the dissolution of the Borrower and the bankruptcy or dissolution of Guarantor would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of the Borrower and creditors of Guarantor shall have no legal or equitable remedies with respect to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of the Borrower and Member; and (d) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received the Title Policies. The Title Policies shall be in form and substance satisfactory to Lender. (G) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business. Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. (H) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. 33 (I) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to Lender for each Borrower Party (including for Guarantor) and for the Properties. If any such statements are not available for the Properties, then the Borrower shall cause the Mortgage Borrowers to provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (J) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year. (K) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. (L) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the applicable Mortgage Borrower. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements (including any Property Improvement Plan) and Franchisor Letters for each of the Properties duly executed by the applicable Franchisors. (M) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrower a rent roll for each of the Properties (collectively, the "RENT ROLL") in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases, and the amount of security deposit being held by the Mortgage Borrowers under each Material Lease, if any. (N) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases, as amended. (O) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to each of the Properties, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (P) PROPERTY CONDITION REPORT. On or before the Closing Date, Lender shall have received a property condition report for each of the Properties, which shall be prepared by an engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion (the "PROPERTY CONDITION REPORTS"). Such reports shall set forth any items of deferred maintenance at the Properties. (Q) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of each of the Properties from a state certified appraiser engaged by Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in 34 the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (R) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search reports with respect to the Borrower, Guarantor and Member, all dated not more than thirty (30) days prior to the Closing Date. (S) LEGAL FEES; CLOSING EXPENSES. The Borrower shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (T) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (U) OTHER REVIEW. Lender shall have completed all other review of the Borrower Parties, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrower Parties shall have satisfied such other reasonable criteria as Lender may reasonably specify. (V) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date, Lender shall have received (i) true and complete copies of each of the Ground Leases, certified by the Borrower, and (ii) estoppels and agreements acceptable to Lender, duly executed by each Ground Lessor. (W) CONDOMINIUM PROPERTY AGREEMENTS. On or before the Closing Date, Lender shall have received an estoppel and agreement of the Board of Managers with respect to the Condominium Property Documents in form and substance reasonably acceptable to Lender. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, the Borrower represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. 35 (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrower, Mortgage Borrowers and Member. The Borrower owns all direct and indirect interests in the Mortgage Borrowers and has the power and authority to control the actions of the Mortgage Borrowers. SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrower has the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower Party of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower Party; (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower Party; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower Party or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower Party or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or imposition of any material Lien (other than the Lien of the Loan Documents) upon the Collateral or assets of any Borrower Party; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower Party, which approvals or consents as set forth on SCHEDULE 4.2 have been obtained on or before the dates required under such material Contractual Obligation, but in no event later than the Closing Date. (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower Party that is a party thereto, enforceable against each of the Borrower Parties, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No 36 Borrower Party has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower Party has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning the Borrower, its Affiliates, the Mortgage Borrowers and the Properties which have been furnished by or on behalf of the Borrower or the Mortgage Borrowers to Lender pursuant to this Loan Agreement present fairly the financial condition of the Persons covered thereby as of the dates thereof and the results of their operations for the periods then ended, and, to the Borrower's Knowledge after due inquiry, have been prepared in accordance with GAAP consistently applied (except as disclosed therein). Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements. SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, neither the Borrower nor the Mortgage Borrowers shall have any outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES AND COLLATERAL. Each of the Mortgage Borrowers has good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to its Property, free and clear of all Liens except for the Permitted Encumbrances. The Mortgage Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Mortgage Borrowers as permitted hereunder), subject only to Permitted Encumbrances. The Borrower is the record and beneficial owner and owns good and indefeasible title to the Collateral, free and clear of all Liens. There are no outstanding options to purchase or rights of first refusal affecting the Collateral. To the Borrower's Knowledge, except as set forth on Schedule 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual Knowledge of the Borrower, none is threatened. Except as set forth on Schedule 4.5(A), no Person has any option or other right to purchase all or any portion of any of the Properties or any interest therein. To the Borrower's Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Pledge Agreement and this Loan Agreement, materially and adversely affect the value of any of the Collateral or impair the Borrower's ability to pay its obligations in a timely manner. SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrower's Knowledge, there are no illegal activities relating to controlled substances on the Properties. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, all material permits, licenses and certificates for the lawful use, occupancy and operation of each component of the Properties in the manner in which it is currently being used, 37 occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, in the event that all or any part of the Improvements located on the Properties is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrower's Knowledge, no legal proceedings are pending or threatened with respect to the zoning of the Properties. To the Borrower's Knowledge, except as set forth in the Title Policies and/or the Survey, each as defined in and delivered to the Mortgage Lender pursuant to the Mortgage Loan Agreement, neither the zoning nor any other right to construct, use or operate the Properties is in any way dependent upon or related to any real estate other than the Properties. The Borrower will not permit any tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Mortgage Borrowers with respect to the Properties without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. The Borrower has delivered to Lender true and complete copies (in all material respects) of all (i) Leases for more than five hundred (500) square feet of space at any Property and (ii) Material Agreements affecting the operation and management of the Properties, and such Leases and Material Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Except for the rights of each of the current Managers pursuant to the existing Management Agreements, no Person has any right or obligation to manage any of the Properties or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the Properties or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, if any, the Properties are not subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrower's Knowledge, (i) the Material Leases are in full force and effect; (ii) the Mortgage Borrowers have not given any notice of default to any tenant under any Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Mortgage Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrower, 38 threatened) against the Mortgage Borrowers by any tenant or former tenant. No rental in excess of one month's rent has been prepaid under any of the Material Leases. To the Borrower's Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. (C) NO RESIDENTIAL UNITS. There are no residential units in any of the Properties and, to the Borrower's Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Properties for dwelling purposes other than on a transient basis. (D) MANAGEMENT AGREEMENTS. The Borrower has delivered to Lender a true and complete copy of each Management Agreement relating to the Properties to which the Mortgage Borrowers are a party that will be in effect on the Closing Date, and such Management Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Each such Management Agreement is in full force and effect and no default by the Mortgage Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENTS/PROPERTY IMPROVEMENT PLANS. The Borrower has delivered to Lender a true and complete copy of the Franchise Agreements relating to each of the Properties to which the Mortgage Borrowers are a party, and such Franchise Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. To the Borrower's Knowledge, (i) each Franchise Agreement is in full force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material default by the Mortgage Borrowers, Manager or the applicable Franchisors exists thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the aggregate, do not and will not have a Material Adverse Effect. Except for the Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no other property improvement plans or similar capital improvement plans or obligations required by any Franchisor pursuant to any Franchise Agreement, in effect for any of the Properties. SECTION 4.8 CONDITION OF THE PROPERTIES. To the Borrower's Knowledge, except as set forth in the Property Condition Reports for the Properties delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in good condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrower is not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrower's Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of the applicable Property (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of the applicable Property as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of the applicable Property as now used or presently contemplated. Except as may be shown on the Surveys, to the Borrower's Knowledge no part of any Property is within a flood plain and none of the Improvements create encroachments over, across or upon any Property's boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each Property for the current and contemplated uses 39 thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrower's Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at the Properties is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 REPRESENTATIONS AND WARRANTIES OF THE MORTGAGE BORROWERS. All of the representations and warranties of the Mortgage Borrowers or any Affiliate of the Mortgage Borrowers made under the Mortgage Loan Documents are true, complete and correct in all material respects. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of the Borrower required to be filed have been timely filed (or the Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon the Borrower and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrower's Knowledge, no taxes which are due and payable remain unpaid and no claims are being asserted with respect to any such taxes. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Borrower or Member is a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. SECTION 4.12 PERFORMANCE OF AGREEMENTS. The Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of the Borrower which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. The Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 4.14 no Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of the Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrower shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from the Borrower Parties' actions. 40 SECTION 4.16 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.16, there are no judgments outstanding against the Borrower or any Mortgage Borrower, or affecting any of the Collateral or any property of the Borrower or of the Mortgage Borrowers, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the Borrower's Knowledge, threatened against the Borrower or any Mortgage Borrower, that could reasonably be expected to result in a Material Adverse Effect. To the Borrower's Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.16 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.17 SOLVENCY. The Borrower (a) has not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the aggregate fair saleable value of the Borrower's assets exceeds and will, immediately following the making of the Loan, exceed the Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The aggregate fair saleable value of the Borrower's assets is and will, immediately following the making of the Loan, be greater than the Borrower's probable total liabilities, including the maximum amount of its Contingent Obligations on its debts as such debts become absolute and matured. The Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrower does not intend to, and does not believe that it will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond its ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrower and the amounts to be payable on or in respect of obligations of the Borrower). SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrower that has had or could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrower. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrower shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrower or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. 41 SECTION 4.20 SECURITY INTERESTS. Upon execution and delivery of the Pledge Agreement, delivery to Lender of the certificates, if any, representing the LLC Interests, the LP Interests and the Stock Interests, and the filing of the Financing Statements with the Secretary of State of the State of Delaware, Lender shall have a first priority perfected security interest in the Collateral, subject to the Permitted Encumbrances. SECTION 4.21 INVESTMENTS. The Borrower does not have any (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person (other than the Beverage Companies) not pledged to Lender pursuant to the terms of the Pledge Agreement, or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. SECTION 4.22 DEFAULTS. To the Borrower's Knowledge, except as disclosed to Lender in writing herein or in any of the Loan Documents, no Default exists. SECTION 4.23 NO PLAN ASSETS. The Borrower is not and will not be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrower has assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.24 GOVERNMENTAL PLAN. The Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrower are not and will not be subject to state statutes applicable to the Borrower's regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.25 NOT FOREIGN PERSON. The Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. SECTION 4.26 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.26, no Borrower Party is a party to any collective bargaining agreement. SECTION 4.27 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including any Property) is property of the estate, in any voluntary or involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law now or hereafter in effect. No Borrower Party and no property of any of them is under the possession or control of a receiver, trustee or other custodian. No Borrower Party has made any assignment for the benefit of creditors. No such assignment or bankruptcy or similar case or proceeding is now contemplated. 42 SECTION 4.28 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective officers, directors, partners, members, Affiliates or, to the knowledge of the Borrower, shareholders is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED PERSON"). ARTICLE V COVENANTS OF BORROWER PARTIES The Borrower covenants and agrees that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrower shall perform and comply with all covenants in this Article V. SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrower shall, and shall cause Mortgage Borrowers (on a consolidated basis) to, provide true and complete copies of their Financial Statements for such year to Lender, and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of its Financial Statements for such year to Lender. All such Financial Statements shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information for such calendar year. Such annual Financial Statements shall be accompanied by a certification executed by the entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). (ii) QUARTERLY REPORTING - THE BORROWER. Within forty-five (45) days after the end of each calendar quarter, the Borrower shall provide copies of its Financial Statements for such quarter to Lender (including the Financial Statements of Mortgage Borrowers on a consolidated basis), together with a certification executed on behalf of the Borrower by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. 43 (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after the end of each calendar year, the Borrower shall provide, or cause the Mortgage Borrowers to provide, to Lender a certified Rent Roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after the end of each calendar year, the Borrower shall also provide, or cause the Mortgage Borrowers to provide, to Lender (a) a schedule of any retail Material Leases that expired during such calendar year and a schedule of retail Material Leases scheduled to expire within the next calendar year and (b) to the extent the Mortgage Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar year. Within ninety (90) days after the end of each calendar year, the Borrower shall provide, or cause the Mortgage Borrowers to provide, to the extent provided to the Borrower or the Mortgage Borrowers and not subject to confidentiality restrictions, to Lender a statement of income and expenses for all retail space at each of the Properties and sales reports for retail tenants for such year. (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, the Borrower shall provide, or cause Manager or the Mortgage Borrowers to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for each of the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly and year to date operating statements prepared for such calendar month and for the trailing twelve (12) month period then ended, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of each of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a detailed explanation for any material deviations from budget) and setting forth that all disbursements and/or withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E Reserve have been made with respect to items of Capital Improvement only (as opposed to items that, in accordance with GAAP, would be included as an Operating Expense); (e) monthly and year to date detailed reports of Operating Expenses for each of the Properties, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement for which Lender has approved a disbursement from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently available "OSI", or similar quality index scores (including detailed information regarding criteria and thresholds); and (g) prior to Securitization (as such term is defined in the Mortgage Loan Agreement) of the Mortgage Loan, market segmentation reports for the trailing twelve (12) month period for each of the Properties; and (h) a report setting forth (i) the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has 44 continued beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the original Aggregate Allocated Loan Amount represented by such Properties), (iii) a summary report establishing that the Borrower is diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Mortgage Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. All of the above statements, reports and information shall be provided to Lender by email in Microsoft Excel format or other spreadsheet format reasonably acceptable to Lender (in the case of any statements, reports or information provided by third parties that are not Affiliates of the Borrower, to the extent same are available in such format). Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of the Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrower shall, and shall cause the Mortgage Borrowers, Guarantor and Manager to, promptly provide to Lender such further documents and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice to the Borrower. (vii) GAAP; UNIFORM SYSTEM. The Borrower will, and will cause the Mortgage Borrowers, Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender by or on behalf of the Borrower or Guarantor under this Section, the Borrower or Guarantor also shall deliver to Lender a certification to Lender, executed on behalf of the applicable Person by its chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of the Borrower, Guarantor and/or the Properties for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating that, to 45 their Knowledge after due inquiry, there does not exist any Default or Event of Default under the Loan Documents (or if any exists, specifying the same in detail), and (b) the Borrower and Guarantor have complied with the applicable reporting requirements of this Section 5.1. (ix) FISCAL YEAR. The Borrower's, Guarantor's, and the Mortgage Borrowers' fiscal years each end on December 31, and no change shall be permitted with respect to any such fiscal year, without Lender's prior written consent. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, the Borrower will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business operations of the Borrower or the Mortgage Borrowers made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, the Borrower shall deliver, and shall cause the Mortgage Borrowers to deliver, to Lender a copy of its Federal income tax returns (or the return of the applicable Person into which the Borrower's and/or the Mortgage Borrowers' Federal income tax returns are consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 1 of each calendar year, the Borrower shall deliver, or cause the Mortgage Borrowers to deliver, to Lender for its review for the Properties a proposed Operating Budget and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap Event or Event of Default exists, the Borrower may allow changes to be made to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Mortgage Borrowers, provided no such modification (together with all prior modifications taken as a whole) shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without Lender's prior written approval, which approval shall not be unreasonably withheld; provided, however, during a Cash Trap Event, increases to the Operating Budget (not to exceed ten percent (10%) of the Operating Budget as a whole) will be permitted without Lender's consent for actual verifiable increases in utilities, water, and sewer over the amounts set forth in the Operating Budget for the applicable period. Notice of any modifications to an Operating Budget and a CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating Budget shall identify and set forth the Mortgage Borrowers' reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and such budget or plan, as applicable, shall promptly be amended and resubmitted for approval, making such changes as are necessary to comply with the reasonable requirements of Lender. Until any such budget or plan for any year requiring Lender's approval is approved or deemed approved, subject to the terms of the 46 Mortgage Loan Documents, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is approved or deemed approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrower to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. (E) MATERIAL NOTICES. (i) The Borrower shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of the Borrower, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrower shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plan received from a Franchisor related to any of the Properties. (F) EVENTS OF DEFAULT, ETC. Promptly upon the Borrower obtaining knowledge of any of the following events or conditions, the Borrower shall deliver a certificate executed on its behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action the Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. (G) LITIGATION. Promptly upon the Borrower obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrower, any of the Properties, or the Collateral, not previously disclosed in writing by the Borrower to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrower, or the Mortgage Borrowers, or the Properties which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect, the Borrower will give notice thereof to Lender and, upon request from Lender, provide such other information as may be reasonably available to it to enable Lender and its counsel to evaluate such matter. 47 (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Mortgage Borrowers, the Borrower shall cause to be delivered to Lender certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Mortgage Borrowers, and all material insurance coverage planned to be maintained by the Mortgage Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. (I) OTHER INFORMATION. With reasonable promptness, the Borrower will deliver such other information and data with respect to such Person, the Mortgage Borrowers, their Affiliates, and the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrower will at all times preserve and keep in full force and effect its existence as a limited liability company and all rights and franchises material to its business, including its qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, the Borrower and Member, shall at all times be qualified to do business in each of the states where such qualification is required to continue the business of the Borrower as in effect on the Closing Date. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) The Borrower will pay, or cause to be paid, all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrower on its business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrower shall cause the Mortgage Borrowers to pay, discharge or remove any Imposition or Claim relating to the Properties owned by such Mortgage Borrowers in accordance with the terms of the Mortgage Loan Agreement. SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrower shall cause the Mortgage Borrowers to continuously maintain the policies of insurance (all such policies, the "INSURANCE POLICIES") required pursuant to the terms of Section 5.4 of the Mortgage Loan Agreement, including meeting all insurer requirements thereunder (it being agreed that, following satisfaction of the Mortgage Loan, the requirements of Section 5.4 of the Mortgage Loan Agreement shall be deemed to be the continuing obligations of the Borrower and the Mortgage Borrowers for as long as the Loan is outstanding and this Agreement is in effect). The provisions of Section 5.4 of the Mortgage Loan Agreement are incorporated herein by reference. The Lender shall be named as an additional insured or loss payee under such policies to the extent that Mortgage Lender is required to be named as such under the Mortgage Loan Agreement. Upon request from Lender, Lender shall be entitled to receive copies of any insurance policies obtained by Mortgage Lender to the extent and at the time such policies are delivered to the Mortgage Lender by the Mortgage Borrowers. All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Mortgage 48 Lender or Lender without ten (10) days' advance written notice to Lender. The Borrower shall furnish Lender receipts for the payment of premiums on such Insurance Policies or other evidence of such payment reasonably satisfactory to Lender in the event that such premiums have not been paid by Lender pursuant to the Loan Agreement. SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrower shall, and shall cause the Mortgage Borrowers to, operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Mortgage Borrowers, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each of the Mortgage Borrowers, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, the Borrower shall, and shall cause the Mortgage Borrowers to, operate and maintain the Properties substantially in accordance with the applicable Operating Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrower may and may permit the Mortgage Borrowers to, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Mortgage Borrowers shall not be permitted to perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the Properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Mortgage Borrowers may be permitted to perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrower delivers notice to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrower delivers to Lender evidence reasonably satisfactory to Lender that the Mortgage Borrowers have cash available for payment of the cost of such Material Alteration or, if the Borrower fails to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an amount equal to 125% of the cost of such Material Alteration as reasonably estimated by Lender, unless such amounts have previously been deposited with Mortgage Lender pursuant to the terms of the Mortgage Loan Documents. Cash deposited by the Borrower with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrower to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the conditions for 49 disbursement of amounts from the Capital Improvements Reserve under Section 6.4 (including the requirements set forth under Section 6.6). Upon completion of the Material Alteration, the Borrower shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. The Borrower shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrower shall give, or shall cause the Mortgage Borrowers to give, immediate written notice of the same to the insurance carrier and to Lender. The terms of the Mortgage Loan Documents will govern the application and distribution of insurance and condemnation proceeds until the Mortgage Loan has been paid in full. Any insurance and/or condemnation proceeds payable with respect to any of the Properties securing the Mortgage Loan shall be paid directly to Mortgage Lender pursuant to the terms of the Mortgage Loan Documents until the Mortgage Loan has been paid in full and, thereafter, shall be paid to Lender pursuant to this Loan Agreement and the Cash Management Agreement. Upon application of any casualty or condemnation proceeds by Mortgage Lender and repayment in full of the Mortgage Loan, if the Loan remains outstanding, any remaining insurance or condemnation proceeds shall be disbursed into the Cash Management Agreement and, at Lender's election, applied to prepay the Loan without the imposition of any Prepayment Consideration on the Payment Date immediately following such election. If Lender elects to apply all of such insurance proceeds toward the repayment of the Obligations, the Borrower shall (subject to compliance with clauses (A), (B), (D) and (F) - (H) of Section 11.4) be entitled to obtain from Lender a Collateral Release (without representation or warranty) relating to such Property, provided that the Borrower pays to Lender the amount, if any, by which the Collateral Release Price for such Collateral exceeds the insurance proceeds received by Lender and applied to repayment of the Obligations. SECTION 5.6 INSPECTION. The Borrower shall, and shall cause the Mortgage Borrowers to, permit any authorized representatives designated by Lender to visit and inspect during normal business hours the Properties and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with the Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice to the Borrower or the Mortgage Borrower of at least three (3) Business Days prior to visiting or inspecting any of the Properties or the Borrower's offices. 50 SECTION 5.7 O&M PLAN. The Borrower shall cause the Mortgage Borrowers to comply fully with the O&M Plans pursuant to the terms of the Mortgage Loan Agreement and this Loan Agreement. SECTION 5.8 INTENTIONALLY DELETED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrower will, and will cause the Mortgage Borrowers to, (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the operation or value of any Property, (B) maintain all licenses and permits now held or hereafter acquired by the Borrower and the Mortgage Borrowers, the loss, suspension, or revocation of which, or failure to renew, could have a material adverse effect on the operation or value of any Property and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrower shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. The Borrower shall, and shall cause the Mortgage Borrowers to, duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its or their part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a material adverse effect on the operation or value of any Property. SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrower shall not, and shall not permit the Mortgage Borrowers, nor shall the Borrower authorize the Mortgage Borrower or any other Person to, (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material 51 Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrower shall, or shall cause the Mortgage Borrowers to, furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease, shall be deemed given, if the first correspondence from the Borrower to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Mortgage Borrowers shall not under any circumstances be permitted to collect any such rent more than one month in advance. The Borrower, at Lender's request, shall, or shall cause the Mortgage Borrowers to, furnish Lender with executed copies of all Material Leases hereafter made. SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS. (A) The Borrower shall cause the Properties to be managed in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and types customary for hotels comparable to each Property. The Borrower shall, and shall cause the Mortgage Borrowers to (i) perform and observe all of the material terms, covenants and conditions of the Management Agreements on the part of the Mortgage Borrowers to be performed and observed, and (ii) promptly notify Lender of any notice of any material default under the Management Agreements of which it is aware. If any Mortgage Borrower shall default in the performance or observance of any material term, covenant or condition of the applicable Management Agreement on the part of such Mortgage Borrower to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrower or such Mortgage Borrower from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrower, but shall be under no obligation, to pay any sums and to perform any act as may be reasonably appropriate to cause such material conditions of the applicable Management Agreement on the part of such Mortgage Borrower to be performed or observed. 52 (B) The Borrower shall not, and shall not permit the Mortgage Borrowers to, surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager, or consent to the assignment by the Manager, of its interest under the Management Agreement, in each case without (i) prior to a Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies. The Borrower shall cause, or shall cause the Mortgage Borrowers to cause, any new Manager with respect to any Property to execute and deliver a subordination of management agreement in substantially the form delivered in connection with the closing of the Mortgage Loan. (C) Lender shall have the right, subject to the rights of Mortgage Lender under the terms of the Mortgage Loan Agreement, to require the replacement of any Manager with a Person chosen by the Borrower and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrower if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrower shall not, and shall not permit the Mortgage Borrowers not to terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. Notwithstanding the foregoing, the following changes to Franchise Agreements shall be permitted without Lender's prior written consent: (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with another Franchisor within the same Category, provided that the Borrower shall not cause or permit the Mortgage Borrowers to replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(ii) with respect to more than the lesser of (x) three (3) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided that the Borrower shall not cause or permit the Mortgage Borrowers to replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(iii) with respect to more than the lesser of (x) two (2) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of three percent (3%) of the Aggregate Outstanding Principal Balance (in each case under clauses (x) or (y), exclusive of the Franchise 53 Agreement for the Holiday Inn, located at 5252 New Jessup Highway, Brunswick, Georgia 31525, which is in the process of being reflagged as a "Park Inn"); (iv) Entering into a new Franchise Agreement in form substantially similar to a form previously approved by Lender with an Acceptable Franchisor for any of the Non-Flagged Hotels, at which time the applicable Property shall be deemed to be within the Category determined by the applicable Franchise Agreement; (v) Entering into a new Franchise Agreement in form substantially similar to a form previously approved by Lender with Park Hospitality LLC under the "Park Inn" brand for the hotel located at 5252 New Jessup Highway, Brunswick, Georgia 31525 at which time the applicable Property shall be deemed to be a Tier 3 Hotel; and (vi) Entering into new Franchise Agreements (or amendments or addenda to existing Franchise Agreements) with the existing Franchisors for the applicable Properties for the same franchise brand, each in form substantially similar to the forms previously approved for the respective Properties by Lender, as required by the existing Franchisors under the respective Franchise Agreements in connection with the transfers of the applicable Properties and the direct and indirect ownership interests in the Mortgage Borrowers made by the Borrower Parties and their Affiliates in connection with the Closing of the Loan. In connection with the replacement of any Franchisors permitted hereunder, the Borrower shall cause the applicable Mortgage Borrower to, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender a Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, the Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants required to be performed and observed by the Franchisor under the Franchise Agreement. In addition, the Borrower shall not, and shall not permit any Mortgage Borrower to, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. 54 Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrower to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. SECTION 5.14 MATERIAL AGREEMENTS. The Borrower shall not, and shall not permit the Mortgage Borrowers to, enter into or become obligated under any Material Agreement pertaining to any Property without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) any Lease that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13 hereof (provided, however, that the foregoing shall not affect the Borrower's or Mortgage Borrowers' obligation to deliver Rating Confirmations with respect to any such Management Agreement if required under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrower will cause all Receipts from the Properties to be deposited into, and shall otherwise comply with, the applicable Accounts established from time to time under the Mortgage Loan Cash Management Agreement and/or the Cash Management Agreement. Subject to Article VII hereof and the Cash Management Agreement, the Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrower shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Pledge Agreement and the other Loan Documents are legal, valid and binding obligations of the Borrower and have not been modified or amended, or if modified or amended, describing such modification or amendments. 55 (B) Within ten (10) Business Days following a written request by the Borrower, Lender shall provide to the Borrower a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrower with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. The Borrower will not, and will not permit the Mortgage Borrowers to, directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): (A) The Obligations; (B) The Mortgage Loan; and (C) (i) Unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the financing of equipment or other personal property used at the Properties in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal property referred to in clauses (i) and (ii) above outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan. In no event shall any Indebtedness other than the Mortgage Loan be secured, in whole or in part, by the Properties or any portion thereof or interest therein, nor shall any Indebtedness other than the Loan be secured, in whole or in part, by the Collateral or any portion thereof or interest therein. SECTION 5.18 NO LIENS. The obligations of the Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not, and shall not permit the Mortgage Borrowers to, create, incur, assume or permit to exist any Lien on or with respect to the Properties, any Collateral or any direct or indirect ownership interest in the Borrower or any Mortgage Loan Borrower, except Permitted Encumbrances. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, neither the Borrower nor Member shall directly or indirectly create or become or be liable with respect to any Contingent Obligation. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted under this Loan Agreement, neither the Borrower nor Member shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of the Borrower's or Member's operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve the Borrower or Member. 56 SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to Manager under the Management Agreement, the Borrower shall not, and shall not permit the Mortgage Borrowers to, directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of the Borrower or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrower, upon fair and reasonable terms and which are no less favorable to the Borrower than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of the Borrower. The Borrower shall not make any payment or permit any payment to be made to any Related Person of the Borrower when or as to any time when any Event of Default shall exist. SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of the Borrower. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which the Borrower is a debtor or any portion of the Properties or the Collateral is property of the estate therein. The Borrower shall not file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or support any motion (irrespective of the subject of the motion), and no Borrower Party shall file or support any plan of reorganization. Each Borrower Party having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower Party shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. Neither the Borrower nor Member will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrower shall not: (i) engage in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee 57 Benefit Plan which establishment or amendment could result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower, provided that the Borrower shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA) or (y) could subject the Borrower or its Affiliates to an excise tax under Section 4975 of the IRC. (C) NO PLAN ASSETS. The Borrower shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrower regulating investments of governmental plans. SECTION 5.24 PRESS RELEASE. The Borrower shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrower shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 GROUND LEASES. (A) NO MODIFICATION. The Borrower shall not permit any Mortgage Borrower to modify or amend, or terminate or surrender any Ground Lease, in each case without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any attempted or purported modification, amendment, or any surrender or termination of any Ground Lease without Lender's prior written consent shall be null and void and of no force or effect. (B) PERFORMANCE OF GROUND LEASES. The Borrower shall cause the Mortgage Borrowers to (i) fully perform as and when due each and all of its obligations under each Ground Lease in accordance with the terms of such Ground Lease, and shall not cause or suffer to occur any material breach or default in any of such obligations, (ii) keep and maintain each Ground Lease in full force and effect, and (iii) exercise any option to renew or extend any Ground Lease and give written confirmation thereof to Lender within thirty (30) days after such option is exercised. (C) NOTICE OF DEFAULT. If the Borrower or any of the Mortgage Borrowers shall receive any written notice that any Ground Lease Default has occurred, then the Borrower immediately shall notify Lender in writing of the same and immediately deliver to Lender a true and complete copy of each such notice. Further, the Borrower shall provide and shall cause the Mortgage Borrowers to provide, such documents and information as Lender shall reasonably request concerning the Ground Lease Default. 58 (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be continuing, or if any Ground Lessor asserts that a Ground Lease Default has occurred (whether or not the Borrower questions or denies such assertion), then, subject to the terms and conditions of the applicable Ground Lease, Lender, upon five (5) Business Days' prior written notice to the Borrower, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary, including, without limitation, (i) performance or attempted performance of the applicable Mortgage Borrowers' obligations under the applicable Ground Lease, (ii) curing or attempting to cure any actual or purported Ground Lease Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the applicable Ground Leased Property for any or all of such purposes. Upon Lender's request, the Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each Ground Lease. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrower shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender, together with interest thereon from the date of expenditure at the Default Rate. (E) LEGAL ACTION. The Borrower shall not commence, or permit the Mortgage Borrowers to commence, any action or proceeding against any Ground Lessor or affecting or potentially affecting any Ground Lease or the Mortgage Borrowers' or Lender's interest therein, the effect of which could cause an event of default or termination of any such Ground Lease, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrower shall notify Lender immediately if any action or proceeding shall be commenced between any Ground Lessor and the Mortgage Borrowers, or affecting or potentially affecting any Ground Lease or the Mortgage Borrowers' or Lender's interest therein (including, without limitation, any case commenced by or against any Ground Lessor under the Bankruptcy Code). Lender shall have the option, exercisable upon notice from Lender to the Borrower, to participate in any such action or proceeding with counsel of Lender's choice. The Borrower shall cause the Mortgage Borrowers to cooperate with Lender, comply with the reasonable instructions of Lender, execute any and all powers, authorizations, consents or other documents reasonably required by Lender in connection therewith, and shall not settle any such action or proceeding without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the applicable Ground Lease, from time to time, at Lender's request, the Borrower shall, or shall cause the Mortgage Borrowers to, use commercially reasonable efforts to obtain and deliver to Lender within the time period required under the applicable Ground Lease, an estoppel certificate from each Ground Lessor setting forth (A) (i) the identities of the original lessor and lessee under the applicable Ground Lease and each of their respective successors, (ii) that the Ground Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modification), (iii) the rent payable under the Ground Lease, (iv) the dates to which all rent and other charges have been paid, (v) whether there are any alleged Ground Lease Defaults and, if so, setting forth the nature thereof in reasonable detail, and (vi) such other matters as Lender may reasonably request or (B) the matters required to be certified by the 59 Ground Lessor under the applicable Ground Lease. The Borrower shall not be required to request an estoppel from any Ground Lessor more than two (2) times in any calendar year. (G) BANKRUPTCY. (i) If any Ground Lessor shall reject any Ground Lease under or pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrower shall not permit the Mortgage Borrowers to elect to treat the Ground Lease as terminated but shall elect to remain in possession of the applicable Ground Leased Property and the leasehold estate under such Ground Lease. (ii) The Borrower acknowledges and agrees that in any case commenced by or against the Borrower or the Mortgage Borrowers under the Bankruptcy Code, Lender by reason of the liens and rights granted under the Pledge Agreement and the Loan Documents shall have a substantial and material interest in the treatment and preservation of such Mortgage Borrower's rights and obligations under such Ground Lease, and that the Borrower shall, in any such bankruptcy case, provide to Lender immediate and continuous reasonably adequate protection of such interests. The Borrower and Lender agree that such adequate protection shall include but shall not necessarily be limited to the following: (a) The Borrower shall serve Lender with copies of all notices, pleadings and other documents relating to or affecting the Ground Lease or the applicable Property. Any notice, pleading or document served by the Borrower or the Mortgage Borrowers on any other party in the bankruptcy case shall be contemporaneously served by the Borrower on Lender, and any notice, pleading or document served upon or received by the Borrower or the Mortgage Borrowers from any other party in the bankruptcy case shall be served by the Borrower on Lender promptly upon receipt by the Borrower or the Mortgage Borrower. (b) Upon written request of Lender, the Borrower shall cause the applicable Mortgage Borrower to assume the Ground Lease, and shall take such steps as are necessary to preserve such Mortgage Borrower's right to assume the Ground Lease, including without limitation using commercially reasonable efforts to obtain extensions of time to assume or reject the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it is applicable. (c) If the Borrower, the Mortgage Borrowers or the applicable Ground Lessor seeks to reject any Ground Lease or have the Ground Lease deemed rejected, then prior to the hearing on such rejection Lender shall, subject to applicable law, be given no less than twenty (20) days' notice thereof. (iii) Rights of Mortgage Lender. The rights of Lender in connection with any bankruptcy proceeding of any Ground Lessor, Borrower or the Mortgage Borrowers under this Section 5.25(G) shall be subject and subordinate to the rights of Mortgage Lender in connection with any such bankruptcy proceeding as and to the extent provided in any intercreditor or similar agreement between Lender and any Mortgage Lender. 60 SECTION 5.26 CONDOMINIUM PROPERTY. (A) NO MODIFICATION. The Borrower shall not permit the Condominium Borrower to modify or amend any material terms of, or terminate or amend any of the Condominium Property Documents, in each case, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (B) PERFORMANCE OF MORTGAGED CONDOMINIUM PROPERTY DOCUMENTS. The Borrower shall cause the Condominium Borrower to fully and faithfully pay when due and payable all assessments, common charges and other charges payable by Condominium Borrower under the Condominium Property Documents and shall perform as and when due each of its material obligations under the Condominium Property Documents in substantial accordance with their respective terms, and shall not cause or suffer to occur any breach or default in any of such obligations. The Borrower shall cause the Condominium Borrower to keep and maintain each of the Condominium Property Documents in full force and effect. (C) NOTICE OF DEFAULT. If the Borrower or the Condominium Borrower shall receive any written notice of any Condominium Default, the Borrower immediately shall notify Lender of same and deliver to Lender a true and complete copy of each such notice, and provide such documents and information as Lender may reasonably request concerning such Condominium Default. (D) LENDER'S RIGHT TO CURE. If any Condominium Default shall occur and be continuing, or if any party to any Condominium Property Document asserts that a Condominium Default has occurred (whether or not the Borrower questions or denies such assertion), then, subject to the terms and conditions of the applicable Condominium Property Documents, after notice to the Borrower, Lender, upon five (5) Business Days' prior written notice to the Borrower, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary to cure such Condominium Default, including, without limitation, (i) performance or attempted performance of the Condominium Borrower's obligations under the applicable Condominium Property Documents, (ii) curing or attempting to cure any actual or purported Condominium Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the Condominium Property for any or all of such purposes. Upon Lender's request, the Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each of the Condominium Property Documents. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrower shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender pursuant to this Section 5.26, together with interest thereon from the date of expenditure at the Default Rate. (E) PRESERVATION OF CONDOMINIUM. The Borrower will do, and will cause the Condominium Borrower to do, all things necessary to preserve and to keep unimpaired its material rights, powers and privileges under the Condominium Property Documents and to prevent the termination or expiration of the Condominium Property Documents, or the withdrawal of the Condominium Property from a condominium form of ownership under 61 applicable law, to the end that the Condominium Borrower may enjoy all of the material rights granted to it as a party to the Condominium Property Documents. (F) STATEMENTS, NOTICES. The Borrower will, within twenty (20) days after demand from Lender (which shall not be required more than two (2) times in any calendar year), obtain, or cause the Condominium Borrower to obtain, if and to the extent that the Condominium Borrower is entitled to the same under the Condominium Property Documents, and otherwise request from and make good faith efforts to obtain, from the Board of Managers and deliver to Lender a duly signed and acknowledged certificate (signed also by the Condominium Borrower) that the Condominium Property Documents are unmodified and in full force and effect (or, if the same have been modified in compliance with this Loan Agreement, that the Condominium Property Documents are in full force and effect as to modified and that there have been no other modifications), stating the dates to which the assessments, common charges and other charges payable under the Condominium Property Documents have been paid and stating whether to each certifying party's and the Condominium Borrower's Knowledge, the Condominium Borrower is in compliance with the Condominium Property Documents, or, if not, specifying each default or failure of compliance of which the certifying party has knowledge. The Borrower will, promptly upon receipt thereof by Condominium Borrower, furnish Lender with a copy of all notices and statements, however characterized, issued by the Board of Managers or relating to the Condominium Property Documents including without limitation, financial statements and projected budgets. SECTION 5.27 LENDER'S EXPENSES. The Borrower shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrower shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrower. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrower shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrower shall not cancel any indebtedness from any Person owing to the Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. SECTION 5.30 MODIFICATION OF MORTGAGE DOCUMENTS. The Borrower shall not consent to, nor permit the Mortgage Borrowers to agree to, any amendment, modification, waiver or restatement of any of the Mortgage Loan Documents without Lender's prior written consent, which will not be unreasonably withheld. 62 SECTION 5.31 PROHIBITED PERSONS. The Borrower covenants and agrees that no Borrower Party, nor any of their respective Affiliates, officers, directors, partners or members will knowingly: (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrower further covenants and agrees to deliver (from time to time) to Lender any such certification or other evidence as may be requested by Lender in its sole and absolute discretion, confirming that: (i) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, has to its Knowledge engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person. ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrower hereby pledges, assigns and grants to Lender a security interest in and to all of the Borrower's right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents, subject, in each case, to the interests of the Mortgage Lender, if any, in the Account Collateral. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves then held by or on behalf of Lender as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) then held by or on behalf of Lender for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any Default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. 63 SECTION 6.2 FUNDS DEPOSITED WITH LENDER. (A) Except only as expressly provided otherwise herein, all funds of the Borrower which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrower and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After repayment of all of the Obligations, all funds held as Reserves will be promptly returned to the Borrower. (B) The Borrower shall cause the Mortgage Borrowers to deposit with Mortgage Lender the amounts necessary to fund each of the Reserves as set forth in the Mortgage Loan Agreement and the Mortgage Loan Cash Management Agreement. SECTION 6.3 FF&E RESERVE. Funds held in the FF&E Reserve may be withdrawn by the Borrower or the Mortgage Borrowers, subject in all instances to the terms of the Mortgage Loan Cash Management Agreement, only in accordance with the approved CapEx/FF&E Budget relating to the Properties. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than for normal repairs, replacements, maintenance expenses, and otherwise in accordance with the terms of the Management Agreements, subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d). SECTION 6.4 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. The Borrower shall cause the Mortgage Borrowers to promptly commence and diligently prosecute to completion the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on Schedule 6.5 to the Mortgage Loan Agreement. Funds held in the Capital Improvement Reserve shall be disbursed to the Mortgage Borrowers only in accordance with Section 6.7 of the Mortgage Loan Agreement. SECTION 6.5 HAZARDOUS MATERIALS REMEDIATION RESERVE. The Borrower shall cause the funds contained in the Hazardous Materials Remediation Reserve to be utilized by the Mortgage Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrower or the Mortgage Borrowers for purposes for which any other Reserve is established. Subject to the Mortgage Borrowers' satisfaction of the applicable conditions of Section 6.7 of the Mortgage Loan Agreement, the Borrower and the Mortgage Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrower, or the Mortgage Borrowers, for such Environmental Work, provided that the Borrower delivers to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, the Borrower or the Mortgage Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, to Lender's reasonable satisfaction. 64 SECTION 6.6 Conditions to Disbursements from Hazardous Materials Remediation Reserve, Capital Improvement Reserve and Performance of Work. (A) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000 and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrower shall cause the Mortgage Borrowers to assign, or cause to be assigned, (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. The Borrower shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work, in each case at the Borrower's sole cost and expense. (B) PERFORMANCE OF WORK. If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrower with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrower of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrower shall have commenced to cure such unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrower in the exercise of due diligence to cure such unsatisfactory work, up to a maximum of an additional sixty (60) days, subject to Force Majeure, without the cure thereof), Lender may, subject to Mortgage Lender's rights under the Mortgage Loan Documents, proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve then held by or on behalf of Lender toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrower, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. In order to facilitate Lender's completion or making of any Work pursuant to this Section 6.6, the Borrower shall cause the Mortgage Borrowers to grant Lender the right to enter 65 onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrower and secured by the Pledge Agreement. For this purpose, the Borrower constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrower pursuant to this Section 6.6(B). Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrower empowers said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve then held by or on behalf of Lender for the purpose of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the applicable Mortgage Borrower which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of such Property; and (vii) to do any and every act which the Borrower might do in its own behalf to fulfill the terms of this Loan Agreement. Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrower additional sums to make or complete any Work. The Borrower shall, and shall cause the Mortgage Borrowers to, permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.6 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may be kept at any Property, and to complete any Work made pursuant to this Section 6.6(B). The Borrower shall, and shall cause the Mortgage Borrowers to, use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 6.6(B) or the completion of the Work pursuant to this Section 6.6(B). (C) INDEMNIFICATION. The Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrower shall assign, and shall cause to be assigned, to Lender all rights and claims the Mortgage Borrowers may have against all Persons supplying labor or 66 materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.7 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations (as defined in the Mortgage Loan Agreement) in full, a Cash Trap Event shall occur, then for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Mortgage Lender (or its Servicer or agent) and held by Mortgage Lender in accordance with the Mortgage Loan Cash Management Agreement or, if not so held by Mortgage Lender, shall be deposited with Lender and held in the Lock Box Account and, in each case disbursed in accordance with the terms of the Mortgage Loan Cash Management Agreement. SECTION 6.8 SUBSTITUTE CASH MANAGEMENT AGREEMENT. If the Mortgage Loan shall have been satisfied prior to the payment in full of the Loan, the Borrower shall, and shall cause the Mortgage Borrowers to, enter into a substitute Cash Management Agreement and related lockbox agreements and pledge agreements with substantially the same terms as the agreements entered into as of the date hereof in connection with the Mortgage Loan (including, the provisions in the Mortgage Loan Agreement relating to all Reserves and Collateral Accounts, Section 5.4, Article VI and Article VII of the Mortgage Loan Agreement) within five (5) days after the satisfaction of such Mortgage Loan, all of which agreements shall be for the benefit of Lender rather than Mortgage Lender. Such substitute agreements shall provide that all Receipts shall be deposited directly into the Deposit Account for disbursement in accordance with the terms of such substitute Cash Management Agreement and this Agreement. Notwithstanding the foregoing, the substitute Cash Management Agreement shall provide that the aggregate amortization payments that were being made prior to the satisfaction of the Mortgage Loan shall continue to be paid and 100% of such payments shall be distributed to Lender. ARTICLE VII LOCK BOX; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF LOCK BOX ACCOUNT. LOCK BOX ACCOUNTS. On or before the Closing Date, pursuant to the terms of the Cash Management Agreement, an Eligible Account shall be established in the name of Lender, as secured party hereunder, to serve as the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement, the Borrower shall not have the right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. The Borrower shall direct that all amounts paid by the Cap Provider under the Cap together with all Receipts with respect to the Properties which the Mortgage Borrower or the Borrower is entitled to receive from Mortgage Lender pursuant to the Mortgage Loan Cash Management Agreement or otherwise, after all sums which are then due and payable have been paid to Mortgage Lender pursuant to the terms of the 67 Mortgage Loan Documents, to be transferred by wire transfer (or transfer via the ACH system) on each Business Day by the Mortgage Loan Lock-Box Account Bank to the Lock Box Account. Lender may elect to change any financial institution in which the Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrower. The Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement: (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Hazardous Materials Remediation Reserve Sub-Account"; (c) the "Cash Trap Reserve Sub-Account"; and (d) the Minimum Balance Sub-Account. SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, the Lock Box Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. SECTION 7.4 MORTGAGE LOAN LOCK BOX. If the lock box and cash management arrangements under the Mortgage Loan Documents in effect as of the Closing Date are terminated, or if the Mortgage Loan shall be repaid in full, while any portion of the Obligations remain outstanding, the Borrower will immediately cause the Mortgage Borrowers to comply with the requirements of Section 6.8 and Section 7.1 hereof. In addition, upon the occurrence of any such event the Borrower shall cause the Mortgage Borrowers to direct the Mortgage Lender to release all funds held in the Mortgage Loan Lock Box or any of the reserves established pursuant to the Mortgage Loan Cash Management Agreement, or the Mortgage Loan Documents, to be deposited with Lock Box Account Bank to be held in the applicable Reserves in accordance with the terms hereof and the Cash Management Agreement. ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. 68 "EVENT OF DEFAULT" means the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrower to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or (B) OTHER PAYMENTS. Failure of the Borrower to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrower; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrower (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if (i) within forty-five (45) days after the filing thereof, the Borrower shall cause the same to be removed of record by payment, bonding or otherwise, or (ii) same is being contested in good faith by the Borrower or the Mortgage Borrowers in accordance with Section 5.3(B) of the Mortgage Loan Agreement); or (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by the Borrower, Guarantor or any Affiliate thereof in any Loan Document or in any statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan Documents and such default is not fully cured within thirty (30) days after receipt by the Borrower of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrower (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) the Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrower in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any 69 applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any Borrower Party commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceeding, it shall not constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrower is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of its business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, the Pledge Agreement or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrower 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) and the Borrower does not take all actions requested by Lender to correct such defect within ten (10) days after the written request 70 by Lender to take such action, or any Person under the control of the Borrower or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; or (ii) any breach or default shall occur in the material obligations of the Mortgage Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, that Manager shall have the right to exercise material remedies as a consequence thereof; or (P) GROUND LEASE/CONDOMINIUM PROPERTY. Any default by any of the Mortgage Borrowers beyond any applicable grace period shall occur under any Ground Lease or any Condominium Property Document or any actual or attempted surrender, termination, modification or amendment of any Ground Lease or any Condominium Property Document without Lender's prior written consent; or (Q) MORTGAGE LOAN DOCUMENTS. Any "Event of Default" (as defined in the Mortgage Loan Agreement) or any other default beyond any applicable notice and grace period under the Mortgage Loan Documents shall occur. If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). SECTION 8.2 ACCELERATION AND REMEDIES. (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by the Borrower. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrower under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced 71 any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Collateral. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Collateral and the Pledge Agreement have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose upon the Collateral in any manner and for any amounts secured by the Collateral then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose upon the Collateral to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose upon the Collateral to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Collateral as Lender may elect. Notwithstanding one or more partial foreclosures, the Collateral shall remain subject to the Pledge Agreement to secure payment of sums secured by the Collateral and not previously recovered. (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. The Borrower shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents reasonably necessary to effect the aforesaid severance if the Borrower fails to do so within ten (10) days of Lender's written request, the Borrower ratifying all that its said attorney shall do by virtue thereof. (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrower pursuant to this Loan Agreement or the other Loan Documents, or existing 72 at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrower or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if the Borrower shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrower including making protective advances on behalf of the Borrower, or, in its sole discretion, causing the obligations of the Borrower to be satisfied with the proceeds of any Reserve held by or on behalf of Lender. In such event, the Borrower shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the Borrower under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. (B) The Borrower, on behalf of the Mortgage Borrowers, hereby agrees that Lender shall have the right to cure defaults by the Mortgage Borrowers under the Mortgage Loan Documents whenever, in Lender's reasonable judgment (after taking into consideration all cure periods provided to Lender under any intercreditor agreement with Mortgage Lender), the existence of such default by the Mortgage Borrowers is reasonably likely to have a material adverse effect on the Borrower, any Mortgage Borrower, the Collateral or any Property. Lender shall endeavor, in good faith, to notify the Borrower prior to taking any such cure action, but shall have no liability to the Borrower or the Mortgage Borrowers for failing to do so. From and after the occurrence of a default under the Mortgage Loan Documents, the Borrower shall cooperate in all commercially reasonable respects with, and shall cause the Mortgage Borrowers to cooperate in all commercially reasonable respects with (and not to impede or interfere with in any respect), Lender's efforts to cure (or cause the cure of) all monetary and non-monetary defaults under the Mortgage Loan Documents, including, without limitation, causing the payment, removal or bonding over of all Liens, claims or judgments, or entering upon the Properties (or any portion thereof) to cure (or cause the cure of ) any non-monetary default under the Mortgage Loan Documents. In addition, after the occurrence of a default under the Mortgage Loan Documents, the Borrower agrees that it will cause the Mortgage Borrowers to coordinate 73 with Lender with respect to all communications (written or oral) with the Mortgage Lender (or any person or entity servicing the Mortgage Loan). (C) Any funds expended by or on behalf of Lender to effect a cure of the Mortgage Loan as contemplated in this Section shall constitute protective advances under the Loan. If Lender so elects to cure (or attempts to cure) any default under the Mortgage Loan, the amount of such expenditures made by or on behalf of Lender shall be added to the Obligations, shall accrue interest at the Default Rate, and shall be secured by the Collateral. (D) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, the Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrower. ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO THE BORROWER. The Borrower hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that the Borrower: (A) does not own and will not own any assets other than the Collateral (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Mortgage Borrowers, and other direct or indirect wholly owned subsidiaries of the Borrower established solely for the purpose of holding liquor licenses with respect to one or more of the Properties (collectively, the "OWNERSHIP INTERESTS") or such incidental assets as are necessary to enable it to discharge its obligations with respect to the Mortgage Borrowers, the Collateral or the Properties; (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Collateral or the Ownership Interests; (C) will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of the Borrower or Member except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate; (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations and (ii) Permitted Indebtedness; 74 (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), and has not acquired and will not acquire obligations or securities (other than the Ownership Interests) of any of its Affiliates other than the other Borrower Parties; (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due; (G) has done or caused to be done and will do or will cause to be done, all things necessary to preserve its existence, and will not, nor will any member, or principal further amend, modify or otherwise change its articles of organization, operating agreement, or other organizational documents, as modified, amended, restated or supplemented as of the date hereof, in any manner with respect to the matters set forth in this Article IX; (H) has at all times continuously maintained its existence and has at all times been qualified to do business, and shall continue to maintain its existence and be qualified to do business in all states necessary to carry on its business; (I) has at all times conducted and operated and will conduct and operate its business as presently contemplated with respect to the ownership of the Collateral; (J) has at all times maintained and will maintain books and records and bank accounts (other than bank accounts established hereunder, or established by Manager with respect to the operations of the Properties pursuant to the Management Agreement) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) has at all times held itself out to the public as, and will at all times hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and has at all times corrected and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) has at all times paid and will pay the salaries of its own employees, if any; (M) has at all times allocated and will allocate fairly and reasonably any overhead for shared office space; (N) has at all times used and will use its own stationery, invoices and checks; (O) has at all times filed and will file its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; 75 (P) has and reasonably expects to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (Q) has not at any time sought, acquiesced in, or suffered or permitted and will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) has not at any time entered and will not enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership (other than the Ownership Interests) of, any Person; (S) has not at any time commingled or permitted to be commingled and will not commingle or permit to be commingled its funds or other assets with those of any other Person; (T) has at all times maintained and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (U) has not at any time held, and will not hold, itself out to be responsible for the debts or obligations (other than the Obligations) of any other Person; (V) has not at any time guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) has at all times complied and shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2 APPLICABLE TO THE BORROWER AND MEMBER. In addition to their respective obligations under Section 9.1, each of the Borrower and Member hereby represent, warrant and covenant as of the Closing Date and until such time as all Obligations are paid and satisfied in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion: (A) Borrower shall at all times act only as the direct or indirect parent of each of the Mortgage Borrowers and the Beverage Companies with all of the rights, powers, obligations and liabilities thereof under the respective organizational documents of such Mortgage Borrower or Beverage Company and has at all times taken and shall take any and all actions and will do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; 76 (B) the Borrower shall not, without the prior unanimous written consent of the Borrower's board of managers including the Independent Directors, institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (C) Member shall not institute proceedings for itself or the Borrower to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or the Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or the Borrower; or a substantial part of its or the Borrower's property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (D) The Borrower shall promptly elect and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by the Borrower and be reasonably acceptable to Lender. ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than the Borrower's internal costs and expenses and the costs and expenses of the Borrower's counsel), to cause the Note and any Pledge Agreement to be split into one or more loans evidenced by multiple notes and secured by multiple pledge agreements in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. 77 SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting any such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Secondary Market Transaction with respect to each of such loans), the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything to the contrary contained in this Article X, it is acknowledged and agreed that in no event shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's) internal costs and expenses in connection with any Secondary Market Transaction. Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of the Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrower's obligations or decrease the Borrower's rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower shall not be required to pay any third party (other than, with respect to the first successful Secondary Market Transaction only (or if the Loan shall hereafter be split into multiple loans, the first successful Secondary Market Transaction with respect to each of such loans) the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than with respect to the first successful Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Secondary Market Transaction with respect to each of such loans), the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrower, at Lender's cost and expense (other than with respect to the first successful Secondary Market 78 Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Secondary Market Transaction with respect to each of such loans), the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent, in substance, with the opinions covered by the original opinions addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrower understands that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrower and Guarantor shall each provide in connection with each (i) preliminary and final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, prepared in connection with any Secondary Market Transaction (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrower and Guarantor certifying that the Borrower and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrower, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrower and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrower, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrower shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrower or its Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrower or its Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and 79 thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, the Borrower shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of the Collateral, any Properties or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in the Borrower or the Mortgage Borrowers, irrespective of the number of tiers of ownership, without Lender's consent. SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN THE BORROWER. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in the Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower) and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving 80 effect to such Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY. (A) The Borrower shall have the right to request that Lender consent to (i) a transfer of all of the Collateral to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrower's obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the obligations of the Guarantors arising from and after such date and release of the Borrower and Guarantor from obligations arising from and after such date and (iii) the replacement of the Mortgage Borrowers with new owners of the Properties, all in connection with an assumption completed in accordance with Section 11.3 of the Mortgage Loan Agreement (collectively, an "ASSUMPTION"), subject to the conditions set forth in paragraphs (B) and (C) of this Section. Together with such written application, the Borrower will pay to Lender a review fee of $10,000. The Borrower also shall pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of Rating Agencies, if any, and other outside entities, in connection with considering any proposed Assumption, whether or not the same is permitted or occurs. (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION" provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrower shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrower shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions, if required in connection with any Securitzation of the Mortgage Loan; (v) The Borrower shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; 81 (vi) The Borrower, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; (vii) (a) The Transferee Borrower shall be a Permitted Transferee or an Affiliate of a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its reasonable discretion; (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender; and (ix) The Borrower shall have delivered to Lender evidence reasonably satisfactory to Lender that the consent of the Mortgage Lender has been obtained and each of the other terms and conditions applicable to the transfer of the Properties and assumption of the Mortgage Loan under Section 11.3 of the Mortgage Loan Agreement has been satisfied. (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or the Borrower, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrower, the Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, a bankruptcy non-consolidation opinion; (iii) The Borrower shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrower and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (iv) The Borrower shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Assumption, including but not limited to Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. SECTION 11.4 RELEASE OF COLLATERAL. On one or more occasions, Lender shall permit the Borrower to cause the Mortgage Borrowers to transfer a Property and the Borrower may obtain the release of a portion of the Collateral (each, a "COLLATERAL RELEASE") relating only to the Borrower's direct or indirect interest in the Mortgage Borrower and its respective Property that is the subject of such Property Release completed in accordance with Section 11.4 of the Mortgage 82 Loan Agreement, simultaneous with such Property Release, subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrower at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) Lender shall have received on the date proposed for such Collateral Release the Mezzanine Lender's Percentage of the Release Price for the Property that is the subject of the Property Release (the "COLLATERAL RELEASE PRICE") it being agreed that, following satisfaction of the Mortgage Loan the entire Release Price shall be paid to Lender and applied to the payment of the Obligations (together with, except in connection with a Release of a Sale Property, the applicable Prepayment Consideration); (D) If required by any Rating Agency, the Borrower at its sole cost and expense shall have delivered to Lender one or more endorsements to the Title Policies insuring that, after giving effect to such Collateral Release, (i) the Liens insured under the Title Policies are first priority Liens on the remaining Collateral, and (ii) that the Title Policies remain in full force and effect and unaffected by such Collateral Release; (E) Immediately following any Collateral Release (other than in connection with a Release of a Sale Property) both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) in effect at Closing or immediately prior to the Collateral Release, whichever is greater; (F) Notwithstanding the foregoing, the Borrower may not obtain a Collateral Release under this Section 11.4 of any Collateral (other than in connection with a Release of a Sale Property) which individually, or in the aggregate (with all Collateral Releases (other than in connection with a Release of a Sale Property) since the Closing Date), is with respect to Properties having an Aggregate Allocated Loan Amount of more than thirty percent (30%) of the Loan Amount (exclusive of the Allocated Loan Amount with respect to any Sale Property); (G) The Borrower shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Collateral Release; and (H) Immediately following such Collateral Release, the Collateral that has been released will be owned by a Person other than the Borrower. Upon satisfaction of the above conditions, Lender shall effectuate the following: the security interest of Lender in and to that portion of the Collateral and the other Loan Documents relating to the Released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrower to effectuate such release. The Borrower acknowledges 83 that it has, in most cases, pledged equity interests in multiple Mortgage Borrowers and that, in several cases, the Mortgage Borrowers own more than one Property. Accordingly, the Borrower acknowledges that, until such time as all Properties owned by a particular Mortgage Borrower have been released, the Collateral relating to such Mortgage Borrower shall not be released and, notwithstanding that no Collateral Release shall have occurred (until the last Property owned by such Mortgage Borrower is being released), a condition to the Borrower permitting any Mortgage Borrower to obtain any Property Release shall be the payment to Lender of the applicable Collateral Release Price and satisfaction of the other conditions set forth in this Section 11.4. In addition, promptly after consummation of any such Collateral Release and Lender's receipt of the Collateral Release Price, any and all Reserves designated as applicable to each Property that is the subject of the Property Release then held by or on behalf of Lender, if any, shall be returned to the Borrower. SECTION 11.5 RESERVED. SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrower may permit the Mortgage Borrowers to transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Properties, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or the Properties taken as a whole, will not materially impair the utility of any individual Property or the Properties, taken as a whole, 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. SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrower may permit the Mortgage Borrowers to, without the consent of Lender, (i) make immaterial transfers of portions of the Properties to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way with respect to any Property in the ordinary course of business 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 Properties or have a Material Adverse Effect on the value of the Properties taken as a whole. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrower to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrower's obligations under the Note shall be limited to (i) the Collateral and (ii) the rents, profits, issues, products and income of the Collateral. Notwithstanding anything to the contrary in this Loan Agreement, the Pledge Agreement or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to 84 file a claim for the full amount of the Obligations secured by the Collateral or to require that all collateral shall continue to secure all of the Obligations owing to Lender in accordance with the Loan Documents. SECTION 12.2 PARTIAL RECOURSE. Notwithstanding Section 12.1, the Borrower (but not its members, partners, employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrower or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrower or any Borrower Party or Manager and not deposited into the Lock Box Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender or Mortgage Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Mortgage Lender, the servicer of the Mortgage Loan, Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrower or of any change in the name of the Borrower or if the Borrower takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrower or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste with respect to any of the Properties; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully recourse to the Borrower and Guarantor upon the happening of any of the following: (i) any Borrower Party's defense of any efforts by Lender to collect or enforce the Obligations following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any efforts by Lender to collect or enforce the Obligations without a good faith basis following any other Event of Default, and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrower and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by the Borrower, Guarantor or any Affiliate of either of them). SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of the Pledge Agreement or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against the Borrower Party but not 85 any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that the Borrower (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold 86 security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors of all or any part of the obligations of the other Borrower Parties, and of all other circumstances bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. 87 ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrower under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrower of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including 88 claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties, the Collateral, or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrower shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrower under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Properties or the Collateral by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrower in any case shall entitle the Borrower or other Person to any other or further notice or demand in similar or other circumstances. SECTION 14.4 RETENTION OF THE BORROWER'S DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrower to Lender (other than the Note) unless the Borrower requests in writing that same be returned. Upon such request and at the Borrower's expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). 89 Notices shall be addressed as follows: If to the Borrower or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Morris, Manning & Martin, LLP 3343 Peachtree Road, NE 1600 Atlanta Financial Center Atlanta, Georgia 30326 Attention: Thomas Gryboski, Esq. Facsimile: (404) 365-9532 If to Lender: c/o Merrill Lynch & Co. Four World Financial Center New York, New York 10080 Attention: Robert Spinna Facsimile: (212) 738-1013 With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attention: Robert L. Boyd, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan 90 Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrower to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its 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 and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, 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. SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE 91 WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrower may not assign its rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrower, on behalf of itself and all Borrower Parties, represents, warrants and acknowledges that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrower, on behalf of itself and all Borrower Parties, also acknowledges and agrees that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrower or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrower or any other Person. The relationship between Lender and the Borrower is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and the Borrower are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrower shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrower's sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and the Borrower hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. The Borrower hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, 92 officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to the Borrower or Affiliates thereof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrower and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrower and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE COLLATERAL IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. THE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE COLLATERAL, GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN 93 ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWER AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWER AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrower has been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrower shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrower in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrower are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, 94 Lender shall have the right, at the Borrower's sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [SIGNATURES FOLLOW ON NEXT PAGE] 95 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWER: LODGIAN MEZZANINE FLOATING, LLC, a Delaware limited liability company By:_________________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:_________________________________________ Name: Title: LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - [Reserved] Exhibit K - Zoning Reports Schedule 2.4 - Scheduled Mezzanine Principal Payments Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.14 - ERISA Plans Schedule 4.16 - Litigation Schedule 4.26 - Collective Bargaining Agreements Schedule 5.14 - Material Agreements List of Schedules EXHIBIT A PROPERTIES
CHAIN/NAME CITY ST Holiday Inn Express Dothan (ex Hampton) AL Quality Inn Dothan AL Holiday Inn Express Gadsden (Attalla) AL Holiday Inn Sheffield AL Holiday Inn Pensacola FL Holiday Inn Express Pensacola (ex Hampton) FL Holiday Inn Winter Haven FL Holiday Inn Brunswick GA Holiday Inn Valdosta GA Fairfield Inn Valdosta GA Crowne Plaza Cedar Rapids IA Holiday Inn Florence KY Clarion Hotel Louisville KY Holiday Inn Silver Spring MD Holiday Inn Lansing MI Holiday Inn St. Louis North MO Holiday Inn Grand Island NY Holiday Inn Hamburg NY Holiday Inn Jamestown NY Holiday Inn Select Niagara Falls NY Four Points Sheraton Niagara Falls NY Holiday Inn Pittsburgh (Pkwy East) PA Fairfield Inn Jackson TN French Quarter Suites Memphis TN Holiday Inn Memphis TN Holiday Inn Austin TX Fairfield Inn Colchester VT Holiday Inn Clarksburg (Bridgeport) WV Holiday Inn Morgantown WV
Exhibit A EXHIBIT B ENVIRONMENTAL REPORTS Exhibit B EXHIBIT C FRANCHISE AGREEMENTS Exhibit C EXHIBIT D ALLOCATED LOAN AMOUNTS AGGREGATE ALLOCATED LOAN AMOUNTS Exhibit D EXHIBIT E MANAGEMENT AGREEMENTS Exhibit E EXHIBIT F [RESERVED] Exhibit F EXHIBIT G PROPERTY IMPROVEMENT PLANS Exhibit G EXHIBIT H [RESERVED] Exhibit H EXHIBIT I ACCEPTABLE FRANCHISORS Exhibit I EXHIBIT J [RESERVED] Exhibit J EXHIBIT K ZONING REPORTS Exhibit K SCHEDULE 2.4 SCHEDULED MEZZANINE PRINCIPAL PAYMENTS Schedule 2.4 SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan Agreement 2. Note 3. Pledge Agreement 4. Guaranty 5. Environmental Indemnity 6. Assignment of Rate Cap 7. Financing Statements 8. Cash Management Agreement 9. Assignments of Management Agreements 10. Post Closing Agreement Schedule 3.1(A) SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES Schedule 4.1(C) SCHEDULE 4.2 CONSENTS NONE. Schedule 4.2 SCHEDULE 4.5 CONDEMNATION PROCEEDINGS Schedule 4.5 SCHEDULE 4.5(A) RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER Schedule 4.5(A) SCHEDULE 4.7(B) RENT ROLL Schedule 4.7(B) SCHEDULE 4.7(E) FRANCHISE DEFAULTS
HOTEL CITY, STATE REASON FOR DEFAULT ~~Holiday Inn Morgantown Morgantown, WV OSI failure Fairfield Inn Jackson Jackson, TN GSS Red Zone~~
Schedule 4.7(E) SCHEDULE 4.14 ERISA PLANS 1. Lodgian, Inc. 401(k) Plan. 2. Lodgian, Inc. Employee Health & Welfare Plan. Schedule 4.14 SCHEDULE 4.16 LITIGATION NONE Schedule 4.16 SCHEDULE 4.26 COLLECTIVE BARGAINING AGREEMENTS NONE Schedule 4.26 SCHEDULE 5.14 MATERIAL AGREEMENTS Agreement between PFG Broadline and Lodgian, Inc. dated July 1, 2003. Agreement between Harbor Linen and Lodgian, Inc. dated March 1, 2002. Various agreements between the Borrowers and On Command Video Corporation. Guest Room Commitment between Servico New York, Inc. and Seneca Niagara Falls Gaming Corporation dated January 21, 2003. Schedule 5.14 EX-10.22.2 8 g87458a3exv10w22w2.txt EX-10.22.2 FORM OF MEZZANINE NOTE(FLOATING) EXHIBIT 10.22.2 FORM OF MEZZANINE NOTE (FLOATING) _______ JUNE __, 2004 FOR VALUE RECEIVED, LODGIAN MEZZANINE FLOATING, LLC, a Delaware limited liability company, having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 ("MEZZANINE Borrower"), promises to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "MEZZANINE LENDER"), at 4 World Financial Center, New York, New York 10080, or such other place as Mezzanine Lender may designate in writing, the principal sum of _______________________, with interest on the unpaid principal balance from the date of this Mezzanine Note, until paid, at the Interest Rate in effect from time to time hereunder. This Mezzanine Note may be referred to herein as the "MEZZANINE NOTE," and the loan evidenced hereby may be referred to herein as the "MEZZANINE LOAN." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Mezzanine Loan Agreement (hereinafter defined). PAYMENTS OF PRINCIPAL AND INTEREST. Mezzanine Borrower shall make payments of principal and interest on the outstanding principal balance of this Mezzanine Note in accordance with the terms and provisions of Section 2.4 of the Mezzanine Loan Agreement. The entire outstanding principal balance of the Mezzanine Loan, all accrued and unpaid interest thereon (including interest through the end of the Interest Accrual Period then in effect) and all other amounts due hereunder and under the other Mezzanine Loan Documents (collectively, the "DEBT") if not sooner paid (and unless Mezzanine Borrower shall extend the term of the Mezzanine Loan for the First Extension Term, the Second Extension Term, or all Extension Terms) shall be due and payable on the Payment Date in June 2006 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of Section 2.5(B) of the Mezzanine Loan Agreement, Mezzanine Borrower may extend the term of the Mezzanine Loan for the Extension Terms. The Scheduled Maturity Date, as the same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B) of the Mezzanine Loan Agreement), or such other date on which the final payment of the Debt becomes due hereunder or under the Mezzanine Loan Agreement or the other Mezzanine Loan Documents, whether at such stated maturity date, by acceleration, or otherwise, shall be referred to herein as the "MATURITY DATE". Interest on the principal sum of this Mezzanine Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. SECURITY; MEZZANINE LOAN DOCUMENTS. This Mezzanine Note is being executed and delivered pursuant to that certain Mezzanine Loan Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "MEZZANINE LOAN AGREEMENT"), between Mezzanine Borrower and Mezzanine Lender, to which reference is hereby made for the terms and conditions governing this Mezzanine Note, including the terms and conditions under which this Mezzanine Note may be prepaid or its maturity accelerated. This Mezzanine Note is secured by, among other things, that certain Pledge and Security Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "PLEDGE AGREEMENT"), executed by Mezzanine Borrower, pledging its legal and beneficial interest in and to certain stock, limited liability company membership interests and limited and general partnership interests, as applicable, as more particularly described therein (collectively, the "PLEDGED INTERESTS") in favor of Mezzanine Lender. This Mezzanine Note, the Mezzanine Loan Agreement, the Pledge Agreement and all other documents or instruments given by Mezzanine Borrower or any guarantor and accepted by Mezzanine Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Mezzanine Note may be referred to as the "MEZZANINE LOAN DOCUMENTS." PREPAYMENT; PREPAYMENT CONSIDERATION. Mezzanine Borrower shall have no right to prepay the Mezzanine Loan in whole or in part except as expressly provided in Section 2.6 of the Mezzanine Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the continuance of any Event of Default, at the option of Mezzanine Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Mezzanine Loan Documents shall at once become due and payable, and Mezzanine Lender may exercise any and all of its rights and remedies under any of the Mezzanine Loan Documents or pursuant to applicable law. Mezzanine Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Mezzanine Note or under any of the other Mezzanine Loan Documents shall occur, then Mezzanine Borrower shall pay to Mezzanine Lender, in addition to all sums otherwise due and payable, a late charge in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Mezzanine Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Mezzanine Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Mezzanine Loan, the outstanding principal balance of this Mezzanine Note and all other Obligations shall bear interest until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of (i) five percent (4.0%) and (ii) the Interest Rate otherwise applicable under this Mezzanine Note. Mezzanine Borrower agrees that such late charge and Default Rate of interest are reasonable and do not constitute a penalty. INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Mezzanine Note, the Mezzanine Loan Agreement or the other Mezzanine Loan Documents, Mezzanine Borrower shall not be required to pay, and Mezzanine Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent 2 jurisdiction to have been provided for in this Mezzanine Note, the Mezzanine Loan Agreement or in any of the other Mezzanine Loan Documents, then in such event: (i) the provisions of this subsection shall govern and control; (ii) Mezzanine Borrower shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Mezzanine Lender may have received hereunder shall be, at Mezzanine Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Mezzanine Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (iv) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Mezzanine Note, the Mezzanine Loan Agreement and the other Mezzanine Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (v) Mezzanine Borrower shall not have any action against Mezzanine Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Mezzanine Note, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Mezzanine Lender shall have received or accrued the amount of interest which Mezzanine Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of Mezzanine Borrower or its permitted successors or assigns to pay the outstanding principal balance of this Mezzanine Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Mezzanine Loan Agreement, the Pledge Agreement or in any other Mezzanine Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Mezzanine Note, without giving notice to or obtaining the consent of Mezzanine Borrower or its permitted successors or assigns or any guarantors or indemnitor, and without liability on the part of Mezzanine Lender, Mezzanine Lender may, at its option, extend the time for payment of the outstanding principal balance of this Mezzanine Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Mezzanine Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Mezzanine Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by Mezzanine Borrower and all makers, sureties, guarantors and endorsers hereof. This Mezzanine Note shall be binding upon Mezzanine Borrower and its successors and assigns. MEZZANINE BORROWER AND MEZZANINE LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A 3 TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS MEZZANINE NOTE, THE PLEDGE AGREEMENT, ANY OTHER MEZZANINE LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. ASSIGNMENT AND TRANSFER OF MEZZANINE NOTE. Mezzanine Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Mezzanine Note, the Mezzanine Loan Agreement, the Pledge Agreement and any or all of the other Mezzanine Loan Documents, subject to the terms of the Mezzanine Loan Agreement. Mezzanine Lender shall be released of any obligations accruing after the date of such assignment or transfer to the extent that the same are so assigned or transferred, and the rights and obligations of "MEZZANINE LENDER" hereunder shall become the rights and obligations of the transferee holder. Mezzanine Lender agrees to provide Mezzanine Borrower with notice of any such assignment; provided, however, that no Mezzanine Borrower's consent shall be required in connection with any such assignment and no failure or delay by Mezzanine Lender in delivering such notice shall limit the effectiveness of such assignment. LIMITATION ON RECOURSE. The obligations of Mezzanine Borrower hereunder are subject to limitations on recourse as provided in Article XII of the Mezzanine Loan Agreement. ATTORNEYS' FEES, COSTS OF COLLECTION. Mezzanine Borrower shall pay to Mezzanine Lender on demand all reasonable out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Mezzanine Lender in collecting the indebtedness arising hereunder or under any other Mezzanine Loan Documents or secured thereby or otherwise exercising any rights or remedies of Mezzanine Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by Mezzanine Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Mezzanine Note or the Mezzanine Loan Documents. Without limitation, such costs and expenses to be reimbursed by Mezzanine Borrower shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Mezzanine Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in the State of New York and any applicable laws of the United States of America. TIME OF ESSENCE. Subject to the terms of the Mezzanine Loan Agreement, time shall be of the essence as to all of the terms, covenants and conditions of this Mezzanine Note. If the due date of any payment due hereunder or under any of the other Mezzanine Loan Documents shall fall on a day other than a Business Day, Mezzanine Borrower shall be required to make such payment on the next succeeding Business Day. 4 IN WITNESS WHEREOF, the undersigned Mezzanine Borrower have executed this Mezzanine Note as of the date first written above. MEZZANINE BORROWER: LODGIAN MEZZANINE FLOATING, LLC, a Delaware limited liability company By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary EX-10.22.3 9 g87458a3exv10w22w3.txt EX-10.22.3 GUARANTY OF RECOURSE OBLIGATIONS EXHIBIT 10.22.3 FORM OF GUARANTY OF RECOURSE OBLIGATIONS This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of June __, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"), having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at 4 World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "MEZZANINE LENDER"). R E C I T A L S: A. Pursuant to that certain Mezzanine Loan Agreement, dated as of the date hereof (as the same may be amended, modified, supplemented or restated from time to time, the "MEZZANINE LOAN Agreement"), between the Borrower named therein ("MEZZANINE BORROWER"), and Mezzanine Lender, Mezzanine Lender has agreed to make a loan to Mezzanine Borrower in the aggregate original principal amount of _______ (the "LOAN"), subject to the terms and conditions of the Mezzanine Loan Agreement; B. As a condition to Mezzanine Lender's making the Loan, Mezzanine Lender is requiring that Guarantor execute and deliver to Mezzanine Lender this Guaranty; and C. Guarantor hereby acknowledges that Guarantor holds a direct and/or indirect ownership interest in Mezzanine Borrower and that Guarantor will materially benefit from Mezzanine Lender's agreeing to make the Loan. NOW, THEREFORE, in consideration of the premises set forth herein and as an inducement for and in consideration of the agreement of Mezzanine Lender to make the Loan pursuant to the Mezzanine Loan Agreement and the other Loan Documents, Guarantor hereby agrees, covenants, represents and warrants to Mezzanine Lender as follows: SECTION 1. DEFINITIONS. All capitalized terms used and not defined herein shall have the respective meanings given such terms in the Mezzanine Loan Agreement. SECTION 2. GUARANTY. (a) Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) hereby irrevocably, absolutely and unconditionally assumes liability for, guarantees payment to Mezzanine Lender of, and agrees to pay, protect, defend, indemnify and save harmless Mezzanine Lender from and against any and all Guaranteed Recourse Obligations of Mezzanine Borrower (as hereinafter defined). The obligations which are the subject of the guaranty referred to in this Section 2 are hereinafter collectively referred to as the "GUARANTEED OBLIGATIONS". (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF MEZZANINE BORROWER" as used in this Guaranty shall mean all obligations and liabilities for which Mezzanine Borrower shall be personally liable under the provisions of Section 12.2 of the Mezzanine Loan Agreement. (c) All sums payable to Mezzanine Lender under this Guaranty shall be payable on demand and without reduction for any offset, claim, counterclaim or defense. SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to Mezzanine Lender as follows (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Guaranty): (d) DUE EXECUTION. This Guaranty has been duly executed and delivered by Guarantor. (e) ENFORCEABILITY. This Guaranty constitutes a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, or application of general principles of equity in any legal proceeding. (f) NO VIOLATION. The execution, delivery and performance by Guarantor of its obligations under this Guaranty do not violate any law, regulation, order, writ, injunction or decree of any court or governmental body, agency or other instrumentality applicable to Guarantor, or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the assets of Guarantor pursuant to the terms of any mortgage, indenture, agreement or instrument to which Guarantor is a party or by which it or any of its properties is bound. Guarantor is not in default under any other guaranty which it has provided to Mezzanine Lender. (g) NO LITIGATION. Except as disclosed on Schedule 4.16 to the Mezzanine Loan Agreement, there are no actions, suits or proceedings at law or at equity, pending or, to Guarantor's knowledge, threatened against or affecting Guarantor or which involve or could reasonably be expected to involve the validity or enforceability of this Guaranty or which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. Guarantor is not in default beyond any applicable grace or cure period with respect to any order, writ, injunction, decree or demand of any Governmental Authority which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. (h) CONSENTS. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities (collectively, the "CONSENTS") that are required in connection with the valid execution, delivery and performance by Guarantor of this Guaranty have been obtained and Guarantor agrees that all Consents required in connection with the carrying out or performance of any of Guarantor's obligations under this Guaranty will be obtained when required. 2 (i) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial statements of Guarantor heretofore delivered to Mezzanine Lender fairly present the financial condition of Guarantor as of the respective dates thereof, and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. None of the aforesaid financial statements or any certificate or statement furnished to Mezzanine Lender by or on behalf of Guarantor in connection with the transactions contemplated hereby, and none of the representations and warranties in this Guaranty contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading. Guarantor is not insolvent within the meaning of the Bankruptcy Code or any other applicable law, code or regulation and the execution, delivery and performance of this Guaranty will not render Guarantor insolvent. SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the benefit of Mezzanine Lender that Guarantor will deliver to Mezzanine Lender each of the financial statements required to be delivered pursuant to Section 5.1 of the Mezzanine Loan Agreement. SECTION 5. INTENTIONALLY DELETED. SECTION 2. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR. (a) The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Mezzanine Loan Agreement, the Pledge Agreement or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against Mezzanine Borrower, Guarantor or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Mezzanine Borrower under the Note, the Mezzanine Loan Agreement, the Pledge Agreement or any other Loan Document or Guarantor under this Guaranty, or any setoff, counterclaim, and irrespective of any other circumstances which might otherwise limit recourse against Guarantor by Mezzanine Lender or constitute a legal or equitable discharge or defense of a guarantor or surety. Mezzanine Lender may enforce the obligations of Guarantor under this Guaranty by a proceeding at law, in equity or otherwise, independent of any loan foreclosure or similar proceeding or any deficiency action against Mezzanine Borrower or any other Person at any time, either before or after an action against the Properties or any of them or any part thereof, Mezzanine Borrower or any other Person. THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION. Guarantor waives diligence, notice of acceptance of this Guaranty, filing of claims with any court, any proceeding to enforce any provision of the Note, the Mezzanine Loan Agreement, the Pledge Agreement or any other Loan Document, against Guarantor, Mezzanine Borrower or any other Person, any right to require a proceeding first against Mezzanine Borrower or any other Person, or to exhaust any security (including, without limitation, the Collateral or Properties or any of them or any part thereof) for the performance of the Guaranteed Obligations or any other obligations of Mezzanine Borrower or any other Person, or any protest, presentment, notice of default (except as may be expressly required under the Loan Documents) or other notice or demand whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not be discharged of its obligations hereunder. 3 (b) The obligations of Guarantor under this Guaranty, and the rights of Mezzanine Lender to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting Mezzanine Borrower, any Property or any part thereof, Guarantor or any other Person; (ii) any failure by Mezzanine Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Mezzanine Loan Agreement, or any other Loan Documents, or any document or instrument relating thereto; (iii) except (A) with respect to activities occurring after the date of a Permitted Assumption or, (B) activities relating to a Collateral Release after the date thereof, the sale, transfer or conveyance of any Collateral or Property or any interest therein to any Person, whether now or hereafter having or acquiring an interest in any Collateral or Property or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against Mezzanine Borrower or any Collateral or Property or any interest therein; (iv) the conveyance to Mezzanine Lender, any Affiliate of Mezzanine Lender or Mezzanine Lender's nominee of any Property or any interest therein by a deed-in-lieu of foreclosure; (v) the release of Mezzanine Borrower or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise; (vi) the release in whole or in part of any collateral for any or all Guaranteed Obligations or for the Loan or any portion thereof; or (vii) the exercise by Mortgage Lender of any remedies made available to any Mortgage Lender pursuant to the terms of its respective Mortgage Loan Documents, including, without limitation, foreclosure or similar remedies under any Mortgages encumbering an applicable Mortgage Borrower's interest in any Property except with respect to actions taken by such Mortgage Lender following the Mortgage Lender succeeding to the interests of the Mortgage Borrowers in and to the applicable Properties. (c) Except as otherwise specifically provided in this Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an action brought by Mezzanine Lender to enforce this Guaranty based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise. (d) Mezzanine Lender may deal with Mezzanine Borrower and Affiliates of Mezzanine Borrower in the same manner and as freely as if this Guaranty did not exist and shall be entitled, among other things, to grant Mezzanine Borrower or any other Person such extension 4 or extensions of time to perform any act or acts as may be deemed advisable by Mezzanine Lender, at any time and from time to time, without terminating, affecting or impairing the validity of this Guaranty or the obligations of Guarantor hereunder. (e) No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Mezzanine Loan Agreement, the Pledge Agreement or the other Loan Documents or any amendment, modification or other change of any legal requirement shall in any way alter, impair or affect any of the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan Documents are modified with Mezzanine Lender's consent, the Guaranteed Obligations shall automatically be deemed modified to include such modifications. (f) Mezzanine Lender may proceed to protect and enforce any or all of its rights under this Guaranty by suit in equity or action at law, whether for the specific performance of any covenants or agreements contained in this Guaranty or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Guarantor. Each and every remedy of Mezzanine Lender shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. (g) No waiver shall be deemed to have been made by Mezzanine Lender of any rights hereunder unless the same shall be in writing and signed by Mezzanine Lender, and any such waiver shall be a waiver only with respect to the specific matter involved and shall in no way impair the rights of Mezzanine Lender or the obligations of Guarantor to Mezzanine Lender in any other respect or at any other time. (h) At the option of Mezzanine Lender, Guarantor may be joined in any action or proceeding commenced by Mezzanine Lender against Mezzanine Borrower in connection with or based upon the Note, the Mezzanine Loan Agreement, the Pledge Agreement or any other Loan Documents and recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor to the extent of Guarantor's liability hereunder, without any requirement that Mezzanine Lender first assert, prosecute or exhaust any remedy or claim against Mezzanine Borrower or any other Person, or any security for the obligations of Mezzanine Borrower or any other Person. (i) Guarantor agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Mezzanine Borrower or Guarantor to Mezzanine Lender and such payment is rescinded or must otherwise be returned by Mezzanine Lender (as determined by Mezzanine Lender in its sole and absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting Mezzanine Borrower or Guarantor, all as though such payment had not been made. (j) In the event that Guarantor shall advance or become obligated to pay any sums under this Guaranty or in connection with the Guaranteed Obligations or in the event that for 5 any reason whatsoever Mezzanine Borrower or any subsequent owner of any Property or Collateral or any part thereof is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to the lien, the time of payment and in all other respects to all sums, including principal and interest and other amounts, at any time owed to Mezzanine Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive payment thereof until all principal, interest and other sums due pursuant to the Loan Documents have been paid in full. Nothing herein contained is intended or shall be construed to give Guarantor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Mezzanine Lender in or to any collateral for the Loan, notwithstanding any payments made by Guarantor under this Guaranty, until the actual and irrevocable receipt by Mezzanine Lender of payment in full of all principal, interest and other sums due with respect to the Loan or otherwise payable under the Loan Documents. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when any such sums due and owing to Mezzanine Lender shall not have been fully paid, such amount shall be paid by Guarantor to Mezzanine Lender for credit and application against such sums due and owing to Mezzanine Lender. The foregoing shall not prohibit Mezzanine Borrower from using the proceeds of the Loan for any permitted use under the Mezzanine Loan Agreement, including, without limitation, the making of distributions to Guarantor. (k) Guarantor's obligations hereunder shall survive a foreclosure, delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or similar proceeding involving any Collateral or any part thereof and the exercise by Mezzanine Lender of any or all of its remedies pursuant to the Loan Documents. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Guarantor under this Guaranty shall survive for a period of two (2) years following payment in full of the Obligations in accordance with the terms of the Loan Documents, provided, however, in the event that any Guaranteed Obligations or liabilities of the Guarantor under this Guaranty shall have arisen prior to the expiration of such period, then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Guarantor hereunder shall survive. SECTION 3. ENTIRE AGREEMENT/AMENDMENTS. This instrument represents the entire agreement between the parties with respect to the subject matter hereof. The terms of this Guaranty shall not be waived, altered, modified, amended, supplemented or terminated in any manner whatsoever except by written instrument signed by Mezzanine Lender and Guarantor. SECTION 4. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor, and its successors and assigns, may not be assigned or delegated by Guarantor and shall inure to the benefit of Mezzanine Lender and its successors and assigns. Mezzanine Lender shall have the right to assign this Guaranty and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. All references to "Mezzanine Lender" hereunder shall be deemed to include the successors and assigns of Mezzanine Lender and the parties hereto acknowledge that actions taken by Mezzanine Lender hereunder may be taken by Mezzanine Lender's agents and by the agents of the successors and assigns of Mezzanine Lender. 6 SECTION 5. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the City and County of New York or in the Courts of the United States of America located in the Southern District of New York, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Guarantor at its address set forth on the first page hereof. Nothing in this Section 9, however, shall affect the right of Mezzanine Lender to serve legal process in any other manner permitted by law or affect the right of Mezzanine Lender to bring any suit, action or proceeding against Guarantor or its property in the courts of any other jurisdictions. SECTION 6. SECTION HEADINGS. The headings of the sections and paragraphs of this Guaranty have been inserted for convenience of reference only and shall in no way define, modify, limit or amplify any of the terms or provisions hereof. SECTION 7. SEVERABILITY. Any provision of this Guaranty which may be determined by any competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Guarantor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. SECTION 8. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND MEZZANINE LENDER HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH. SECTION 9. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL LIABILITY. (a) The obligations of Guarantor hereunder are separate and distinct from, and in addition to, the obligations of Guarantor now or hereafter arising under the other guaranties pursuant to which Guarantor has guaranteed the payment and performance of certain other obligations of Mezzanine Borrower described therein. (b) If there is more than one entity comprising Guarantor, all references to Guarantor herein shall be to Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) or any one or more of them. All obligations and liabilities of Guarantor hereunder are in addition to, not in lieu of and are independent of: (i) all obligations of Mezzanine Borrower under any other Loan Document, including the Note and the Mezzanine Loan Agreement; and (ii) any obligation of Guarantor under any other Loan Document to which Guarantor is a party. 7 (c) If there is more than one entity comprising Guarantor, all obligations of Guarantor hereunder shall be joint and several. SECTION 10. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder to Mezzanine Lender or Guarantor or which are given to Mezzanine Lender or Guarantor with respect to this Guaranty shall be in writing and shall be delivered to Mezzanine Lender at the address set forth in Section 14.5 of the Mezzanine Loan Agreement and to Guarantor at the address set forth on the first page hereof, each in the manner provided in Section 14.5 of the Mezzanine Loan Agreement. Guarantor agrees to give Mezzanine Lender not less than ten (10) days' prior written notice of any change in the location of Guarantor's principal place of business. SECTION 11. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its execution hereof acknowledges receipt of true copies of all of the Loan Documents, the terms and conditions of which are hereby incorporated herein by reference. SECTION 12. INTEREST; EXPENSES. (a) If Guarantor fails to pay all or any sums due hereunder within ten (10) days of demand by Mezzanine Lender, the amount of such sums payable by Guarantor to Mezzanine Lender shall bear interest from the date of demand until paid at the Default Rate in effect from time to time. (b) Guarantor hereby agrees to pay all reasonable out of pocket costs, charges and expenses, including, without limitation, reasonable attorneys' fees and disbursements, that may be incurred by Mezzanine Lender in enforcing the covenants, agreements, obligations and liabilities of Guarantor under this Guaranty. [SIGNATURE PAGE FOLLOWS] 8 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written. GUARANTOR: LODGIAN, INC., a Delaware corporation By: __________________________________ Name: Daniel E. Ellis Title: Senior Vice President EX-10.23.1 10 g87458a3exv10w23w1.txt EX-10.23.1 MEZZANINE LOAN AGREEMENT (FIXED RATE) EXHIBIT 10.23.1 FORM OF MEZZANINE LOAN AGREEMENT (FIXED RATE POOL) DATED AS OF JUNE __, 2004 BETWEEN LODGIAN MEZZANINE FIXED, LLC AS BORROWER AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS............................................................................ 1 SECTION 1.1 Certain Defined Terms.................................................. 1 SECTION 1.2 Accounting Terms....................................................... 20 SECTION 1.3 Other Definitional Provisions.......................................... 20 ARTICLE II TERMS OF THE LOAN..................................................................... 21 SECTION 2.1 Loan................................................................... 21 SECTION 2.2 Interest............................................................... 21 SECTION 2.3 Reserved............................................................... 22 SECTION 2.4 Payments............................................................... 22 SECTION 2.5 Maturity............................................................... 23 SECTION 2.6 Prepayment............................................................. 23 SECTION 2.7 Outstanding Balance.................................................... 24 SECTION 2.8 Taxes.................................................................. 24 SECTION 2.9 Reasonableness of Charges.............................................. 25 SECTION 2.10 Reserved............................................................... 25 SECTION 2.11 Servicing/Special Servicing............................................ 25 SECTION 2.12 Mortgage Loan Event of Default......................................... 25 SECTION 2.13 Mezzanine Lender Approvals............................................. 25 ARTICLE III CONDITIONS TO LOAN................................................................... 26 SECTION 3.1 Conditions to Funding of the Loan on the Closing Date.................. 26 ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................ 30 SECTION 4.1 Organization, Powers, Capitalization, Good Standing, Business.......... 31 SECTION 4.2 Authorization of Borrowing, etc........................................ 31 SECTION 4.3 Financial Statements................................................... 32 SECTION 4.4 Indebtedness and Contingent Obligations................................ 32 SECTION 4.5 Title to the Properties and Collateral................................. 32 SECTION 4.6 Zoning; Compliance with Laws........................................... 33 SECTION 4.7 Leases; Agreements..................................................... 33 SECTION 4.8 Condition of the Properties............................................ 34 SECTION 4.9 Representations and Warranties of the Mortgage Borrowers............... 35 SECTION 4.10 Payment of Taxes....................................................... 35 SECTION 4.11 Adverse Contracts...................................................... 35 SECTION 4.12 Performance of Agreements.............................................. 35 SECTION 4.13 Governmental Regulation................................................ 35 SECTION 4.14 Employee Benefit Plans................................................. 36 SECTION 4.15 Broker's Fees.......................................................... 36 SECTION 4.16 Litigation; Adverse Facts.............................................. 36
i SECTION 4.17 Solvency............................................................... 36 SECTION 4.18 Disclosure............................................................. 36 SECTION 4.19 Use of Proceeds and Margin Security.................................... 37 SECTION 4.20 Security Interests..................................................... 37 SECTION 4.21 Investments............................................................ 37 SECTION 4.22 Defaults............................................................... 37 SECTION 4.23 No Plan Assets......................................................... 37 SECTION 4.24 Governmental Plan...................................................... 37 SECTION 4.25 Not Foreign Person..................................................... 37 SECTION 4.26 No Collective Bargaining Agreements.................................... 38 SECTION 4.27 Bankruptcy............................................................. 38 SECTION 4.28 No Prohibited Persons.................................................. 38 ARTICLE V COVENANTS OF BORROWER PARTIES.......................................................... 38 SECTION 5.1 Financial Statements and Other Reports................................. 38 SECTION 5.2 Existence; Qualification............................................... 43 SECTION 5.3 Payment of Impositions and Claims...................................... 43 SECTION 5.4 Maintenance of Insurance............................................... 44 SECTION 5.5 Operation and Maintenance of the Properties; Casualty.................. 44 SECTION 5.6 Inspection............................................................. 46 SECTION 5.7 O&M Plan............................................................... 46 SECTION 5.8 Intentionally Deleted.................................................. 46 SECTION 5.9 Compliance with Laws and Contractual Obligations....................... 46 SECTION 5.10 Further Assurances..................................................... 46 SECTION 5.11 Performance of Agreements and Leases................................... 47 SECTION 5.12 Leases................................................................. 47 SECTION 5.13 Management; Franchise Agreements....................................... 48 SECTION 5.14 Material Agreements.................................................... 50 SECTION 5.15 Deposits; Application of Receipts...................................... 50 SECTION 5.16 Estoppel Certificates.................................................. 50 SECTION 5.17 Indebtedness........................................................... 51 SECTION 5.18 No Liens............................................................... 51 SECTION 5.19 Contingent Obligations................................................. 52 SECTION 5.20 Restriction on Fundamental Changes..................................... 52 SECTION 5.21 Transactions with Related Persons...................................... 52 SECTION 5.22 Bankruptcy, Receivers, Similar Matters................................. 52 SECTION 5.23 ERISA.................................................................. 53 SECTION 5.24 Press Release.......................................................... 53 SECTION 5.25 Ground Leases.......................................................... 53 SECTION 5.26 Condominium Property................................................... 56 SECTION 5.27 Lender's Expenses...................................................... 57 SECTION 5.28 Distributions.......................................................... 57 SECTION 5.29 Cancellation of Indebtedness; Settlement of Claims..................... 58 SECTION 5.30 Modification of Mortgage Documents..................................... 58 SECTION 5.31 Prohibited Persons..................................................... 58 ARTICLE VI RESERVES.............................................................................. 58

ii SECTION 6.1 Security Interest in Reserves; Other Matters Pertaining to Reserves.... 58 SECTION 6.2 Funds Deposited with Lender............................................ 59 SECTION 6.3 FF&E Reserve........................................................... 59 SECTION 6.4 Capital Improvement Reserve; Required Capital Improvements............. 59 SECTION 6.5 Hazardous Materials Remediation Reserve................................ 59 SECTION 6.6 Conditions to Disbursements from Hazardous Materials................... 60 SECTION 6.7 Cash Trap Reserve...................................................... 62 SECTION 6.8 Substitute Cash Management Agreement................................... 62 ARTICLE VII LOCK BOX; CASH MANAGEMENT............................................................ 63 SECTION 7.1 Establishment of Lock Box Account...................................... 63 SECTION 7.2 Application of Funds in Lock Box Account............................... 63 SECTION 7.3 Application of Funds After Event of Default............................ 63 SECTION 7.4 Mortgage Loan Lock Box................................................. 64 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES........................................................ 64 Section 8.1 Event of Default....................................................... 64 Section 8.2 Acceleration and Remedies.............................................. 67 Section 8.3 Performance by Lender.................................................. 68 Section 8.4 Evidence of Compliance................................................. 69 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS........... 70 Section 9.1 Applicable to the Borrower............................................. 70 Section 9.2 Applicable to the Borrower and Member.................................. 72 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS...................................... 73 Section 10.1 Secondary Market Transactions Generally................................ 73 Section 10.2 Cooperation; Limitations............................................... 73 Section 10.3 Information............................................................ 74 Section 10.4 Additional Provisions.................................................. 75 ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES................. 75 Section 11.1 Restrictions on Transfer and Encumbrance............................... 75 Section 11.2 Transfers of Beneficial Interests in the Borrower...................... 76 Section 11.3 Assumability........................................................... 76 Section 11.4 Release of Collateral.................................................. 80 Section 11.5 Sale of Building Equipment............................................. 81 Section 11.6 Immaterial Transfers and Easements, etc................................ 81 ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE.................................................... 81 Section 12.1 Limitations on Recourse................................................ 81 Section 12.2 Partial Recourse....................................................... 81

iii Section 12.3 Miscellaneous.......................................................... 82 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES...................................... 82 Section 13.1 Waivers................................................................ 82 ARTICLE XIV MISCELLANEOUS........................................................................ 84 Section 14.1 Expenses and Attorneys' Fees........................................... 84 Section 14.2 Indemnity.............................................................. 85 Section 14.3 Amendments and Waivers................................................. 86 Section 14.4 Retention of the Borrower's Documents.................................. 86 Section 14.5 Notices................................................................ 86 Section 14.6 Survival of Warranties and Certain Agreements.......................... 87 Section 14.7 Failure or Indulgence Not Waiver; Remedies Cumulative.................. 87 Section 14.8 Marshaling; Payments Set Aside......................................... 87 Section 14.9 Severability........................................................... 88 Section 14.10 Headings............................................................... 88 Section 14.11 APPLICABLE LAW......................................................... 88 Section 14.12 Successors and Assigns................................................. 88 Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship..... 88 Section 14.14 Reasonableness of Determinations....................................... 89 Section 14.15 Limitation of Liability................................................ 89 Section 14.16 No Duty................................................................ 89 Section 14.17 Entire Agreement....................................................... 89 Section 14.18 Construction; Supremacy of Loan Agreement.............................. 90 Section 14.19 Consent to Jurisdiction................................................ 90 Section 14.20 Waiver of Jury Trial................................................... 90 Section 14.21 Counterparts; Effectiveness............................................ 91 Section 14.22 Servicer............................................................... 91 Section 14.23 Obligations of Borrower Parties........................................ 91 Section 14.24 Additional Inspections; Reports........................................ 91

iv LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amount/Aggregate Allocated Loan Amount Exhibit E - Management Agreements Exhibit F - Mortgage Borrowers Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - [Reserved] Exhibit K - Zoning Reports Schedule 2.4 - Scheduled Mezzanine Principal Payments Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 - ERISA Plans Schedule 4.26 - Collective Bargaining Agreements Schedule 5.14 - Material Agreements MEZZANINE LOAN AGREEMENT This MEZZANINE LOAN AGREEMENT (this "LOAN AGREEMENT") is dated as of June ___, 2004 and entered into by and between LODGIAN MEZZANINE FIXED, LLC, a Delaware limited liability company (the "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrower and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. All terms not otherwise defined herein shall have the meaning given such terms in the respective Mortgage Loan Agreements. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT I. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Mortgage Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCOUNT COLLATERAL" means all of the Borrower's right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves, if any, and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the Lock Box Account, all accounts maintained by or for the benefit of Mortgage Lender pursuant to the terms of the Mortgage Loan Documents and any other accounts pledged to Lender pursuant to this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER [Fixed Mezz Loan Agreement] COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, directors, managing members, or general partners of the entity Person. "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the applicable Mortgage Loan and the Loan allocated to each Property as set forth on EXHIBIT D. "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Loan and each of the Mortgage Loans. "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each Property as set forth on EXHIBIT D. "APPROVAL PROCEDURES" has the meaning set forth in Section 2.13(A). "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain Conditional Assignments of Hotel Management Agreements of even date herewith executed by the Borrower and the applicable Manager, constituting an assignment of each Management Agreement as Collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "BEVERAGE COMPANY" means any Person (other than the Borrower and the Mortgage Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property. "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Condominium Property Documents. "BORROWER" has the meaning set forth in the preamble. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrower, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing 2 offices of the Servicer, and, if the Loan becomes a "specially serviced loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1(D) hereof. "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations (including any improvements, repairs or alterations required pursuant to a Property Improvement Plan), FF&E and other capital items (whether paid in cash or property or accrued as liabilities) made by the Mortgage Borrowers that, in conformity with GAAP, would not be included in the Mortgage Borrowers' annual financial statements as an Operating Expense of the Properties. "CASH MANAGEMENT AGREEMENT" means the Mezzanine Cash Management Agreement of even date herewith among the Borrower, Lender, Manager, and Lock Box Account Bank. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan and the consummation of the other transactions contemplated by this Loan Agreement. "CLOSING DATE" means the date on which the Closing occurs. "COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Pledge Agreement, the Cash Management Agreement or the other Loan Documents, including the Account Collateral. "COLLATERAL RELEASE" has the meaning set forth in Section 11.4. "COLLATERAL RELEASE PRICE" has the meaning set forth in Section 11.4. 3 "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "CONDOMINIUM BORROWER" has the meaning given such term in the Pool 3 Mortgage Loan Agreement. "CONDOMINIUM DEFAULT" has the meaning set forth in the Pool 3 Mortgage Loan Agreement. "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning given such term in the Cash Management Agreement. 4 "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "ELIGIBLE ACCOUNT" means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations ss. 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of the Borrower or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of the Borrower or any current or former ERISA Affiliate or (iii) for which the Borrower or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrower and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAWS" shall have the meaning given such term in each of the Mortgage Loan Agreements. "ENVIRONMENTAL REPORTS" means those certain environmental reports and audits for the Properties as described on EXHIBIT B. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. 5 "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning given such term in the Mortgage Loan Cash Management Agreements. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning given such term in the Mortgage Loan Cash Management Agreements. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Mortgage Borrowers, or in which the Mortgage Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature whatsoever owned by the Mortgage Borrowers, or in which Mortgage Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. "FF&E RESERVE" means the reserve established pursuant to Section 6.4 of each of the Mortgage Loan Agreements. "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the Borrower as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FITCH" means Fitch, Inc. 6 "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrower or its Affiliates, or other causes beyond the reasonable control of the Borrower and/or its Affiliates, but the Borrower's lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrower. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT C and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Mortgage Borrowers, as the case may be, as franchisee, pursuant to which the Mortgage Borrowers, as the case may be, have the right to operate the Properties under names and hotel systems controlled by the applicable Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to any of the Properties or any other successor franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" means, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Mortgage Lender and Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GROUND LEASE DEFAULT" has the meaning given such term in each of the Pool 1 Mortgage Loan Agreement, the Pool 2 Mortgage Loan Agreement, and the Pool 3 Mortgage Loan Agreement. "GROUND LEASED PROPERTIES" has the meaning given such term in each of the Pool 1 Mortgage Loan Agreement, the Pool 2 Mortgage Loan Agreement, and the Pool 3 Mortgage Loan Agreement. "GROUND LEASES" has the meaning given such term in each of the Pool 1 Mortgage Loan Agreement, the Pool 2 Mortgage Loan Agreement, and the Pool 3 Mortgage Loan Agreement. "GROUND LESSOR" means each of the lessors under the Ground Leases. 7 "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity. "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse Obligations of even date herewith from Guarantor to Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.6 of each of the Mortgage Loan Agreements. "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Mortgage Borrowers under each of the Ground Leases and under the Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Mortgage Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Mortgage Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3 of each of the Mortgage Loan Agreements. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties. "INDEBTEDNESS" or "INDEBTEDNESS" means, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, and (v) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. 8 "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of Member, the Borrower, the Mortgage Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of Member, Guarantor, the Borrower, the Mortgage Borrowers or any Affiliate of any of them (except that such individual may be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with Member, Guarantor, the Borrower, the Mortgage Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to Member, the Borrower, the Mortgage Borrowers or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Mortgage Borrowers pursuant to Section 5.4. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. "INTEREST RATE" has the meaning set forth in Section 2.2. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. "IRS" means the Internal Revenue Service or any successor thereto. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrower or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation or inquiry unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of the Borrower and 9 Member, with respect to operational issues of any of the Mortgage Borrowers, any of the Properties, or the Borrower; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) the person signing such document or certificate. "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. "LENDER" is defined in the preamble. "LENDER'S CONSULTANT" has the meaning set forth in Section 6.6. "LETTER OF CREDIT" means an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrower shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrower that the institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LLC INTERESTS" has the meaning given such term in the Pledge Agreement. "LOAN" has the meaning set forth in Section 2.1. "LOAN AGREEMENT" means this Mezzanine Loan Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Assignments of Management Agreements, the Pledge Agreement, the Guaranty, the Financing Statements, the Cash Management Agreement and any and all other documents and agreements from the Borrower, Member, Guarantor or Manager accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mortgage Loan Documents. "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. 10 "LP INTERESTS" has the meaning given such term in the Pledge Agreement. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT E, between each Mortgage Borrower, and the applicable Manager described therein and any management agreement which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT E or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties approved by Lender in accordance with the terms and conditions hereof. "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations, properties, assets or condition (financial or otherwise) of the Borrower, the Mortgage Borrowers or Guarantor, or (B) the impairment of the ability of the Borrower, the Mortgage Borrowers or Guarantor to perform their respective obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due or of Mortgage Lender to enforce or collect any of the obligations under the Mortgage Loan Documents as such obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Mortgage Borrowers, in the aggregate, to pay, or under which any Mortgage Borrower receives in compensation, more than $500,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Mortgage Borrowers, in the aggregate, to pay, or under which any Mortgage Borrower (or all of the Mortgage Borrowers, in the aggregate) receives in compensation, not more than $1,000,000 per annum and (y) which is terminable by the Mortgage Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. "MATERIAL ALTERATION" means any improvement or alteration to any Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget then in effect or which otherwise does not constitute Work. "MATERIAL LEASE" means any Lease of space in a Property which (i) is with an Affiliate of the Mortgage Borrowers, (ii)(a) either provides for annual rent or other payments in an 11 amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, or (iv) obligates the Mortgage Borrowers to make any improvements to the Property either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. "MATURITY DATE" means July 1, 2009 or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. "MEMBER" means, as of the date hereof, Lodgian Financing Mezzanine, LLC, a Delaware limited liability company, and thereafter any other entity which hereafter becomes the managing member or sole member of the Borrower under its limited liability company operating agreement. "MEMBERSHIP CERTIFICATES" has the meaning given such term in the Pledge Agreement. "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE LOAN SUBSTITUTION" has the meaning set forth in Section 11.3. "MOODY'S" means Moody's Investors Service. "MORTGAGE BORROWERS" means, collectively, the Pool 1 Mortgage Borrowers, the Pool 2 Mortgage Borrowers, the Pool 3 Mortgage Borrowers, and the Pool 4 Mortgage Borrowers. "MORTGAGE LENDER" means Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as lender with respect to each of the Mortgage Loans under the respective Mortgage Loan Documents. "MORTGAGE LOAN AGREEMENTS" means, collectively, the Pool 1 Mortgage Loan Agreement, the Pool 2 Mortgage Loan Agreement, the Pool 3 Mortgage Loan Agreement, and the Pool 4 Mortgage Loan Agreement. "MORTGAGE LOAN CASH MANAGEMENT AGREEMENTS" means, collectively, the Cash Management Agreements of even date herewith, among Mortgage Lender, Manager, Mortgage Loan Lock Box Account Bank and the respective Mortgage Borrowers, delivered pursuant to terms of the respective Mortgage Loan Agreements, and any replacements thereof entered into with a successor Agent in accordance with the terms thereof. 12 "MORTGAGE LOAN DOCUMENTS" means the documents executed and delivered by the Mortgage Borrowers and certain Affiliates thereof to Mortgage Lender in connection with the respective Mortgage Loans. "MORTGAGE LOAN LOCK BOX ACCOUNTS" means, collectively, the Lock Box Accounts established for each of the Mortgage Loans pursuant to the terms of the respective Mortgage Loan Cash Management Agreements. "MORTGAGE LOAN LOCK BOX ACCOUNT BANK" means each bank that is designated as the "Lock Box Account Bank" under the respective Mortgage Loan Agreements on the date hereof, and any successor thereto. "MORTGAGE LOANS" means, collectively, the Pool 1 Mortgage Loan, the Pool 2 Mortgage Loan, the Pool 3 Mortgage Loan and the Pool 4 Mortgage Loan from Mortgage Lender to the applicable Mortgage Borrowers governed by the applicable Mortgage Loan Agreements. "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments of Leases and Security Agreements, (ii) those certain Deeds of Trust, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security Agreements of even date herewith from the applicable Mortgage Borrowers to Mortgage Lender (or deed trustee on behalf of Mortgage Lender, as applicable), constituting Liens on their respective Properties as collateral for each of the Mortgage Loans under the respective Mortgage Loan Documents as same may be modified or amended from time to time. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA to which the Borrower or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which the Borrower or any Affiliate has any liability, including contingent liability. "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" or "NOI" has the meaning given such term in the Mortgage Loan Agreements. "NOTE" has the meaning set forth in Section 2.1. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrower under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against the Borrower, and the performance of all other terms, conditions and covenants under the Loan Documents. 13 "OPERATING BUDGET" means, collectively, for any period, the Mortgage Borrowers' budgets setting forth the Mortgage Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties for such period, which budgets have been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" has the meaning given such term in each of the Mortgage Loan Agreements. "OPERATING REVENUES" has the meaning given such term in each of the Mortgage Loan Agreements. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. "PARTIAL MORTGAGE LOAN ASSUMPTION" shall mean a Permitted Assumption (as such term is defined in each of the Mortgage Loan Agreements) with respect to less than all of the Mortgage Loans then outstanding. "PAYMENT DATE" means the first (1st) day of each calendar month occurring during the term of the Loan (or if such day is not a Business Day, the immediately succeeding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" has the meaning given such term in each of the Mortgage Loan Agreements. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning given such term in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States 14 (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PLEDGE AGREEMENT" means, that certain Pledge and Security Agreement dated as of the date hereof given by the Borrower, as pledgor, in favor of Lender, as secured party, with respect to 100% of the LLC Interests (other than those LLC Interests in Macon Hotel Associates, LLC that are held by outside investors), 100% of the LP Interests (other than those LP Interests in Servico Centre Associates, Ltd. consisting of limited partnership interests that are held by individuals) and 100% of the Stock Interests. "POOL 1 LOAN AGREEMENT" means the Loan and Security Agreement of even date herewith, between the Pool 1 Mortgage Borrowers and Mortgage Lender, evidencing and securing the Pool 1 Mortgage Loan. "POOL 2 LOAN AGREEMENT" means the Loan and Security Agreement of even date herewith, between the Pool 2 Mortgage Borrowers and Mortgage Lender, evidencing and securing the Pool 2 Mortgage Loan. "POOL 3 LOAN AGREEMENT" means the Loan and Security Agreement of even date herewith, between the Pool 3 Mortgage Borrowers and Mortgage Lender, evidencing and securing the Pool 3 Mortgage Loan. "POOL 4 LOAN AGREEMENT" means the Loan and Security Agreement of even date herewith, between the Pool 4 Mortgage Borrowers and Mortgage Lender, evidencing and securing the Pool 4 Mortgage Loan. 15 "POOL 1 MORTGAGE BORROWERS" means, collectively, each of the Mortgage Borrowers identified on EXHIBIT F as "Pool 1 Mortgage Borrowers", provided that, following a Collateral Release, "POOL 1 MORTGAGE BORROWERS" means each of such Mortgage Borrowers remaining as a party to the Pool 1 Loan Agreement. "POOL 2 MORTGAGE BORROWERS" means, collectively, each of the Mortgage Borrowers identified on EXHIBIT F as "Pool 2 Mortgage Borrowers", provided that, following a Collateral Release, "POOL 2 MORTGAGE BORROWERS" means each of such Mortgage Borrowers remaining as a party to the Pool 2 Loan Agreement. "POOL 3 MORTGAGE BORROWERS" means, collectively, each of the Mortgage Borrowers identified on EXHIBIT F as "Pool 3 Mortgage Borrowers", provided that, following a Collateral Release, "POOL 3 MORTGAGE BORROWERS" means each of such Mortgage Borrowers remaining as a party to the Pool 3 Loan Agreement. "POOL 4 MORTGAGE BORROWERS" means, collectively, each of the Mortgage Borrowers identified on EXHIBIT F as "Pool 1 Mortgage Borrowers", provided that, following a Collateral Release, "POOL 4 MORTGAGE BORROWERS" means each of such Mortgage Borrowers remaining as a party to the Pool 4 Loan Agreement. "POOL 1 MORTGAGE LOAN" means that certain loan in the original principal amount of $__________ being made on the date hereof from Mortgage Lender to the Pool 1 Mortgage Borrowers, pursuant to the terms and conditions of the Pool 1 Loan Agreement. "POOL 2 MORTGAGE LOAN" means that certain loan in the original principal amount of $__________ being made on the date hereof from Mortgage Lender to the Pool 2 Mortgage Borrowers, pursuant to the terms and conditions of the Pool 2 Loan Agreement. "POOL 3 MORTGAGE LOAN" means that certain loan in the original principal amount of $__________ being made on the date hereof from Mortgage Lender to the Pool 3 Mortgage Borrowers, pursuant to the terms and conditions of the Pool 3 Loan Agreement. "POOL 4 MORTGAGE LOAN" means that certain loan in the original principal amount of $__________ being made on the date hereof from Mortgage Lender to the Pool 4 Mortgage Borrowers, pursuant to the terms and conditions of the Pool 4 Loan Agreement. "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT A, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the applicable Mortgage Borrowers and which shall be encumbered by and are more particularly described in the respective Mortgages; provided that, following a Property Release, "PROPERTIES" and "PROPERTY means each of the Properties or the Property, as applicable, that remain encumbered by the Mortgages as Collateral for the Mortgage Loans. 16 "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties described on EXHIBIT G and any future Property Improvement Plans required to be implemented by the applicable Franchisor. "PROPERTY RELEASE" has the meaning given such term in each of the Mortgage Loan Agreements. "RATING AGENCY" means, prior to a Securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization; and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. "RATING CRITERIA" with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" means all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties, received by the Mortgage Borrowers or any Related Person of the Mortgage Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which the Borrower or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE PRICE" means an amount equal to one hundred twenty-five percent (125%) of the Allocated Loan Amount of the applicable Property. "REMAINING NOTE" has the meaning set forth in Section 11.3. "RENT ROLLS" has the meaning set forth in Section 3.1. 17 "RENTS" has the meaning given such term in the Mortgages. "REPLACEMENTS" has the meaning given such term in Section 6.4 of each of the Mortgage Loan Agreements. "RESERVE SUB-ACCOUNTS" has the meaning given such term in Section 7.1 of each of the Mortgage Loan Agreements. "RESERVES" means the reserves established by or on behalf of Mortgage Lender pursuant to the Mortgage Loan Documents including the reserves established pursuant to Article VI of each of the Mortgage Loan Agreements, and the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Documents. "RESTORATION" has the meaning given such term in each of the Mortgage Loan Agreements. "REVPAR" means average room revenues per available room per day. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SCHEDULED MEZZANINE PRINCIPAL PAYMENTS" means the monthly payments of principal for each Payment Date as set forth on Schedule 2.4 attached hereto; which payment amounts were calculated based upon a twenty-five (25) year amortization schedule. "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" means a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer or servicers selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEE" has the meaning set forth in Section 2.11. "SPECIFIED APPROVAL" means any request for Lender approval required to be submitted by the Borrower under Section 5.1(D) [Budgets]; Section 5.5(A) [Material Alterations]; Section 5.12 [Leases]; Section 5.13 [Management/Franchise Agreements]; Section 11.1 [Transfers]; or Section 11.3 [Assumptions]. "STOCK INTERESTS" has the meaning given such term in the Pledge Agreement. 18 "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUBSTITUTE BORROWER" has the meaning set forth in Section 11.3. "SUBSTITUTE NOTE" has the meaning set forth in Section 11.4. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period and (iii) such other financial reports as the subject entity shall routinely and regularly prepare. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TIER 1 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT I. "TIER 2 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT I. "TIER 3 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT I. "TITLE COMPANIES" means LandAmerica Title Insurance Company, Stewart Title Company of New York and/or such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means the mezzanine title insurance policy, or similar title insurance policy, issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, (y) the failure to pay to any Franchisor any amount due under any Franchise Agreement (a "FRANCHISE PAYMENT DEFAULT") and the continuance thereof beyond any applicable notice and grace period under such Franchise Agreement or the occurrence of one or more breaches or defaults (other than Franchise Payment Defaults), and the continuance thereof beyond all applicable notice and grace periods, if any, under such Franchise Agreements (or such other cure periods as may be provided by the applicable Franchisors in writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or more of the outstanding principal balance of the Loan; provided, however, no Uncured Franchise Default shall be 19 deemed to have occurred under clause (x) above with respect to any Property following the voluntary or involuntary termination of the applicable Franchise Agreement if (a) within ten (10) Business Days of the termination of such Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)), the Borrower delivers to Lender evidence reasonably satisfactory to Lender that the applicable Mortgage Borrower is diligently pursuing efforts to enter into a new Franchise Agreement with an Acceptable Franchisor for the applicable Property and shall thereafter diligently and continuously pursue such efforts to enter into a new Franchise Agreement, (b) at the time of such termination no other Property shall be in operation without being subject to a Franchise Agreement, (c) the Allocated Loan Amount of the Property is not more than five percent (5%) of the outstanding principal balance of the Loan or such Property shall not be in operation for more than five (5) consecutive days without being subject to a Franchise Agreement, and (d) no Property shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. "WORK" has the meaning given such term in each of the Mortgage Loan Agreements. "WORK RESERVES" has the meaning given such term in Section 6.7 of each of the Mortgage Loan Agreements. "ZONING REPORTS" means those certain zoning and site requirements summaries for the Properties as described on EXHIBIT K. SECTION 1.2 ACCOUNTING TERMS. For purposes of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any 20 reference to any Person may include such Person's respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrower contained herein, Lender agrees to lend to the Borrower, and the Borrower agrees to borrow from Lender, a loan in the original principal amount of $______ (the "LOAN"). (B) NOTE. On the Closing Date, the Borrower shall execute and deliver to Lender a Mezzanine Note, dated of even date herewith (as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise, collectively, the "NOTE"), made by the Borrower to the order of Lender, in the original principal amount of $______. (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing may be used to (i) refinance existing indebtedness; (ii) pay all recording and filing fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender and Mortgage Lender, including reasonable legal fees and expenses of counsel to Lender and Mortgage Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) provide for general corporate purposes, including, without limitation, payment of transaction costs and expenses incurred by the Borrower and capital contributions to the Mortgage Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrower. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall bear interest at a rate per annum equal to ___% (the "INTEREST RATE"). (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is four percent (4.0%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT RATE"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in arrears. 21 (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrower shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrower shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrower shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrower shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 RESERVED. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrower shall make payments of interest and principal on the Note as follows: (i) The Borrower shall make a payment to Lender of interest only on the Closing Date for the period from the Closing Date through and including the last day of the calendar month in which the Closing occurs; and (ii) On each Payment Date commencing on August 1, 2004, and on each Payment Date thereafter through but not including the Maturity Date, the Borrower shall make a 22 payment of interest on the Loan for the prior calendar month, and in addition, shall make a payment of principal on the Loan in an amount equal to the Scheduled Mezzanine Principal Payment for such Payment Date. (B) DATE AND TIME OF PAYMENT. The Borrower shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrower promises to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrower on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or a Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account, if any, on such Payment Date, the Borrower shall be deemed to have satisfied its obligation to make such payments. Upon the occurrence and during the continuance of an Event of Default, payments shall be applied to the Obligations in such order as Lender shall determine in its sole and absolute discretion. SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance with the Loan Documents, the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon, and all other sums then owing to Lender hereunder and under the Note, the Pledge Agreement and the other Loan Documents, shall be due and payable on the Maturity Date. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrower shall have no right to prepay the Loan in whole or in part at any time, except as expressly set forth in this provision. On and after May 1, 2009, the Borrower may prepay the Loan in whole, but not in part, without payment of any Prepayment Consideration, provided that (i) the Borrower shall provide to Lender not less than fifteen (15) days' prior written notice of such prepayment, (ii) together with such prepayment the Borrower also shall pay all accrued and unpaid interest and all other Obligations and (iii) if such prepayment occurs on any day other than the first (1st) day of a calendar month, then together therewith the Borrower also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to end of such calendar month. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur prior to May 1, 2009, on account of acceleration of the Loan (whether or not 23 due to an Event of Default), or otherwise, then except only as expressly provided herein to the contrary, the Borrower shall be required to pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due in connection with (i) any principal prepayment resulting from the application of insurance or condemnation proceeds required by Lender pursuant to this Loan Agreement in the absence of an Event of Default, and (ii) Scheduled Mezzanine Principal Payments. The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. (C) DEFINITIONS. The following terms shall have the meanings indicated: "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii) the Yield Maintenance Amount. "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if any, between (i) the present value on the date of prepayment (by acceleration or otherwise) of all future installments of principal and interest which the Borrowers would otherwise be required to pay under the Note from the date of such prepayment until the Maturity Date absent such prepayment, including the unpaid principal amount which might otherwise be due upon the Maturity Date absent such prepayment, with such present value being determined by the use of a discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent Basis" pursuant to the standards and practices of the Securities Industry Association), on the date of such prepayment of the United States Treasury Security having the term to maturity closest to what otherwise would have been the remaining term hereof absent such prepayment and (ii) the principal balance of the Loan on the date of such prepayment. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrower; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrower's obligation to pay the Obligations. SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrower shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrower shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after 24 making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 RESERVED. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrower, on prior written notice to the Borrower. The Borrower expressly acknowledges and agrees that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths of one percent (.05%) per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrower and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrower be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. SECTION 2.12 MORTGAGE LOAN EVENT OF DEFAULT. Notwithstanding anything to the contrary contained herein or the other Loan Documents, if compliance by the Borrower with the provisions of this Loan Agreement would cause an Event of Default under (and as defined in) any Mortgage Loan Agreement to occur, after the giving of notice or passage of any grace periods provided for in the applicable Mortgage Loan Agreement, the Borrower shall notify the Lender in writing and the Borrower shall not be in default hereunder or under the other Loan Documents by reason of its failure to comply with such provisions. Lender reserves the right to modify any such provisions to prevent the occurrence of an Event of Default under any Mortgage Loan Agreement, in which case failure to comply with such modified provisions shall not be excused hereby. Furthermore, the Borrower acknowledges and agrees that this Section 2.12 shall in no way relieve the Borrower from the obligation to perform any obligation under the Loan Agreement or the other Loan Documents that may be performed by the payment of a sum of money. SECTION 2.13 MEZZANINE LENDER APPROVALS. (A) Lender and the Borrower acknowledge and agree that both Mortgage Lender and Lender have certain approval rights with respect to the operation of the Properties and other matters pursuant to the Mortgage Loan Documents and the Loan Documents, including approval of Managers, Franchisors, Leases, alterations and annual budgets. Notwithstanding anything to the contrary contained herein or in the other Loan 25 Documents, until such time as each of the Mortgage Loans has been satisfied, and to the extent Lender and Mortgage Lender shall have approval rights covering the same matters, the Borrower shall submit such requests for approval in the following manner and shall be subject to the following procedures (the "APPROVAL PROCEDURES"): (i) the Borrower shall (x) with respect to any Specified Approval, deliver to Lender any such request for any Specified Approval at least fifteen (15) days prior to the date a corresponding request for approval shall be submitted by the Mortgage Borrowers to the applicable Mortgage Lender under the applicable Mortgage Loan Agreement (it being agreed that the Borrower shall not permit the Mortgage Borrowers to submit a corresponding request for approval to the applicable Mortgage Lender until such fifteen (15) day period has expired), and (y) with respect to all other requests for approval, shall deliver such requests simultaneously to both Lender and the applicable Mortgage Lender, (ii) following the initial submission requesting any Specified Approval to Lender, the Borrower shall cooperate with Lender during such fifteen (15) day period and respond to any comments or suggested changes recommended by Lender prior to the Mortgage Borrowers submitting a corresponding request for approval to such Mortgage Lender, (iii) if the Borrower or the Mortgage Borrowers intend to submit a request for approval to such Mortgage Lender that differs in any respect from the matters as approved (or disapproved) by Lender, the Borrower shall, or shall cause the Mortgage Borrowers to, submit to such Mortgage Lender with any such request, a copy of all correspondence and materials from Lender relating to Lender's approval or disapproval of the request for the Specified Approval, and (iv) provided the Borrower complies, and causes the Mortgage Borrowers to comply, with the foregoing, the Borrower shall be entitled to rely on the approval or requirements given by such Mortgage Lender in accordance with the terms of the applicable Mortgage Loan Documents. (B) Until such time as each Mortgage Loan has been satisfied, if and to the extent the consent or approval of any Mortgage Lender is required in order for the Borrower to perform its obligations under the Loan Documents without violating the provisions of the Mortgage Loan Documents, the Borrower shall not be deemed in default hereunder, but shall seek all consents and approvals of the Lender in accordance with the terms and provisions of this Loan Agreement and the other Loan Documents and shall seek all required consents or approvals of the applicable Mortgage Lender under the Mortgage Loan Documents to permit the Borrower to comply with its obligations under the Loan Documents; and the Borrower shall not be in default if such Mortgage Lender does not grant such approval or consent. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to fund the Loan is subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrower and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrower shall deliver to Lender a certificate duly executed by the 26 Borrower stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrower shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A) to which it is a party, together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. (B) DEPOSITS. The deposits required pursuant to the terms of each of the Mortgage Loan Agreements and this Loan Agreement, including without limitation, the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrower's option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower Party and all other Persons executing any agreement on behalf of any Borrower Party shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of the Borrower by the chief financial officer (or similar officer of the Borrower) stating that: (i) on such date, to the Borrower's Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrower, Mortgage Borrowers or the projected cash flow of either of them or of the Properties, in each case taken as a whole, has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, specifying such change in detail), and that, to the Borrower's Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operations of the Borrower, the Mortgage Borrowers, and the Properties, in each case taken as a whole, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrower's Knowledge after due inquiry, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Morris, Manning & Martin, LLP or other legal counsel for the Borrower satisfactory to Lender, written legal opinions, each in form and substance acceptable to Lender, as to such matters as Lender shall request, including opinions to the effect that (i) each of the Borrower Parties is duly formed, validly existing, and in good standing in its state of organization, (ii) this 27 Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Cash Management Agreement has been duly authorized, executed and delivered by the Borrower and is enforceable in accordance with its terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) neither Borrower nor Member would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrower's counsel as to the enforceability of, and the creation and perfection of Liens under, the Pledge Agreement and such other matters as Lender may reasonably request; (b) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for the Borrower that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous written consent of the board of directors of Member including the Independent Directors, or the unanimous prior written consent of the board of managers' of the Borrower, including the Independent Directors) would be required for a voluntary bankruptcy filing by the Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors) would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law, the bankruptcy or dissolution of Member would not cause the dissolution of the Borrower and the bankruptcy or dissolution of Guarantor would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of the Borrower and creditors of Guarantor shall have no legal or equitable remedies with respect to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of the Borrower and Member; and (c) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received the Title Policies. The Title Policies shall be in form and substance satisfactory to Lender. (G) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business. Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. 28 (H) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. (I) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to Lender for each Borrower Party (including for Guarantor) and for the Properties. If any such statements are not available for the Properties, then the Borrower shall cause the Mortgage Borrowers to provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (J) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year. (K) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. (L) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the applicable Mortgage Borrower. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements (including any Property Improvement Plan) and Franchisor Letters for each of the Properties duly executed by the applicable Franchisors. (M) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrower a rent roll for each of the Properties (collectively, the "RENT ROLL") in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases, and the amount of security deposit being held by the Mortgage Borrowers under each Material Lease, if any. (N) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases, as amended. (O) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to each of the Properties, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (P) PROPERTY CONDITION REPORT. On or before the Closing Date, Lender shall have received a property condition report for each of the Properties, which shall be prepared by an 29 engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion (the "PROPERTY CONDITION REPORTS"). Such reports shall set forth any items of deferred maintenance at the Properties. (Q) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of each of the Properties from a state certified appraiser engaged by Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (R) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search reports with respect to the Borrower, Guarantor and Member, all dated not more than thirty (30) days prior to the Closing Date. (S) LEGAL FEES; CLOSING EXPENSES. The Borrower shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (T) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (U) OTHER REVIEW. Lender shall have completed all other review of the Borrower Parties, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrower Parties shall have satisfied such other reasonable criteria as Lender may reasonably specify. (V) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date, Lender shall have received (i) true and complete copies of each of the Ground Leases, certified by the Borrower, and (ii) estoppels and agreements acceptable to Lender, duly executed by each Ground Lessor. (W) CONDOMINIUM PROPERTY AGREEMENTS. On or before the Closing Date, Lender shall have received an estoppel and agreement of the Board of Managers with respect to the Condominium Property Documents in form and substance reasonably acceptable to Lender. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, the Borrower represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. 30 SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrower, Mortgage Borrowers and Member. The Borrower owns all direct and indirect interests in the Mortgage Borrowers (other than, with respect to Servico Centre Associates, Ltd., the interests held by the individual limited partners consisting of 50% of the ownership interests in Servico Centre Associates, Ltd. and, with respect to Macon Hotel Associates, LLC, the interests held by non-managing members consisting of 40% of the Ownership interests in Macon Hotel Associates, LLC) and has the power and authority to control the actions of the Mortgage Borrowers. SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrower has the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower Party of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower Party; (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower Party; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower Party or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower Party or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or imposition of any material Lien (other than the Lien of the Loan Documents) upon the Collateral or assets of any Borrower Party; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower Party, which approvals or consents as set forth on SCHEDULE 4.2 have been obtained on or before the dates required under such material Contractual Obligation, but in no event later than the Closing Date. 31 (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower Party that is a party thereto, enforceable against each of the Borrower Parties, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No Borrower Party has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower Party has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning the Borrower, its Affiliates, the Mortgage Borrowers and the Properties which have been furnished by or on behalf of the Borrower or the Mortgage Borrowers to Lender pursuant to this Loan Agreement present fairly the financial condition of the Persons covered thereby as of the dates thereof and the results of their operations for the periods then ended, and, to Borrower's Knowledge after due inquiry, have been prepared in accordance with GAAP consistently applied (except as disclosed therein). Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements. SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, neither the Borrower nor the Mortgage Borrowers shall have any outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES AND COLLATERAL. Each of the Mortgage Borrowers has good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to its Property, free and clear of all Liens except for the Permitted Encumbrances. The Mortgage Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Mortgage Borrowers as permitted hereunder), subject only to Permitted Encumbrances. The Borrower is the record and beneficial owner and owns good and indefeasible title to the Collateral, free and clear of all Liens. There are no outstanding options to purchase or rights of first refusal affecting the Collateral. To the Borrower's Knowledge, except as set forth on Schedule 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual Knowledge of the Borrower, none is threatened. Except as set forth on Schedule 4.5(A), no Person has any option or other right to purchase all or any portion of any of the Properties or any interest therein. To the Borrower's Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Pledge Agreement and this Loan Agreement, materially and adversely affect the value of any of the Collateral or impair the Borrower's ability to pay its obligations in a timely manner. 32 SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrower's Knowledge, there are no illegal activities relating to controlled substances on the Properties. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, all material permits, licenses and certificates for the lawful use, occupancy and operation of each component of the Properties in the manner in which it is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, in the event that all or any part of the Improvements located on the Properties is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrower's Knowledge, no legal proceedings are pending or threatened with respect to the zoning of the Properties. To the Borrower's Knowledge, except as set forth in the Title Policies and/or the Survey, each as defined in and delivered to the Mortgage Lender pursuant to the Mortgage Loan Agreement, neither the zoning nor any other right to construct, use or operate the Properties is in any way dependent upon or related to any real estate other than the Properties. The Borrower will not permit any tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Mortgage Borrowers with respect to the Properties without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. The Borrower has delivered to Lender true and complete copies (in all material respects) of all (i) Leases for more than five hundred (500) square feet of space at any Property and (ii) Material Agreements affecting the operation and management of the Properties, and such Leases and Material Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Except for the rights of each of the current Managers pursuant to the existing Management Agreements, no Person has any right or obligation to manage any of the Properties or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the Properties or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, if any, the Properties are not subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrower's Knowledge, (i) the Material Leases are in full force and effect; (ii) the Mortgage 33 Borrowers have not given any notice of default to any tenant under any Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Mortgage Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrower, threatened) against the Mortgage Borrowers by any tenant or former tenant. No rental in excess of one month's rent has been prepaid under any of the Material Leases. To the Borrower's Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. (C) NO RESIDENTIAL UNITS. There are no residential units in any of the Properties and, to the Borrower's Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Properties for dwelling purposes other than on a transient basis. (D) MANAGEMENT AGREEMENTS. The Borrower has delivered to Lender a true and complete copy of each Management Agreement relating to the Properties to which the Mortgage Borrowers are a party that will be in effect on the Closing Date, and such Management Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Each such Management Agreement is in full force and effect and no default by the Mortgage Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENTS. The Borrower has delivered to Lender a true and complete copy of the Franchise Agreements relating to each of the Properties to which the Mortgage Borrowers are a party, and such Franchise Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. To the Borrower's Knowledge, (i) each Franchise Agreement is in full force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material default by the Mortgage Borrowers, Manager or the applicable Franchisors exists thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the aggregate, do not and will not have a Material Adverse Effect. Except for the Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no other property improvement plans or similar capital improvement plans or obligations required by any Franchisor pursuant to any Franchise Agreement, in effect for any of the Properties. SECTION 4.8 CONDITION OF THE PROPERTIES. To the Borrower's Knowledge, except as set forth in the Property Condition Reports for the Properties delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in good condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrower is not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrower's Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of the applicable 34 Property (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of the applicable Property as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of the applicable Property as now used or presently contemplated. Except as may be shown on the Surveys, to the Borrower's Knowledge no part of any Property is within a flood plain and none of the Improvements create encroachments over, across or upon any Property's boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each Property for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrower's Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at the Properties is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 REPRESENTATIONS AND WARRANTIES OF THE MORTGAGE BORROWERS. All of the representations and warranties of the Mortgage Borrowers or any Affiliate of the Mortgage Borrowers made under the Mortgage Loan Documents are true, complete and correct in all material respects. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of the Borrower required to be filed have been timely filed (or the Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon the Borrower and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrower's Knowledge, no taxes which are due and payable remain unpaid and no claims are being asserted with respect to any such taxes. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Borrower or Member is a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. SECTION 4.12 PERFORMANCE OF AGREEMENTS. The Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of the Borrower which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. The Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. 35 SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 4.14 no Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of the Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrower shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from the Borrower Parties' actions. SECTION 4.16 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.16, there are no judgments outstanding against the Borrower or any Mortgage Borrower, or affecting any of the Collateral or any property of the Borrower or of the Mortgage Borrowers, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the Borrower's Knowledge, threatened against the Borrower or any Mortgage Borrower, that could reasonably be expected to result in a Material Adverse Effect. To the Borrower's Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.16 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.17 SOLVENCY. The Borrower (a) has not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the aggregate fair saleable value of the Borrower's assets exceeds and will, immediately following the making of the Loan, exceed the Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The aggregate fair saleable value of the Borrower's assets is and will, immediately following the making of the Loan, be greater than the Borrower's probable total liabilities, including the maximum amount of its Contingent Obligations on its debts as such debts become absolute and matured. The Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrower does not intend to, and does not believe that it will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond its ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrower and the amounts to be payable on or in respect of obligations of the Borrower). SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements 36 contained therein not misleading. There is no material fact actually known to the Borrower that has had or could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrower. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrower shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrower or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. SECTION 4.20 SECURITY INTERESTS. Upon execution and delivery of the Pledge Agreement, delivery to Lender of the certificates, if any, representing the LLC Interests, the LP Interests and the Stock Interests, and the filing of the Financing Statements with the Secretary of State of the State of Delaware, Lender shall have a first priority perfected security interest in the Collateral, subject to the Permitted Encumbrances. SECTION 4.21 INVESTMENTS. The Borrower does not have any (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person (other than Beverage Companies) not pledged to Lender pursuant to the terms of the Pledge Agreement, or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. SECTION 4.22 DEFAULTS. To the Borrower's Knowledge, except as disclosed to Lender in writing herein or in any of the Loan Documents, no Default exists. SECTION 4.23 NO PLAN ASSETS. The Borrower is not and will not be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrower has assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.24 GOVERNMENTAL PLAN. The Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrower are not and will not be subject to state statutes applicable to the Borrower's regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.25 NOT FOREIGN PERSON. The Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. 37 SECTION 4.26 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.26, no Borrower Party is a party to any collective bargaining agreement. SECTION 4.27 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including any Property) is property of the estate, in any voluntary or involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law now or hereafter in effect. No Borrower Party and no property of any of them is under the possession or control of a receiver, trustee or other custodian. No Borrower Party has made any assignment for the benefit of creditors. No such assignment or bankruptcy or similar case or proceeding is now contemplated. Notwithstanding the foregoing, Lender acknowledges that case #01-16402 involving Impac Hotels I, L.L.C. remains pending in the Bankruptcy Court for the Southern District of New York. Borrower represents that the Plan of Reorganization for this case has been approved by the bankruptcy court and that the case remains open solely for the purpose of resolution of certain unsecured claims, which remaining claims are payable solely out of a disputed claims reserve established by Guarantor pursuant to the Plan of Reorganization. SECTION 4.28 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective officers, directors, partners, members, Affiliates or, to the knowledge of the Borrower, shareholders is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED PERSON"). ARTICLE V COVENANTS OF BORROWER PARTIES The Borrower covenants and agrees that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrower shall perform and comply with all covenants in this Article V. SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrower shall, and shall cause Mortgage Borrowers (on a consolidated basis) to, provide true and complete copies of their Financial Statements for such year to Lender, and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of its Financial Statements for such year to Lender. All such Financial Statements shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material 38 respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information for such calendar year. Such annual Financial Statements shall be accompanied by a certification executed by the entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). (ii) QUARTERLY REPORTING - THE BORROWER. Within forty-five (45) days after the end of each calendar quarter, the Borrower shall provide copies of its Financial Statements for such quarter to Lender (including the Financial Statements of Mortgage Borrowers on a consolidated basis), together with a certification executed on behalf of the Borrower by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after the end of each calendar year, the Borrower shall provide, or cause the Mortgage Borrowers to provide, to Lender a certified Rent Roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after the end of each calendar year, the Borrower shall also provide, or cause the Mortgage Borrowers to provide, to Lender (a) a schedule of any retail Material Leases that expired during such calendar year and a schedule of retail Material Leases scheduled to expire within the next calendar year and (b) to the extent the Mortgage Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar year. Within ninety (90) days after the end of each calendar year, the Borrower shall provide, or cause the Mortgage Borrowers to provide, to the extent provided to the Borrower or the Mortgage Borrowers and not subject to confidentiality restrictions, to Lender a statement of income and expenses for all retail space at each of the Properties and sales reports for retail tenants for such year. (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, the Borrower shall provide, or cause Manager or the Mortgage Borrowers to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for each of the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly and year to date operating statements prepared for such calendar month and for the trailing twelve (12) month period then ended, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of each of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a 39 detailed explanation for any material deviations from budget) and setting forth that all disbursements and/or withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E Reserve have been made with respect to items of Capital Improvement only (as opposed to items that, in accordance with GAAP, would be included as an Operating Expense); (e) monthly and year to date detailed reports of Operating Expenses for each of the Properties, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement for which Lender has approved a disbursement from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently available "OSI", or similar quality index scores (including detailed information regarding criteria and thresholds); (g) prior to Securitization (as such term is defined in each of the Mortgage Loan Agreements) of the last of the Mortgage Loans, market segmentation reports for the trailing twelve (12) month period for each of the Properties; and (h) a report setting forth (i) the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has continued beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the original Aggregate Allocated Loan Amount represented by such Properties), (iii) a summary report establishing that the Borrower is diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Mortgage Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. All of the above statements, reports and information shall be provided to Lender by email in Microsoft Excel format or other spreadsheet format reasonably acceptable to Lender (in the case of any statements, reports or information provided by third parties that are not Affiliates of the Borrower, to the extent same are available in such format). Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of the Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrower shall, and shall cause the Mortgage Borrowers, Guarantor and Manager to, promptly provide to Lender such further documents and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice to the Borrower. (vii) GAAP; UNIFORM SYSTEM. The Borrower will, and will cause the Mortgage Borrowers, Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, 40 consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender by or on behalf of the Borrower or Guarantor under this Section, the Borrower or Guarantor also shall deliver to Lender a certification to Lender, executed on behalf of the applicable Person by its chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of the Borrower, Guarantor and/or the Properties for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating that, to their Knowledge after due inquiry, there does not exist any Default or Event of Default under the Loan Documents (or if any exists, specifying the same in detail), and (b) the Borrower and Guarantor have complied with the applicable reporting requirements of this Section 5.1. (ix) FISCAL YEAR. The Borrower's, Guarantor's, and the Mortgage Borrowers' fiscal years each end on December 31, and no change shall be permitted with respect to any such fiscal year, without Lender's prior written consent. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, the Borrower will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business operations of the Borrower or the Mortgage Borrowers made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, the Borrower shall deliver, and shall cause the Mortgage Borrowers to deliver, to Lender a copy of its Federal income tax returns (or the return of the applicable Person into which the Borrower's and/or the Mortgage Borrowers' Federal income tax returns are consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 1 of each calendar year, the Borrower shall deliver, or cause the Mortgage Borrowers to deliver, to Lender for its review for the Properties a proposed Operating Budget and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap Event or Event of Default exists, the Borrower may allow changes to be made to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Mortgage Borrowers, provided no such modification (together with all prior modifications taken as a whole) shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without 41 Lender's prior written approval, which approval shall not be unreasonably withheld; provided, however, notwithstanding the foregoing during a Cash Trap Event, increases to the Operating Budget for any Property (not to exceed ten percent (10%) of the Operating Budget for such Property as a whole) will be permitted without Lender's consent for actual verifiable increases in utilities, water and sewer assessments and charges and real property taxes for the applicable Property over the amounts therefor set forth in the Operating Budget for such Property for the prior period. Notice of any modifications to an Operating Budget and a CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating Budget shall identify and set forth the Mortgage Borrowers' reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and such budget or plan, as applicable, shall promptly be amended and resubmitted for approval, making such changes as are necessary to comply with the reasonable requirements of Lender. Until any such budget or plan for any year requiring Lender's approval is approved or deemed approved, subject to the terms of the Mortgage Loan Documents, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is approved or deemed approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrower to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. (E) MATERIAL NOTICES. (i) The Borrower shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of the Borrower, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrower shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plan received from a Franchisor related to any of the Properties. (F) EVENTS OF DEFAULT, ETC. Promptly upon the Borrower obtaining knowledge of any of the following events or conditions, the Borrower shall deliver a certificate executed on its 42 behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action the Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. (G) LITIGATION. Promptly upon the Borrower obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrower, any of the Properties, or the Collateral, not previously disclosed in writing by the Borrower to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrower, or the Mortgage Borrowers, or the Properties which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect, the Borrower will give notice thereof to Lender and, upon request from Lender, provide such other information as may be reasonably available to it to enable Lender and its counsel to evaluate such matter. (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Mortgage Borrowers, the Borrower shall cause to be delivered to Lender certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Mortgage Borrowers, and all material insurance coverage planned to be maintained by the Mortgage Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. (I) OTHER INFORMATION. With reasonable promptness, the Borrower will deliver such other information and data with respect to such Person, the Mortgage Borrowers, their Affiliates, and the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrower will at all times preserve and keep in full force and effect its existence as a limited liability company and all rights and franchises material to its business, including its qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, the Borrower and Member, shall at all times be qualified to do business in each of the states where such qualification is required to continue the business of the Borrower as in effect on the Closing Date. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) The Borrower will pay, or cause to be paid, all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrower on its business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrower shall cause the Mortgage Borrowers to pay, discharge or remove any Imposition or Claim relating to the Properties owned by such Mortgage Borrowers in accordance with the terms of the applicable Mortgage Loan Agreements. 43 SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrower shall cause the Mortgage Borrowers to continuously maintain the policies of insurance (all such policies, the "INSURANCE POLICIES") required pursuant to the terms of Section 5.4 of each of the Mortgage Loan Agreements, including meeting all insurer requirements thereunder (it being agreed that, following termination of any Mortgage Loan Agreement, the requirements of Section 5.4 of the applicable Mortgage Loan Agreement shall be deemed to be the continuing obligations of the Borrower and the applicable Mortgage Borrowers for as long as the Loan is outstanding and this Agreement is in effect). The provisions of Section 5.4 of each of the Mortgage Loan Agreements are incorporated herein by reference. The Lender shall be named as an additional insured or loss payee under such policies to the extent that Mortgage Lender is required to be named as such under the Mortgage Loan Agreements. Upon request from Lender, Lender shall be entitled to receive copies of any insurance policies obtained by Mortgage Lender to the extent and at the time such policies are delivered to the Mortgage Lender by the Mortgage Borrowers. All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Mortgage Lender or Lender without ten (10) days' advance written notice to Lender. The Borrower shall furnish Lender receipts for the payment of premiums on such Insurance Policies or other evidence of such payment reasonably satisfactory to Lender in the event that such premiums have not been paid by Lender pursuant to the Loan Agreement. SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrower shall, and shall cause the Mortgage Borrowers to, operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Mortgage Borrowers, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each of the Mortgage Borrowers, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, the Borrower shall, and shall cause the Mortgage Borrowers to, operate and maintain the Properties substantially in accordance with the applicable Operating Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrower may and may permit the Mortgage Borrowers to, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Mortgage Borrowers shall not be permitted to perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the Properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being 44 undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Mortgage Borrowers may be permitted to perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrower delivers notice to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrower deliver to Lender evidence reasonably satisfactory to Lender that the Mortgage Borrowers have cash available for payment of the cost of such Material Alteration or, if the Borrower fails to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an amount equal to 125% of the cost of such Material Alteration as reasonably estimated by Lender, unless such amounts have previously been deposited with Mortgage Lender pursuant to the terms of the Mortgage Loan Documents. Cash deposited by the Borrower with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrower to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the conditions for disbursement of amounts from the Capital Improvements Reserve under Section 6.4 (including the requirements set forth under Section 6.6). Upon completion of the Material Alteration, the Borrower shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. The Borrower shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrower shall give, or shall cause the Mortgage Borrowers to give, immediate written notice of the same to the insurance carrier and to Lender. The terms of the Mortgage Loan Documents will govern the application and distribution of insurance and condemnation proceeds until the applicable Mortgage Loan has been paid in full. Any insurance and/or condemnation proceeds payable with respect to any of the Properties securing a Mortgage Loan shall be paid directly to the applicable Mortgage Lender pursuant to the terms of the Mortgage Loan Documents until such Mortgage Loan has been paid in full and, thereafter, shall be paid to Lender pursuant to this Loan Agreement and the Cash Management Agreement. Upon application of any casualty or condemnation proceeds by any Mortgage Lender toward repayment of any Mortgage Loan, any remaining insurance or condemnation proceeds relating to the affected Property shall be disbursed into the Mezzanine Lockbox Account and, at Lender's election, applied to prepay the Loan without the imposition of any Prepayment Consideration on the Payment Date immediately following such election. If, in connection with any such casualty or condemnation to any 45 Property, the applicable Mortgage Borrowers shall obtain the release of such Property from the Lien of the related Mortgage securing the applicable Mortgage Loan in accordance with the terms and conditions of the applicable Mortgage Loan Agreement, on or prior to the date of such Property Release under the applicable Mortgage Loan Agreement, the Borrower shall be required to consummate a Collateral Release with respect to such Property in accordance with the terms and conditions of Section 11.4 hereof and shall be required to pay to Lender the Collateral Release Price for such Property (or if Lender shall have received any insurance or condemnation proceeds with respect to such Property as provided above, the amount, if any, by which the Collateral Release Price for such Property exceeds such insurance or condemnation proceeds received by Lender), which Collateral Release Price (or such balance) shall be applied toward repayment of the Loan on the next Payment Date without imposition of any Prepayment Consideration. SECTION 5.6 INSPECTION. The Borrower shall, and shall cause the Mortgage Borrowers to, permit any authorized representatives designated by Lender to visit and inspect during normal business hours the Properties and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with the Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice to the Borrower or the Mortgage Borrower of at least three (3) Business Days prior to visiting or inspecting any of the Properties or the Borrower's offices. SECTION 5.7 O&M PLAN. The Borrower shall cause the Mortgage Borrowers to comply fully with the O&M Plans pursuant to the terms of each of the Mortgage Loan Agreements and this Loan Agreement. SECTION 5.8 INTENTIONALLY DELETED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrower will, and will cause the Mortgage Borrowers to, (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the operation or value of any Property, (B) maintain all licenses and permits now held or hereafter acquired by the Borrower and the Mortgage Borrowers, the loss, suspension, or revocation of which, or failure to renew, could have a material adverse effect on the operation or value of any Property and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrower shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. 46 SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. The Borrower shall, and shall cause the Mortgage Borrowers to, duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its or their part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a material adverse effect on the operation or value of any Property. SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrower shall not, and shall not permit the Mortgage Borrowers, nor shall the Borrower authorize the Mortgage Borrower or any other Person to, (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrower shall, or shall cause the Mortgage Borrowers to, furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease, shall be deemed given, if the first correspondence from the Borrower to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Mortgage Borrowers shall 47 not under any circumstances be permitted to collect any such rent more than one month in advance. The Borrower, at Lender's request, shall, or shall cause the Mortgage Borrowers to, furnish Lender with executed copies of all Material Leases hereafter made. SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS. (A) The Borrower shall cause the Properties to be managed in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and types customary for hotels comparable to each Property. The Borrower shall, and shall cause the Mortgage Borrowers to (i) perform and observe all of the material terms, covenants and conditions of the Management Agreements on the part of the Mortgage Borrowers to be performed and observed, and (ii) promptly notify Lender of any notice of any material default under the Management Agreements of which it is aware. If any Mortgage Borrower shall default in the performance or observance of any material term, covenant or condition of the applicable Management Agreement on the part of such Mortgage Borrower to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrower or such Mortgage Borrower from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrower, but shall be under no obligation, to pay any sums and to perform any act as may be reasonably appropriate to cause such material conditions of the applicable Management Agreement on the part of such Mortgage Borrower to be performed or observed. (B) The Borrower shall not, and shall not permit the Mortgage Borrowers to, surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager, or consent to the assignment by the Manager, of its interest under the Management Agreement, in each case without (i) prior to a Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies. The Borrower shall cause, or shall cause the Mortgage Borrowers to cause, any new Manager with respect to any Property to execute and deliver a subordination of management agreement in substantially the form delivered in connection with the closing of the Mortgage Loans. (C) Lender shall have the right, subject to the rights of Mortgage Lender under the terms of the respective Mortgage Loan Agreements, to require the replacement of any Manager with a Person chosen by the Borrower and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrower if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrower shall not, and shall not permit the Mortgage Borrowers not to terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. Notwithstanding the foregoing, the 48 following changes to Franchise Agreements shall be permitted without Lender's prior written consent: (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with another Franchisor within the same Category, provided that the Borrower shall not cause or permit the Mortgage Borrowers to replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(ii) with respect to more than the lesser of (x) two (2) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided that the Borrower shall not cause or permit the Mortgage Borrowers to replace Franchise Agreements for more than one (1) Property or for any Property with an Allocated Loan Amount greater than five percent (5%) of the outstanding principal balance of the Loan pursuant to this Section 5.13(D)(iii); and (iv) Entering into new Franchise Agreements (or amendments or addenda to existing Franchise Agreements) with the existing Franchisors for the applicable Properties for the same franchise brand, each in form substantially similar to the forms previously approved for the respective Properties by Lender, as required by the existing Franchisors under the respective Franchise Agreements in connection with the transfers of the applicable Properties and the direct and indirect ownership interests in the Mortgage Borrowers made by the Borrower Parties and their Affiliates in connection with the Closing of the Loan. In connection with the replacement of any Franchisors permitted hereunder, the Borrower shall cause the applicable Mortgage Borrower to, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender a Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, the Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance 49 of all of the material covenants required to be performed and observed by the Franchisor under the Franchise Agreement. In addition, the Borrower shall not, and shall not permit any Mortgage Borrower to, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrower to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. SECTION 5.14 MATERIAL AGREEMENTS. The Borrower shall not, and shall not permit the Mortgage Borrowers to, enter into or become obligated under any Material Agreement pertaining to any Property without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) any Lease that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13 hereof (provided, however, that the foregoing shall not affect the Borrower's or Mortgage Borrowers' obligation to deliver Rating Confirmations with respect to any such Management Agreement if required under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrower will cause all Receipts from the Properties to be deposited into, and shall otherwise comply with, the applicable Accounts established from time to time under the Mortgage Loan Cash Management Agreements and/or the Cash Management Agreement. Subject to Article VII hereof and the Cash Management Agreement, the Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrower shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the 50 outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Pledge Agreement and the other Loan Documents are legal, valid and binding obligations of the Borrower and have not been modified or amended, or if modified or amended, describing such modification or amendments. (B) Within ten (10) Business Days following a written request by the Borrower, Lender shall provide to the Borrower a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrower with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. The Borrower will not, and will not permit the Mortgage Borrowers to, directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): (A) The Obligations; (B) The Mortgage Loans; (C) (i) Unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the financing of equipment or other personal property used at the Properties in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal property referred to in clauses (i) and (ii) above outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan; and (D) That certain unsecured loan in the original principal amount of $17,686,292, evidenced by a certain replacement promissory note dated as of November 15, 2002 given by Servico Centre Associates, Ltd., to Servico Palm Beach General Partner SPE, Inc., the outstanding principal balance of which on the Closing Date is $10,808,383 and which is subject to the terms of that certain Subordination and Standstill Agreement given by the holder of such note in favor of Lender and dated as of the Closing Date. In no event shall any Indebtedness other than the Mortgage Loans be secured, in whole or in part, by the Properties or any portion thereof or interest therein, nor shall any Indebtedness other than the Loan be secured, in whole or in part, by the Collateral or any portion thereof or interest therein. SECTION 5.18 NO LIENS. The obligations of the Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not, and shall 51 not permit the Mortgage Borrowers to, create, incur, assume or permit to exist any Lien on or with respect to the Properties, any Collateral or any direct or indirect ownership interest in the Borrower or any Mortgage Loan Borrower, except Permitted Encumbrances. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, neither the Borrower nor Member shall directly or indirectly create or become or be liable with respect to any Contingent Obligation. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted under this Loan Agreement, neither the Borrower nor Member shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of the Borrower's or Member's operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve the Borrower or Member. SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to Manager under the Management Agreement, the Borrower shall not, and shall not permit the Mortgage Borrowers to, directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of the Borrower or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrower, upon fair and reasonable terms and which are no less favorable to the Borrower than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of the Borrower. The Borrower shall not make any payment or permit any payment to be made to any Related Person of the Borrower when or as to any time when any Event of Default shall exist. SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of the Borrower. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which the Borrower is a debtor or any portion of the Properties or the Collateral is property of the estate therein. The Borrower shall not file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or support any motion (irrespective of the subject of the motion), and no Borrower Party shall file or support any plan of reorganization. Each Borrower Party having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist 52 Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower Party shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. Neither the Borrower nor Member will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrower shall not: (i) engage in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower, provided that the Borrower shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA) or (y) could subject the Borrower or its Affiliates to an excise tax under Section 4975 of the IRC. (C) NO PLAN ASSETS. The Borrower shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrower regulating investments of governmental plans. SECTION 5.24 PRESS RELEASE. The Borrower shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrower shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 GROUND LEASES. (A) NO MODIFICATION. The Borrower shall not permit any Mortgage Borrower to modify or amend, or terminate or surrender any Ground Lease, in each case without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any attempted or purported modification, amendment, or any surrender or termination of any Ground Lease without Lender's prior written consent shall be null and void and of no force or effect. 53 (B) PERFORMANCE OF GROUND LEASES. The Borrower shall cause the Mortgage Borrowers to (i) fully perform as and when due each and all of its obligations under each Ground Lease in accordance with the terms of such Ground Lease, and shall not cause or suffer to occur any material breach or default in any of such obligations, (ii) keep and maintain each Ground Lease in full force and effect, and (iii) exercise any option to renew or extend any Ground Lease and give written confirmation thereof to Lender within thirty (30) days after such option is exercised. (C) NOTICE OF DEFAULT. If the Borrower or any of the Mortgage Borrowers shall receive any written notice that any Ground Lease Default has occurred, then the Borrower immediately shall notify Lender in writing of the same and immediately deliver to Lender a true and complete copy of each such notice. Further, the Borrower shall provide and shall cause the Mortgage Borrowers to provide, such documents and information as Lender shall reasonably request concerning the Ground Lease Default. (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be continuing, or if any Ground Lessor asserts that a Ground Lease Default has occurred (whether or not the Borrower questions or denies such assertion), then, subject to the terms and conditions of the applicable Ground Lease, Lender, upon five (5) Business Days' prior written notice to the Borrower, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary, including, without limitation, (i) performance or attempted performance of the applicable Mortgage Borrowers' obligations under the applicable Ground Lease, (ii) curing or attempting to cure any actual or purported Ground Lease Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the applicable Ground Leased Property for any or all of such purposes. Upon Lender's request, the Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each Ground Lease. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrower shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender, together with interest thereon from the date of expenditure at the Default Rate. (E) LEGAL ACTION. The Borrower shall not commence, or permit the Mortgage Borrowers to commence, any action or proceeding against any Ground Lessor or affecting or potentially affecting any Ground Lease or the Mortgage Borrowers' or Lender's interest therein, the effect of which could cause an event of default or termination of any such Ground Lease, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrower shall notify Lender immediately if any action or proceeding shall be commenced between any Ground Lessor and the Mortgage Borrowers, or affecting or potentially affecting any Ground Lease or the Mortgage Borrowers' or Lender's interest therein (including, without limitation, any case commenced by or against any Ground Lessor under the Bankruptcy Code). Lender shall have the option, exercisable upon notice from Lender to the Borrower, to participate in any such action or proceeding with counsel of Lender's choice. The Borrower shall cause the Mortgage Borrowers to cooperate with Lender, comply with the reasonable instructions of Lender, execute any and all powers, authorizations, consents or other documents reasonably required by Lender in connection therewith, and shall not settle 54 any such action or proceeding without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the applicable Ground Lease, from time to time, at Lender's request, the Borrower shall, or shall cause the Mortgage Borrowers to, use commercially reasonable efforts to obtain and deliver to Lender within the time period required under the applicable Ground Lease, an estoppel certificate from each Ground Lessor setting forth (A) (i) the identities of the original lessor and lessee under the applicable Ground Lease and each of their respective successors, (ii) that the Ground Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modification), (iii) the rent payable under the Ground Lease, (iv) the dates to which all rent and other charges have been paid, (v) whether there are any alleged Ground Lease Defaults and, if so, setting forth the nature thereof in reasonable detail, and (vi) such other matters as Lender may reasonably request or (B) the matters required to be certified by the Ground Lessor under the applicable Ground Lease. The Borrower shall not be required to request an estoppel from any Ground Lessor more than two (2) times in any calendar year. (G) BANKRUPTCY. (i) If any Ground Lessor shall reject any Ground Lease under or pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrower shall not permit the Mortgage Borrowers to elect to treat the Ground Lease as terminated but shall elect to remain in possession of the applicable Ground Leased Property and the leasehold estate under such Ground Lease. (ii) The Borrower acknowledges and agrees that in any case commenced by or against the Borrower or the Mortgage Borrowers under the Bankruptcy Code, Lender by reason of the liens and rights granted under the Pledge Agreement and the Loan Documents shall have a substantial and material interest in the treatment and preservation of such Mortgage Borrower's rights and obligations under such Ground Lease, and that the Borrower shall, in any such bankruptcy case, provide to Lender immediate and continuous reasonably adequate protection of such interests. The Borrower and Lender agree that such adequate protection shall include but shall not necessarily be limited to the following: (a) The Borrower shall serve Lender with copies of all notices, pleadings and other documents relating to or affecting the Ground Lease or the applicable Property. Any notice, pleading or document served by the Borrower or the Mortgage Borrowers on any other party in the bankruptcy case shall be contemporaneously served by the Borrower on Lender, and any notice, pleading or document served upon or received by the Borrower or the Mortgage Borrowers from any other party in the bankruptcy case shall be served by the Borrower on Lender promptly upon receipt by the Borrower or the Mortgage Borrower. (b) Upon written request of Lender, the Borrower shall cause the applicable Mortgage Borrower to assume the Ground Lease, and shall take such steps as are necessary to preserve such Mortgage Borrower's right to assume the Ground Lease, including without limitation using commercially reasonable efforts to obtain extensions of time to assume or reject the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it is applicable. 55 (c) If the Borrower, the Mortgage Borrowers or the applicable Ground Lessor seeks to reject any Ground Lease or have the Ground Lease deemed rejected, then prior to the hearing on such rejection Lender shall, subject to applicable law, be given no less than twenty (20) days' notice thereof. (iii) Rights of Mortgage Lender. The rights of Lender in connection with any bankruptcy proceeding of any Ground Lessor, Borrower or the Mortgage Borrowers under this Section 5.25(G) shall be subject and subordinate to the rights of Mortgage Lender in connection with any such bankruptcy proceeding as and to the extent provided in any intercreditor or similar agreement between Lender and Mortgage Lender. SECTION 5.26 CONDOMINIUM PROPERTY. (A) NO MODIFICATION. The Borrower shall not permit the Condominium Borrower to modify or amend any material terms of, or terminate or amend any of the Condominium Property Documents, in each case, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (B) PERFORMANCE OF MORTGAGED CONDOMINIUM PROPERTY DOCUMENTS. The Borrower shall cause the Condominium Borrower to fully and faithfully pay when due and payable all assessments, common charges and other charges payable by Condominium Borrower under the Condominium Property Documents and shall perform as and when due each of its material obligations under the Condominium Property Documents in substantial accordance with their respective terms, and shall not cause or suffer to occur any breach or default in any of such obligations. The Borrower shall cause the Condominium Borrower to keep and maintain each of the Condominium Property Documents in full force and effect. (C) NOTICE OF DEFAULT. If the Borrower or the Condominium Borrower shall receive any written notice of any Condominium Default, the Borrower immediately shall notify Lender of same and deliver to Lender a true and complete copy of each such notice, and provide such documents and information as Lender may reasonably request concerning such Condominium Default. (D) LENDER'S RIGHT TO CURE. If any Condominium Default shall occur and be continuing, or if any party to any Condominium Property Document asserts that a Condominium Default has occurred (whether or not the Borrower questions or denies such assertion), then, subject to the terms and conditions of the applicable Condominium Property Documents, after notice to the Borrower, Lender, upon five (5) Business Days' prior written notice to the Borrower, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary to cure such Condominium Default, including, without limitation, (i) performance or attempted performance of the Condominium Borrower's obligations under the applicable Condominium Property Documents, (ii) curing or attempting to cure any actual or purported Condominium Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the Condominium Property for any or all of such purposes. Upon Lender's request, the Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each of the 56 Condominium Property Documents. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrower shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender pursuant to this Section 5.26, together with interest thereon from the date of expenditure at the Default Rate. (E) PRESERVATION OF CONDOMINIUM. The Borrower will do, and will cause the Condominium Borrower to do, all things necessary to preserve and to keep unimpaired its material rights, powers and privileges under the Condominium Property Documents and to prevent the termination or expiration of the Condominium Property Documents, or the withdrawal of the Condominium Property from a condominium form of ownership under applicable law, to the end that the Condominium Borrower may enjoy all of the material rights granted to it as a party to the Condominium Property Documents. (F) STATEMENTS, NOTICES. The Borrower will, within twenty (20) days after demand from Lender (which shall not be required more than two (2) times in any calendar year), obtain, or cause the Condominium Borrower to obtain, if and to the extent that the Condominium Borrower is entitled to the same under the Condominium Property Documents, and otherwise request from and make good faith efforts to obtain, from the Board of Managers and deliver to Lender a duly signed and acknowledged certificate (signed also by the Condominium Borrower) that the Condominium Property Documents are unmodified and in full force and effect (or, if the same have been modified in compliance with this Loan Agreement, that the Condominium Property Documents are in full force and effect as to modified and that there have been no other modifications), stating the dates to which the assessments, common charges and other charges payable under the Condominium Property Documents have been paid and stating whether to each certifying party's and the Condominium Borrower's Knowledge, the Condominium Borrower is in compliance with the Condominium Property Documents, or, if not, specifying each default or failure of compliance of which the certifying party has knowledge. The Borrower will, promptly upon receipt thereof by Condominium Borrower, furnish Lender with a copy of all notices and statements, however characterized, issued by the Board of Managers or relating to the Condominium Property Documents including without limitation, financial statements and projected budgets. SECTION 5.27 LENDER'S EXPENSES. The Borrower shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrower shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrower. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrower shall not make any distributions of cash or other 57 property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrower shall not cancel any indebtedness from any Person owing to the Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. SECTION 5.30 MODIFICATION OF MORTGAGE DOCUMENTS. The Borrower shall not consent to, nor permit the Mortgage Borrowers to agree to, any amendment, modification, waiver or restatement of any of the Mortgage Loan Documents without Lender's prior written consent, which will not be unreasonably withheld. SECTION 5.31 PROHIBITED PERSONS. The Borrower covenants and agrees that no Borrower Party, nor any of their respective Affiliates, officers, directors, partners or members will knowingly: (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrower further covenants and agrees to deliver (from time to time) to Lender any such certification or other evidence as may be requested by Lender in its sole and absolute discretion, confirming that: (i) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, has to its Knowledge engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person. ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrower hereby pledges, assigns and grants to Lender a security interest in and to all of the Borrower's right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents, subject, in each case, to the interests of the Mortgage Lender, if any, in the Account Collateral. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves then held by or on behalf of Lender as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) 58 then held by or on behalf of Lender for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any Default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. SECTION 6.2 FUNDS DEPOSITED WITH LENDER. (A) Except only as expressly provided otherwise herein, all funds of the Borrower which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrower and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After repayment of all of the Obligations, all funds held as Reserves will be promptly returned to the Borrower. (B) The Borrower shall cause the Mortgage Borrowers to deposit with Mortgage Lender the amounts necessary to fund each of the Reserves as set forth in each of the Mortgage Loan Agreements and the Mortgage Loan Cash Management Agreements. SECTION 6.3 FF&E RESERVE. Funds held in the FF&E Reserve may be withdrawn by the Borrower or the Mortgage Borrowers, subject in all instances to the terms of the Mortgage Loan Cash Management Agreements, only in accordance with the approved CapEx/FF&E Budget relating to the Properties. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than for normal repairs, replacements, maintenance expenses, and otherwise in accordance with the terms of the Management Agreements, subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d). SECTION 6.4 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. The Borrower shall cause the Mortgage Borrowers to promptly commence and diligently prosecute to completion the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on Schedule 6.5 to each of the Mortgage Loan Agreements. Funds held in the Capital Improvement Reserve shall be disbursed to the Mortgage Borrowers only in accordance with Section 6.7 of each of the Mortgage Loan Agreements. SECTION 6.5 HAZARDOUS MATERIALS REMEDIATION RESERVE. The Borrower shall cause the funds contained in the Hazardous Materials Remediation Reserve to be utilized by the Mortgage Borrowers solely for performance of the Environmental Work in accordance with the 59 Environmental Reports, and shall not be used by the Borrower or the Mortgage Borrowers for purposes for which any other Reserve is established. Subject to the Mortgage Borrowers' satisfaction of the applicable conditions of Section 6.7 of each of the Mortgage Loan Agreements, the Borrower and the Mortgage Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrower, or the Mortgage Borrowers, for such Environmental Work, provided that the Borrower delivers to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, the Borrower or the Mortgage Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, to Lender's reasonable satisfaction. SECTION 6.6 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE, CAPITAL IMPROVEMENT RESERVE AND PERFORMANCE OF WORK. (A) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000 and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrower shall cause the Mortgage Borrowers to assign, or cause to be assigned, (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. The Borrower shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work, in each case at the Borrower's sole cost and expense. (B) PERFORMANCE OF WORK. If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrower with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrower of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrower shall have commenced to cure such 60 unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrower in the exercise of due diligence to cure such unsatisfactory work, up to a maximum of an additional sixty (60) days, subject to Force Majeure, without the cure thereof), Lender may, subject to Mortgage Lender's rights under the Mortgage Loan Documents, proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve then held by or on behalf of Lender toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrower, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. In order to facilitate Lender's completion or making of any Work pursuant to this Section 6.6, the Borrower shall cause the Mortgage Borrowers to grant Lender the right to enter onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrower and secured by the Pledge Agreement. For this purpose, the Borrower constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrower pursuant to this Section 6.6(B). Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrower empowers said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve then held by or on behalf of Lender for the purpose of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the applicable Mortgage Borrower which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of such Property; and (vii) to do any and every act which the Borrower might do in its own behalf to fulfill the terms of this Loan Agreement. Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrower additional sums to make or complete any Work. The Borrower shall, and shall cause the Mortgage Borrowers to, permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.6 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may 61 be kept at any Property, and to complete any Work made pursuant to this Section 6.6(B). The Borrower shall, and shall cause the Mortgage Borrowers to, use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 6.6(B) or the completion of the Work pursuant to this Section 6.6(B). (C) INDEMNIFICATION. The Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrower shall assign, and shall cause to be assigned, to Lender all rights and claims the Mortgage Borrowers may have against all Persons supplying labor or materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.7 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of any Mortgage Loan in full, a Cash Trap Event shall occur with respect to such Mortgage Loan, then for so long as such Cash Trap Event continues to exist, all Excess Cash Flow from the Properties securing such Mortgage Loan (except as otherwise expressly provided below) shall be deposited with the applicable Mortgage Lender (or its Servicer or agent) and held by such Mortgage Lender in accordance with the applicable Mortgage Loan Cash Management Agreement or, if not so held by such Mortgage Lender, shall be deposited with Lender and held in the Lock Box Account and, in each case disbursed in accordance with the terms of the applicable Mortgage Loan Cash Management Agreement. SECTION 6.8 SUBSTITUTE CASH MANAGEMENT AGREEMENT. If any Mortgage Loan shall have been satisfied prior to the payment in full of the Loan, the Borrower shall, and shall cause the applicable Mortgage Borrowers whose interests remain pledged pursuant to the Pledge Agreement to, enter into a substitute Cash Management Agreement and related lockbox agreements and pledge agreements with substantially the same terms as the agreements entered into as of the date hereof in connection with such Mortgage Loan (including, the provisions in the applicable Mortgage Loan Agreement relating to all Reserves and Collateral Accounts, including under Section 5.4, Article VI and Article VII of such Mortgage Loan Agreement) within five (5) days after the satisfaction of such Mortgage Loan, all of which agreements shall be for the benefit of Lender rather than the applicable Mortgage Lender. Such substitute agreements shall provide that all Receipts from the Properties that secured such Mortgage Loan shall be deposited directly into the Deposit Account for disbursement in accordance with the terms of such substitute Cash Management Agreement and this Agreement. Notwithstanding the foregoing, the substitute Cash Management Agreement shall provide that the aggregate amortization payments that were being made prior to the satisfaction of the applicable Mortgage Loan shall continue to be paid and 100% of such payments shall be distributed to Lender. 62 ARTICLE VII LOCK BOX; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF LOCK BOX ACCOUNT. LOCK BOX ACCOUNTS. On or before the Closing Date, pursuant to the terms of the Cash Management Agreement, an Eligible Account shall be established in the name of Lender, as secured party hereunder, to serve as the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement, the Borrower shall not have the right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. The Borrower shall direct that all Receipts with respect to the Properties which the Mortgage Borrowers or the Borrower are entitled to receive from any Mortgage Lender pursuant to any Mortgage Loan Cash Management Agreement or otherwise, after all sums which are then due and payable have been paid to such Mortgage Lender pursuant to the terms of the applicable Mortgage Loan Documents, to be transferred by wire transfer (or transfer via the ACH system) on each Business Day by the applicable Mortgage Loan Lock-Box Account Bank to the Lock Box Account. Lender may elect to change any financial institution in which the Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrower. The Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement: (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Hazardous Materials Remediation Reserve Sub-Account"; (c) the "Cash Trap Reserve Sub-Account"; and (d) the Minimum Balance Sub-Account. SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default 63 exists, Lender may apply any and all funds in the Deposit Account, the Lock Box Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. SECTION 7.4 MORTGAGE LOAN LOCK BOX. If the lock box and cash management arrangements with respect to any Mortgage Loan under the applicable Mortgage Loan Documents in effect as of the Closing Date are terminated, or if any Mortgage Loan shall be repaid in full, while any portion of the Obligations remain outstanding, the Borrower will immediately cause the applicable Mortgage Borrowers to comply with the requirements of Section 6.8 and Section 7.1 hereof. In addition, upon the occurrence of any such event the Borrower shall cause the Mortgage Borrowers whose interests remain pledged pursuant to the Pledge Agreement to direct the applicable Mortgage Lender to release all funds held in the applicable Mortgage Loan Lock Box or any of the reserves established pursuant to the applicable Mortgage Loan Cash Management Agreement or the other Mortgage Loan Documents evidencing and securing such Mortgage Loan, to be deposited with Lock Box Account Bank to be held in the applicable Reserves in accordance with the terms hereof and the Cash Management Agreement. ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" means the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrower to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or (B) OTHER PAYMENTS. Failure of the Borrower to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrower; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrower (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if (i) within forty-five (45) days after the filing thereof, the Borrower shall cause the same to be removed of record by payment, bonding or otherwise, or (ii) same is being contested in good faith by the Borrower or the applicable Mortgage Borrowers in accordance with Section 5.3(B) of the applicable Mortgage Loan Agreement); or (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by the Borrower, Guarantor or any Affiliate thereof in any Loan Document or in 64 any statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan Documents and such default is not fully cured within thirty (30) days after receipt by the Borrower of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrower (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) the Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrower in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any Borrower Party commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceeding, it shall not constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or 65 (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrower is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of its business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, the Pledge Agreement or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrower 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) and the Borrower does not take all actions requested by Lender to correct such defect within ten (10) days after the written request by Lender to take such action, or any Person under the control of the Borrower or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; or (ii) any breach or default shall occur in the material obligations of the Mortgage Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, that Manager shall have the right to exercise material remedies as a consequence thereof; or (P) GROUND LEASE/CONDOMINIUM PROPERTY. Any default by any of the Mortgage Borrowers beyond any applicable grace period shall occur under any Ground Lease or any Condominium Property Document or any actual or attempted surrender, termination, modification or amendment of any Ground Lease or any Condominium Property Document without Lender's prior written consent; or (Q) MORTGAGE LOAN DOCUMENTS. Any "Event of Default" (as defined in the respective Mortgage Loan Agreements) or any other default beyond any applicable notice and grace period under any Mortgage Loan Agreement or any of the Mortgage Loan Documents shall occur. 66 If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). SECTION 8.2 ACCELERATION AND REMEDIES. (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by the Borrower. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrower under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Collateral. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Collateral and the Pledge Agreement have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose upon the Collateral in any manner and for any amounts secured by the Collateral then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose upon the Collateral to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose upon the Collateral to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Collateral as Lender may elect. Notwithstanding one or more partial foreclosures, the Collateral shall remain subject to the Pledge Agreement to secure payment of sums secured by the Collateral and not previously recovered. 67 (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. The Borrower shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents reasonably necessary to effect the aforesaid severance if the Borrower fails to do so within ten (10) days of Lender's written request, the Borrower ratifying all that its said attorney shall do by virtue thereof. (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrower pursuant to this Loan Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrower or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if the Borrower shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrower including making protective advances on behalf of the Borrower, or, in its sole discretion, causing the obligations of the Borrower to be satisfied with the proceeds of any Reserve held by or on behalf of Lender. In such event, the Borrower shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance 68 of any obligation of the Borrower under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. (B) The Borrower, on behalf of the Mortgage Borrowers, hereby agrees that Lender shall have the right to cure defaults by the Mortgage Borrowers under the Mortgage Loan Documents whenever, in Lender's reasonable judgment (after taking into consideration all cure periods provided to Lender under any intercreditor agreement with Mortgage Lender), the existence of such default by the Mortgage Borrowers is reasonably likely to have a material adverse effect on the Borrower, any Mortgage Borrower, the Collateral or any Property. Lender shall endeavor, in good faith, to notify the Borrower prior to taking any such cure action, but shall have no liability to the Borrower or the Mortgage Borrowers for failing to do so. From and after the occurrence of a default under the Mortgage Loan Documents, the Borrower shall cooperate in all commercially reasonable respects with, and shall cause the Mortgage Borrowers to cooperate in all commercially reasonable respects with (and not to impede or interfere with in any respect), Lender's efforts to cure (or cause the cure of) all monetary and non-monetary defaults under the Mortgage Loan Documents, including, without limitation, causing the payment, removal or bonding over of all Liens, claims or judgments, or entering upon the Properties (or any portion thereof) to cure (or cause the cure of ) any non-monetary default under the Mortgage Loan Documents. In addition, after the occurrence of a default under the Mortgage Loan Documents, the Borrower agrees that it will cause the Mortgage Borrowers to coordinate with Lender with respect to all communications (written or oral) with the applicable Mortgage Lender (or any person or entity servicing the applicable Mortgage Loan). (C) Any funds expended by or on behalf of Lender to effect a cure of any Mortgage Loan as contemplated in this Section shall constitute protective advances under the Loan. If Lender so elects to cure (or attempts to cure) any default under any Mortgage Loan, the amount of such expenditures made by or on behalf of Lender shall be added to the Obligations, shall accrue interest at the Default Rate, and shall be secured by the Collateral. (D) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, the Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrower. 69 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO THE BORROWER. The Borrower hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that the Borrower: (A) does not own and will not own any assets other than the Collateral (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Mortgage Borrowers, and other direct or indirect wholly owned subsidiaries of the Borrower established solely for the purpose of holding liquor licenses with respect to one or more of the Properties (collectively, the "OWNERSHIP INTERESTS") or such incidental assets as are necessary to enable it to discharge its obligations with respect to the Mortgage Borrowers, the Collateral or the Properties; (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Collateral or the Ownership Interests; (C) will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of the Borrower or Member except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate; (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations and (ii) Permitted Indebtedness; (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), and has not acquired and will not acquire obligations or securities (other than the Ownership Interests) of any of its Affiliates other than the other Borrower Parties; (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due; (G) has done or caused to be done and will do or will cause to be done, all things necessary to preserve its existence, and will not, nor will any member or principal further amend, modify or otherwise change its articles of organization, operating agreement, or other organizational documents, as modified, amended, restated or supplemented as of the date hereof, in any manner with respect to the matters set forth in this Article IX; (H) has at all times continuously maintained its existence and has at all times been qualified to do business, and shall continue to maintain its existence and be qualified to do business in all states necessary to carry on its business; 70 (I) has at all times conducted and operated and will conduct and operate its business as presently contemplated with respect to the ownership of the Collateral; (J) has at all times maintained and will maintain books and records and bank accounts (other than bank accounts established hereunder, or established by Manager with respect to the operations of the Properties pursuant to the Management Agreement) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) has at all times held itself out to the public as, and will at all times hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and has at all times corrected and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) has at all times paid and will pay the salaries of its own employees, if any; (M) has at all times allocated and will allocate fairly and reasonably any overhead for shared office space; (N) has at all times used and will use its own stationery, invoices and checks; (O) has at all times filed and will file its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; (P) has and reasonably expects to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (Q) has not at any time sought, acquiesced in, or suffered or permitted and will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) has not at any time entered and will not enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership (other than Ownership Interests) of, any Person; (S) has not at any time commingled or permitted to be commingled and will not commingle or permit to be commingled its funds or other assets with those of any other Person; (T) has at all times maintained and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (U) has not at any time held, and will not hold, itself out to be responsible for the debts or obligations (other than the Obligations) of any other Person; 71 (V) has not at any time guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) has at all times complied and shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2 APPLICABLE TO THE BORROWER AND MEMBER. In addition to their respective obligations under Section 9.1, each of the Borrower and Member hereby represent, warrant and covenant as of the Closing Date and until such time as all Obligations are paid and satisfied in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion: (A) Borrower shall at all times act only as the direct or indirect parent of each of the Mortgage Borrowers and the Beverage Companies with all of the rights, powers, obligations and liabilities thereof under the respective organizational documents of such Mortgage Borrower or Beverage Company and has at all times taken and shall take any and all actions and will do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (B) the Borrower shall not, without the prior unanimous written consent of the Borrower's board of managers including the Independent Directors, institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (C) Member shall not institute proceedings for itself or the Borrower to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or the Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or the Borrower; or a substantial part of its or the Borrower's property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (D) The Borrower shall promptly elect and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by the Borrower and be reasonably acceptable to Lender. 72 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), to cause the Note and any Pledge Agreement to be split into one or more loans evidenced by multiple notes and secured by multiple pledge agreements in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting any such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Secondary Market Transaction with respect to each of such loans), the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything to the contrary contained in this Article X, it is acknowledged and agreed that in no event shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's) internal costs and expenses in connection with any Secondary Market Transaction. Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of the Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrower's obligations or decrease the Borrower's rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower shall not be required to pay any third party (other than, with respect to the first successful Secondary Market Transaction only (or if the Loan shall 73 hereafter be split into multiple loans, the first successful Secondary Market Transaction with respect to each of such loans) the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than with respect to the first successful Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Secondary Market Transaction with respect to each of such loans) the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrower, at Lender's cost and expense (other than with respect to the first successful Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Secondary Market Transaction with respect to each of such loans), the Borrower Parties' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent, in substance, with the opinions covered by the original opinions addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrower understands that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrower and Guarantor shall each provide in connection with each (i) preliminary and final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, prepared in connection with any Secondary Market Transaction (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrower and 74 Guarantor certifying that the Borrower and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrower, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrower and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrower, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrower shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrower or its Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrower or its Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, the Borrower shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of the Collateral, any Properties or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in the Borrower or the Mortgage Borrowers, irrespective of the number of tiers of ownership, without Lender's consent. 75 SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN THE BORROWER. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in the Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower) and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving effect to such Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY/SUBSTITUTE MEZZANINE LOANS. (A) The Borrower shall have the right to request that Lender consent to (i) a transfer of all of the Collateral to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrower's obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the obligations of the Guarantors arising from and after such date and release of the Borrower and Guarantor from obligations arising from and after such date and (iii) the replacement of the Mortgage Borrowers with new owners of the Properties, all in connection with a transfer of each of the Properties and an assumption of each of the Mortgage Loans completed in accordance with Section 11.3 of each of the Mortgage Loan Agreements (collectively, an "ASSUMPTION"), provided such assumption does not constitute a Partial Mortgage Loan Assumption, subject to the conditions set forth in paragraphs (B) and (C) of this Section. Together with such written application, the Borrower will pay to Lender a review fee of $10,000. The Borrower also shall 76 pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of Rating Agencies, if any, and other outside entities, in connection with considering any proposed Assumption, whether or not the same is permitted or occurs. (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrower shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrower shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions, if required in connection with any Securitization of any Mortgage Loan; (v) The Borrower shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; (vi) The Borrower, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; (vii) (a) The Transferee Borrower shall be a Permitted Transferee or an Affiliate of a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its reasonable discretion; (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender; and (ix) The Borrower shall have delivered to Lender evidence reasonably satisfactory to Lender that the consent of each of the Mortgage Lenders has been obtained and each of the other terms and conditions applicable to the transfer of the Properties and assumption of each of the Mortgage Loans under Section 11.3 of the respective Mortgage Loan Agreements have been satisfied. 77 (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or the Borrower, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrower, the Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, a bankruptcy non-consolidation opinion; (iii) The Borrower shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrower and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (iv) The Borrower shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Assumption, including but not limited to Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. (D) In connection with any Partial Mortgage Loan Assumption, at Lender's election (exercised in it sole discretion), the Borrower shall either (i) make a partial prepayment of the Loan in the amount of the Release Price for each of the Properties that are the subject of such Partial Mortgage Loan Assumption (such Properties, the "TRANSFERRED PROPERTIES"), together with any Prepayment Premium due thereon and any other amounts payable hereunder, and effect a Collateral Release with respect to such Transferred Properties in accordance with Section 11.4, or (ii) complete a Mezzanine Loan Substitution in accordance with the terms and conditions below. As used herein, a "MEZZANINE LOAN SUBSTITUTION" means the severance and splitting of the Loan, the Note, the Pledge Agreement, and the Collateral into two loans (respectively, the "SUBSTITUTE LOAN" and the "REMAINING LOAN") evidenced by separate notes and secured by separate pledge agreements such that following such severance and splitting, the Borrower and a new borrower meeting the requirements for a Transferee Borrower in paragraph (B) of this Section 11.3 (the "SUBSTITUTE BORROWER"), shall be the obligors under the Remaining Note (as hereinafter defined) and the Substitute Note (as hereinafter defined), respectively, and the Remaining Note shall be secured by, among other things, a pledge of the Ownership Interests in the Mortgage Borrowers that own (or lease) the remaining Properties that are not the subject of such Partial Mortgage Loan Assumption and the Substitute Note shall be secured, in part, by a pledge of the Ownership Interests in the Mortgage Borrowers that own (or lease) the Transferred Properties. 78 A Mezzanine Loan Substitution shall be subject to the following conditions: (i) All of the conditions in paragraph (B)(i) through (v), and (vii) through (ix) shall have been satisfied to Lender's reasonable satisfaction; (ii) The Borrower, the Substitute Borrower, the original and additional guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence and secure the Substitute Loan and to modify and amend the Remaining Loan to effect the Mezzanine Loan Substitution, each substantially in the form of the applicable Loan Documents received at Closing and otherwise in form and substance reasonably acceptable to Lender, and such other certificates, documents or instruments as Lender may reasonably request, including all necessary documents to amend and restate the Note and issue two substitute promissory notes therefor: one note having a principal balance equal to the aggregate Allocated Loan Amount with respect to each of the Transferred Properties (the "SUBSTITUTE NOTE") executed and delivered by the Substitute Borrower, and one note having a principal balance equal to the remaining portion of the Loan then outstanding (the "REMAINING NOTE") executed and delivered by the Borrower. The Substitute Note and the Remaining Note shall have identical terms as the original Note except for the principal balance; (iii) Counsel to each of the Borrower and the Substitute Borrower and the original and additional guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Mezzanine Loan Substitution, including opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, bankruptcy non-consolidation opinions; (iv) The Borrower and the Substitute Borrower shall cause to be delivered to Lender (1) a new policy of title insurance with respect to the Substitute Loan in form (and with endorsements) substantially the same as the title insurance policy delivered at Closing with respect to the Loan and (2) endorsements to Lender's existing policy of title insurance with respect to the Loan amending such policy to reflect the Mezzanine Loan Substitution, in form and substance reasonably acceptable to Lender; (v) The Borrower shall pay any and all reasonable costs and expenses incurred by Lender in connection with the Mezzanine Loan Substitution, including but not limited to Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Mezzanine Loan Substitution; and (vi) The Borrower and the Substitute Borrower shall deliver to Lender evidence reasonably satisfactory to Lender that each of the Borrower and the Substitute Borrower is validly existing and in good standing under the laws of the state where it is organized and, to the extent required by applicable law, qualified to do business in the state where its property is located; and each of the Borrower and the Substitute Borrower shall maintain such existence during the time thereafter when the Remaining Note and the Substitute Note shall be outstanding. 79 SECTION 11.4 RELEASE OF COLLATERAL. On one or more occasions, Lender shall permit the Borrower to cause the Mortgage Borrowers to transfer a Property and the Borrower may obtain the release of a portion of the Collateral (each, a "COLLATERAL RELEASE") relating only to the Borrower's direct or indirect interest in the Mortgage Borrower and its respective Property that is the subject of such Property Release completed in accordance with Section 11.4 of the applicable Mortgage Loan Agreement, simultaneous with such Property Release, subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrower at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) Lender shall have received on the date proposed for such Collateral Release 125% of the Allocated Loan Amount for the Property that is the subject of the Property Release (the "COLLATERAL RELEASE Price") together with the applicable Prepayment Consideration; (D) If required by any Rating Agency, the Borrower at its sole cost and expense shall have delivered to Lender one or more endorsements to the Title Policies insuring that, after giving effect to such Collateral Release, (i) the Liens insured under the Title Policies are first priority Liens on the remaining Collateral, and (ii) that the Title Policies remain in full force and effect and unaffected by such Collateral Release; (E) The Borrower shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Collateral Release; and (F) Immediately following such Collateral Release, the Collateral that has been released will be owned by a Person other than the Borrower. Upon satisfaction of the above conditions, Lender shall effectuate the following: the security interest of Lender in and to that portion of the Collateral and the other Loan Documents relating to the Released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrower to effectuate such release. The Borrower acknowledges that it has, in most cases, pledged equity interests in multiple Mortgage Borrowers and that, in several cases, the Mortgage Borrowers own more than one Property. Accordingly, the Borrower acknowledges that, until such time as all Properties owned by a particular Mortgage Borrower have been released, the Collateral relating to such Mortgage Borrower shall not be released and, notwithstanding that no Collateral Release shall have occurred (until the last Property owned by such Mortgage Borrower is being released), a condition to the Borrower permitting any Mortgage Borrower to obtain any Property Release shall be the payment to Lender of the applicable Collateral Release Price and satisfaction of the other conditions set forth in this Section 11.4. In addition, promptly after consummation of any such Collateral Release and Lender's receipt of the Collateral Release Price, any and all Reserves designated as 80 applicable to each Property that is the subject of the Property Release then held by or on behalf of Lender, if any, shall be returned to the Borrower. SECTION 11.5 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrower may permit the Mortgage Borrowers to transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Properties, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or the Properties taken as a whole, will not materially impair the utility of any individual Property or the Properties, taken as a whole, 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. SECTION 11.6 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrower may permit the Mortgage Borrowers to, without the consent of Lender, (i) make immaterial transfers of portions of the Properties to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way with respect to any Property in the ordinary course of business 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 Properties or have a Material Adverse Effect on the value of the Properties taken as a whole. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrower to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrower's obligations under the Note shall be limited to (i) the Collateral and (ii) the rents, profits, issues, products and income of the Collateral. Notwithstanding anything to the contrary in this Loan Agreement, the Pledge Agreement or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Obligations secured by the Collateral or to require that all collateral shall continue to secure all of the Obligations owing to Lender in accordance with the Loan Documents. SECTION 12.2 PARTIAL RECOURSE. Notwithstanding Section 12.1, the Borrower (but not its members, partners, employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrower or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the 81 Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrower or any Borrower Party or Manager and not deposited into the Lock Box Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender or any Mortgage Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by any Mortgage Lender, the servicer of any Mortgage Loan, Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrower or of any change in the name of the Borrower or if the Borrower takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrower or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste with respect to any of the Properties; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully recourse to the Borrower and Guarantor upon the happening of any of the following: (i) any Borrower Party's defense of any efforts by Lender to collect or enforce the Obligations following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any efforts by Lender to collect or enforce the Obligations without a good faith basis following any other Event of Default, and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrower and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by the Borrower, Guarantor or any Affiliate of either of them). SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of the Pledge Agreement or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against the Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that the Borrower (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) 82 in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors of all or any part of the obligations of the other Borrower Parties, and of all other circumstances 83 bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and 84 the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrower under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrower of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties, the Collateral, or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrower shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrower under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or 85 remedies under the Loan Documents, including the acquisition of the Properties or the Collateral by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrower in any case shall entitle the Borrower or other Person to any other or further notice or demand in similar or other circumstances. SECTION 14.4 RETENTION OF THE BORROWER'S DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrower to Lender (other than the Note) unless the Borrower requests in writing that same be returned. Upon such request and at the Borrower's expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). Notices shall be addressed as follows: If to the Borrower or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Morris, Manning & Martin, LLP 3343 Peachtree Road, NE 1600 Atlanta Financial Center Atlanta, Georgia 30326 Attention: Thomas Gryboski, Esq. Facsimile: (404) 365-9532 86 If to Lender: c/o Merrill Lynch & Co. Four World Financial Center New York, New York 10080 Attention: Robert Spinna Facsimile: (212) 738-1013 With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attention: Robert L. Boyd, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrower to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its rights of set off, and such payment or payments or the 87 proceeds of such enforcement or set off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, 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. SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrower may not assign its rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrower, on behalf of itself and all Borrower Parties, represents, warrants and acknowledges that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrower, on behalf of itself and all Borrower Parties, also acknowledges and agrees that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No 88 provision in this Loan Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrower or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrower or any other Person. The relationship between Lender and the Borrower is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and the Borrower are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrower shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrower's sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and the Borrower hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. The Borrower hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to the Borrower or Affiliates thereof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. 89 SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrower and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrower and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE COLLATERAL IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. THE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE COLLATERAL, GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWER AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWER AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS 90 WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrower has been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrower shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrower in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrower are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, Lender shall have the right, at the Borrower's sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [SIGNATURES FOLLOW ON NEXT PAGE] 91 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWER: LODGIAN MEZZANINE FLOATING, LLC, a Delaware limited liability company By: ________________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: ________________________________________ Name: Title: LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amount/Aggregate Allocated Loan Amount Exhibit E - Management Agreements Exhibit F - Mortgage Borrowers Exhibit G - Property Improvement Plan Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - [Reserved] Exhibit K - Zoning Reports Schedule 2.4 - Scheduled Mezzanine Principal Payments Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.14 - ERISA Plans Schedule 4.16 - Litigation Schedule 4.26 - Collective Bargaining Agreements Schedule 5.14 - Material Agreements EXHIBIT A PROPERTIES
CHAIN/NAME CITY ST Pool 1 Marriott Denver (Aurora) CO Courtyard by Marriott Atlanta GA Doubletree Club Philadelphia PA Holiday Inn Select Strongsville OH Crowne Plaza Macon GA Holiday Inn Marietta (hotel & suites) GA Holiday Inn Lancaster PA Clarion North Charleston SC Pool 2 Crowne Plaza Albany NY Holiday Inn Baltimore - BWI Airport MD (Linthicum) Residence Inn Dedham MA Courtyard by Marriott Tulsa OK Courtyard by Marriott Lafayette LA Holiday Inn- Greentree Pittsburgh PA Marriott Fairfield Inn Augusta GA Holiday Inn York PA Holiday Inn East Hartford CT Pool 3 Holiday Inn Baltimore, Inner Harbor MD Crowne Plaza West Palm Beach FL Holiday Inn Glen Burnie MD Courtyard by Marriott Bentonville AR Holiday Inn Towson (Cromwell Bridge) MD Holiday Inn Arden Hills/St. Paul MN Courtyard by Marriott Florence KY Holiday Inn Sunspree Myrtle Beach (Surfside Beach) SC Marriott Fairfield Inn Merrimack NH Exhibit A

CHAIN/NAME CITY ST Pool 4 Crowne Plaza Houston TX Hilton Inn Columbia MD Hilton Inn Troy (Northfield) MI Holiday Inn Select Dallas (DFW Airport) (Irving) TX Residence Inn Little Rock AR Holiday Inn Frederick MD Courtyard by Marriott Paducah KY Courtyard by Marriott Abilene TX Holiday Inn Fairmont WV
EXHIBIT B ENVIRONMENTAL REPORTS Exhibit B EXHIBIT C FRANCHISE AGREEMENTS Exhibit C EXHIBIT D ALLOCATED LOAN AMOUNT AGGREGATE ALLOCATED LOAN AMOUNT Exhibit D EXHIBIT E MANAGEMENT AGREEMENTS Exhibit E EXHIBIT F MORTGAGE BORROWERS Pool 1 Lodgian Hotels Fixed I, LLC Macon Hotel Associates, L.L.C. Servico Northwoods, Inc. Impac Hotels I, L.L.C. Lodgian Denver LLC Pool 2 AMI Operating Partners, L.P. Albany Hotel, Inc. APICO Inns of Green Tree, Inc. Lodgian Tulsa LLC Lodgian Augusta LLC Lodgian Lafayette LLC Dedham Lodging Associates I, Limited Partnership Lodgian Hotels Fixed II, Inc. Pool 3 Minneapolis Motel Enterprises, Inc. Servico Centre Associates, Ltd. Lodgian Hotels Fixed III, LLC Lodgian AMI, Inc. Pool 4 NH Motel Enterprises, Inc. Servico Columbia, Inc. Lodgian Fairmont LLC Little Rock Lodging Associates I, Limited Partnership Lodgian Hotels Fixed IV, L.P. Servico Houston, Inc. Exhibit F EXHIBIT G PROPERTY IMPROVEMENT PLAN Exhibit G EXHIBIT H [RESERVED] Exhibit H EXHIBIT I ACCEPTABLE FRANCHISORS Exhibit I EXHIBIT J [RESERVED] Exhibit J EXHIBIT K ZONING REPORTS Exhibit K SCHEDULE 2.4 SCHEDULED MEZZANINE PRINCIPAL PAYMENTS Schedule 2.4 SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan Agreement 2. Note 3. Pledge Agreement 4. Guaranty 5. Environmental Indemnity 6. Financing Statements 7. Cash Management Agreement 8. Assignments of Management Agreements 9. Post Closing Agreement Schedule 3.1(A) SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES Schedule 4.1(C) SCHEDULE 4.2 CONSENTS NONE. Schedule 4.2 SCHEDULE 4.5 CONDEMNATION PROCEEDINGS Schedule 4.5 SCHEDULE 4.5(A) RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER Schedule 4.5(A) SCHEDULE 4.7(B) RENT ROLL Schedule 4.7(B) SCHEDULE 4.7(E) FRANCHISE DEFAULTS HOTEL CITY, STATE REASON FOR DEFAULT T/B/D SCHEDULE 4.14 ERISA PLANS 1. Lodgian, Inc. 401(k) Plan. 2. Lodgian, Inc. Employee Health & Welfare Plan. 3. Multiemployer Plans covering employees of the following unions: Hotel, Motel & Restaurant Employees & Bartenders - Local 471 (Albany, NY) (pension, welfare) Hotel Employees & Restaurant Employees Local 274 (Philadelphia, PA) (pension, welfare) Hotel Employees & Restaurant Employees Local 17 (St. Paul, MN) (pension, welfare) Hotel Employees & Restaurant Employees Local 24 (Northfield, MI) (pension, welfare) International Union of Operating Engineers - Local 547 - A, B, C, E, H, (Northfield, MI) (pension, welfare) Schedule 4.14 SCHEDULE 4.16 LITIGATION NONE Schedule 4.16 SCHEDULE 4.26 COLLECTIVE BARGAINING AGREEMENTS NONE Schedule 4.26 SCHEDULE 5.14 MATERIAL AGREEMENTS Agreement between PFG Broadline and Lodgian, Inc. dated July 1, 2003. Agreement between Harbor Linen and Lodgian, Inc. dated March 1, 2002. Various agreements between the Borrowers and On Command Video Corporation. Group booking contract between Albany Hotel, Inc, and Southwest Airlines dated EX-10.23.2 11 g87458a3exv10w23w2.txt EX-10.23.2 FORM OF PROMISSORY NOTE EXHIBIT 10.23.2 FORM OF PROMISSORY NOTE $______ JUNE ___, 2004 FOR VALUE RECEIVED, the undersigned, having an address at c/o Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (the "Borrower"), promises to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "Lender"), having an address at Four World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of ________________ _________________, with interest on the unpaid principal balance from the date of this Note, until paid, at the Interest Rate (as hereinafter defined) in effect from time to time hereunder. This Promissory Note may be referred to herein as the "Note," and the loan evidenced hereby may be referred to herein as the "Loan." PAYMENTS OF PRINCIPAL AND INTEREST. The Borrower shall make a payment on the date hereof to Lender of interest only on the outstanding principal balance of this Note at the Interest Rate (hereinafter defined), from the date hereof through and including the last day of the calendar month in which this Note is executed. Commencing on August 1, 2004 (the "First Payment Date") and on the first (1st) day of each calendar month (each, a "Payment Date") thereafter to and including the Maturity Date (hereinafter defined), the Borrower shall make payments to Lender of interest and principal in monthly installments in the amounts set forth on Schedule 1 attached hereto and made a part hereof (the "Monthly Debt Service Payment Amounts"). The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon and all other amounts due hereunder and under the other Loan Documents (collectively the "Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the "Maturity Date"). Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest on this Note shall be payable in arrears. DEFINITIONS. The term "Interest Rate" as used in this Note shall have the meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined). SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered pursuant to that certain Mezzanine Loan Agreement, dated as of the date hereof (the "Loan Agreement"), between the Borrower and Lender and is secured by, among other things, that certain Pledge and Security Agreement, dated as of the date hereof (the "Security Instrument"), executed by the Borrower with respect to the LLC Interests, the LP Interests and the Stock Interests (as such terms are defined in the Security Instrument). This Note, the Loan Agreement, the Security Instrument, and all other documents or instruments given by the Borrower or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Note may be referred to as the "Loan Documents." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement. PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrower may not prepay this Note in whole or in part at any time except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the occurrence of any Event of Default, then at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Note or under any of the other Loan Documents shall occur, then the Borrower shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Note shall bear interest until paid in full at a rate per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under this Note. The Borrower agrees that such late charges and Default Rate of interest are reasonable and do not constitute a penalty. LAWFUL INTEREST. Notwithstanding any provision to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, the Borrower shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrower shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrower shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any 2 Obligation is calculated at the Maximum Rate rather than the applicable rate under this Note or the Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the applicable Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the applicable Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligations of the Borrower or its successors or assigns to pay the outstanding principal balance of this Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Security Instrument or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of the Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given hereof, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by the Borrower and all makers, sureties, guarantors and endorsers hereof. This Note shall be binding upon the Borrower and its successors and assigns. THE BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan Agreement, Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Note, the Loan Agreement, the Security Instrument and any or all of the other Loan Documents. Lender shall be released of any obligations to the extent that the same are so assigned or transferred, and the rights and obligations of "Lender" hereunder shall become the rights and obligations of the transferee holder. 3 LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of the Borrower hereunder are limited in accordance with Article XII of the Loan Agreement. This provision shall not limit any rights of Lender under the Guaranty of Recourse Obligations or the Environmental Indemnity, each dated as of the date hereof. ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrower shall pay to Lender on demand all out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by the Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by the Borrower shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York and applicable federal law. TIME OF ESSENCE. Time shall be of the essence as to all of the terms, covenants and conditions of this Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, the Borrower shall be required to make such payment on the next succeeding Business Day. 4 IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the date first written above. BORROWER: LODGIAN MEZZANINE FIXED, LLC, a Delaware limited liability company By: _______________________ Name: Daniel E. Ellis Title: Vice President and Secretary SCHEDULE 1 MONTHLY DEBT SERVICE PAYMENT AMOUNTS EX-10.23.3 12 g87458a3exv10w23w3.txt EX-10.23.3 GUARANTY RECOURSE OBLIGATIONS EXHIBIT 10.23.3 FORM OF GUARANTY OF RECOURSE OBLIGATIONS This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of June __, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"), having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at 4 World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "MEZZANINE LENDER"). R E C I T A L S: A. Pursuant to that certain Mezzanine Loan Agreement, dated as of the date hereof (as the same may be amended, modified, supplemented or restated from time to time, the "MEZZANINE LOAN AGREEMENT"), between the Borrower named therein ("MEZZANINE BORROWER"), and Mezzanine Lender, Mezzanine Lender has agreed to make a loan to Mezzanine Borrower in the aggregate original principal amount of up to $______ (the "LOAN"), subject to the terms and conditions of the Mezzanine Loan Agreement; B. As a condition to Mezzanine Lender's making the Loan, Mezzanine Lender is requiring that Guarantor execute and deliver to Mezzanine Lender this Guaranty; and C. Guarantor hereby acknowledges that Guarantor holds a direct and/or indirect ownership interest in Mezzanine Borrower and that Guarantor will materially benefit from Mezzanine Lender's agreeing to make the Loan. NOW, THEREFORE, in consideration of the premises set forth herein and as an inducement for and in consideration of the agreement of Mezzanine Lender to make the Loan pursuant to the Mezzanine Loan Agreement and the other Loan Documents, Guarantor hereby agrees, covenants, represents and warrants to Mezzanine Lender as follows: SECTION 1. DEFINITIONS. All capitalized terms used and not defined herein shall have the respective meanings given such terms in the Mezzanine Loan Agreement. SECTION 2. GUARANTY. (a) Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) hereby irrevocably, absolutely and unconditionally assumes liability for, guarantees payment to Mezzanine Lender of, and agrees to pay, protect, defend, indemnify and save harmless Mezzanine Lender from and against any and all Guaranteed Recourse Obligations of Mezzanine Borrower (as hereinafter defined). The obligations which are the subject of the guaranty referred to in this Section 2 are hereinafter collectively referred to as the "GUARANTEED OBLIGATIONS". (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF MEZZANINE BORROWER" as used in this Guaranty shall mean all obligations and liabilities for which Mezzanine Borrower shall be personally liable under the provisions of Section 12.2 of the Mezzanine Loan Agreement. (c) All sums payable to Mezzanine Lender under this Guaranty shall be payable on demand and without reduction for any offset, claim, counterclaim or defense. SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to Mezzanine Lender as follows (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Guaranty): (a) DUE EXECUTION. This Guaranty has been duly executed and delivered by Guarantor. (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, or application of general principles of equity in any legal proceeding. (c) NO VIOLATION. The execution, delivery and performance by Guarantor of its obligations under this Guaranty do not violate any law, regulation, order, writ, injunction or decree of any court or governmental body, agency or other instrumentality applicable to Guarantor, or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the assets of Guarantor pursuant to the terms of any mortgage, indenture, agreement or instrument to which Guarantor is a party or by which it or any of its properties is bound. Guarantor is not in default under any other guaranty which it has provided to Mezzanine Lender. (d) NO LITIGATION. Except as disclosed on Schedule 4.16 to the Mezzanine Loan Agreement, there are no actions, suits or proceedings at law or at equity, pending or, to Guarantor's knowledge, threatened against or affecting Guarantor or which involve or could reasonably be expected to involve the validity or enforceability of this Guaranty or which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. Guarantor is not in default beyond any applicable grace or cure period with respect to any order, writ, injunction, decree or demand of any Governmental Authority which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. (e) CONSENTS. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities (collectively, the "CONSENTS") that are required in connection with the valid execution, delivery and performance by Guarantor of this Guaranty have been obtained and Guarantor agrees that all Consents required in connection with the carrying out or performance of any of Guarantor's obligations under this Guaranty will be obtained when required. 2 (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial statements of Guarantor heretofore delivered to Mezzanine Lender fairly present the financial condition of Guarantor as of the respective dates thereof, and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. None of the aforesaid financial statements or any certificate or statement furnished to Mezzanine Lender by or on behalf of Guarantor in connection with the transactions contemplated hereby, and none of the representations and warranties in this Guaranty contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading. Guarantor is not insolvent within the meaning of the Bankruptcy Code or any other applicable law, code or regulation and the execution, delivery and performance of this Guaranty will not render Guarantor insolvent. SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the benefit of Mezzanine Lender that Guarantor will deliver to Mezzanine Lender each of the financial statements required to be delivered pursuant to Section 5.1 of the Mezzanine Loan Agreement. SECTION 5. INTENTIONALLY DELETED. SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR. (a) The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Mezzanine Loan Agreement, the Pledge Agreement or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against Mezzanine Borrower, Guarantor or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Mezzanine Borrower under the Note, the Mezzanine Loan Agreement, the Pledge Agreement or any other Loan Document or Guarantor under this Guaranty, or any setoff, counterclaim, and irrespective of any other circumstances which might otherwise limit recourse against Guarantor by Mezzanine Lender or constitute a legal or equitable discharge or defense of a guarantor or surety. Mezzanine Lender may enforce the obligations of Guarantor under this Guaranty by a proceeding at law, in equity or otherwise, independent of any loan foreclosure or similar proceeding or any deficiency action against Mezzanine Borrower or any other Person at any time, either before or after an action against the Properties or any of them or any part thereof, Mezzanine Borrower or any other Person. THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION. Guarantor waives diligence, notice of acceptance of this Guaranty, filing of claims with any court, any proceeding to enforce any provision of the Note, the Mezzanine Loan Agreement, the Pledge Agreement or any other Loan Document, against Guarantor, Mezzanine Borrower or any other Person, any right to require a proceeding first against Mezzanine Borrower or any other Person, or to exhaust any security (including, without limitation, the Collateral or Properties or any of them or any part thereof) for the performance of the Guaranteed Obligations or any other obligations of Mezzanine Borrower or any other Person, or any protest, presentment, notice of default (except as may be expressly required under the Loan Documents) or other notice or demand whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not be discharged of its obligations hereunder. 3 (b) The obligations of Guarantor under this Guaranty, and the rights of Mezzanine Lender to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting Mezzanine Borrower, any Property or any part thereof, Guarantor or any other Person; (ii) any failure by Mezzanine Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Mezzanine Loan Agreement, or any other Loan Documents, or any document or instrument relating thereto; (iii) except (A) with respect to activities occurring after the date of a Permitted Assumption or, (B) activities relating to a Collateral Release after the date thereof, the sale, transfer or conveyance of any Collateral or Property or any interest therein to any Person, whether now or hereafter having or acquiring an interest in any Collateral or Property or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against Mezzanine Borrower or any Collateral or Property or any interest therein; (iv) the conveyance to Mezzanine Lender, any Affiliate of Mezzanine Lender or Mezzanine Lender's nominee of any Property or any interest therein by a deed-in-lieu of foreclosure; (v) the release of Mezzanine Borrower or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise; (vi) the release in whole or in part of any collateral for any or all Guaranteed Obligations or for the Loan or any portion thereof; or (vii) the exercise by Mortgage Lender of any remedies made available to any Mortgage Lender pursuant to the terms of its Mortgage Loan Documents, including, without limitation, foreclosure or similar remedies under any Mortgages encumbering an applicable Mortgage Borrower's interest in any Property except with respect to actions taken by such Mortgage Lender following the Mortgage Lender succeeding to the interests of the Mortgage Borrowers in and to the applicable Properties. (c) Except as otherwise specifically provided in this Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an action brought by Mezzanine Lender to enforce this Guaranty based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise. (d) Mezzanine Lender may deal with Mezzanine Borrower and Affiliates of Mezzanine Borrower in the same manner and as freely as if this Guaranty did not exist and shall be entitled, among other things, to grant Mezzanine Borrower or any other Person such extension 4 or extensions of time to perform any act or acts as may be deemed advisable by Mezzanine Lender, at any time and from time to time, without terminating, affecting or impairing the validity of this Guaranty or the obligations of Guarantor hereunder. (e) No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Mezzanine Loan Agreement, the Pledge Agreement or the other Loan Documents or any amendment, modification or other change of any legal requirement shall in any way alter, impair or affect any of the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan Documents are modified with Mezzanine Lender's consent, the Guaranteed Obligations shall automatically be deemed modified to include such modifications. (f) Mezzanine Lender may proceed to protect and enforce any or all of its rights under this Guaranty by suit in equity or action at law, whether for the specific performance of any covenants or agreements contained in this Guaranty or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Guarantor. Each and every remedy of Mezzanine Lender shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. (g) No waiver shall be deemed to have been made by Mezzanine Lender of any rights hereunder unless the same shall be in writing and signed by Mezzanine Lender, and any such waiver shall be a waiver only with respect to the specific matter involved and shall in no way impair the rights of Mezzanine Lender or the obligations of Guarantor to Mezzanine Lender in any other respect or at any other time. (h) At the option of Mezzanine Lender, Guarantor may be joined in any action or proceeding commenced by Mezzanine Lender against Mezzanine Borrower in connection with or based upon the Note, the Mezzanine Loan Agreement, the Pledge Agreement or any other Loan Documents and recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor to the extent of Guarantor's liability hereunder, without any requirement that Mezzanine Lender first assert, prosecute or exhaust any remedy or claim against Mezzanine Borrower or any other Person, or any security for the obligations of Mezzanine Borrower or any other Person. (i) Guarantor agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Mezzanine Borrower or Guarantor to Mezzanine Lender and such payment is rescinded or must otherwise be returned by Mezzanine Lender (as determined by Mezzanine Lender in its sole and absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting Mezzanine Borrower or Guarantor, all as though such payment had not been made. (j) In the event that Guarantor shall advance or become obligated to pay any sums under this Guaranty or in connection with the Guaranteed Obligations or in the event that for 5 any reason whatsoever Mezzanine Borrower or any subsequent owner of any Property or Collateral or any part thereof is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to the lien, the time of payment and in all other respects to all sums, including principal and interest and other amounts, at any time owed to Mezzanine Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive payment thereof until all principal, interest and other sums due pursuant to the Loan Documents have been paid in full. Nothing herein contained is intended or shall be construed to give Guarantor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Mezzanine Lender in or to any collateral for the Loan, notwithstanding any payments made by Guarantor under this Guaranty, until the actual and irrevocable receipt by Mezzanine Lender of payment in full of all principal, interest and other sums due with respect to the Loan or otherwise payable under the Loan Documents. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when any such sums due and owing to Mezzanine Lender shall not have been fully paid, such amount shall be paid by Guarantor to Mezzanine Lender for credit and application against such sums due and owing to Mezzanine Lender. The foregoing shall not prohibit Mezzanine Borrower from using the proceeds of the Loan for any permitted use under the Mezzanine Loan Agreement, including, without limitation, the making of distributions to Guarantor. (k) Guarantor's obligations hereunder shall survive a foreclosure, delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or similar proceeding involving any Collateral or any part thereof and the exercise by Mezzanine Lender of any or all of its remedies pursuant to the Loan Documents. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Guarantor under this Guaranty shall survive for a period of two (2) years following payment in full of the Obligations in accordance with the terms of the Loan Documents, provided, however, in the event that any Guaranteed Obligations or liabilities of the Guarantor under this Guaranty shall have arisen prior to the expiration of such period, then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Guarantor hereunder shall survive. SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. This instrument represents the entire agreement between the parties with respect to the subject matter hereof. The terms of this Guaranty shall not be waived, altered, modified, amended, supplemented or terminated in any manner whatsoever except by written instrument signed by Mezzanine Lender and Guarantor. SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor, and its successors and assigns, may not be assigned or delegated by Guarantor and shall inure to the benefit of Mezzanine Lender and its successors and assigns. Mezzanine Lender shall have the right to assign this Guaranty and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. All references to "Mezzanine Lender" hereunder shall be deemed to include the successors and assigns of Mezzanine Lender and the parties hereto acknowledge that actions taken by Mezzanine Lender hereunder may be taken by Mezzanine Lender's agents and by the agents of the successors and assigns of Mezzanine Lender. 6 SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the City and County of New York or in the Courts of the United States of America located in the Southern District of New York, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Guarantor at its address set forth on the first page hereof. Nothing in this Section 9, however, shall affect the right of Mezzanine Lender to serve legal process in any other manner permitted by law or affect the right of Mezzanine Lender to bring any suit, action or proceeding against Guarantor or its property in the courts of any other jurisdictions. SECTION 10. SECTION HEADINGS. The headings of the sections and paragraphs of this Guaranty have been inserted for convenience of reference only and shall in no way define, modify, limit or amplify any of the terms or provisions hereof. SECTION 11. SEVERABILITY. Any provision of this Guaranty which may be determined by any competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Guarantor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND MEZZANINE LENDER HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH. SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL LIABILITY. (a) The obligations of Guarantor hereunder are separate and distinct from, and in addition to, the obligations of Guarantor now or hereafter arising under the other guaranties pursuant to which Guarantor has guaranteed the payment and performance of certain other obligations of Mezzanine Borrower described therein. (b) If there is more than one entity comprising Guarantor, all references to Guarantor herein shall be to Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) or any one or more of them. All obligations and liabilities of Guarantor hereunder are in addition to, not in lieu of and are independent of: (i) all obligations of Mezzanine Borrower under any other Loan Document, including the Note and the Mezzanine Loan Agreement; and (ii) any obligation of Guarantor under any other Loan Document to which Guarantor is a party. 7 (c) If there is more than one entity comprising Guarantor, all obligations of Guarantor hereunder shall be joint and several. SECTION 14. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder to Mezzanine Lender or Guarantor or which are given to Mezzanine Lender or Guarantor with respect to this Guaranty shall be in writing and shall be delivered to Mezzanine Lender at the address set forth in Section 14.5 of the Mezzanine Loan Agreement and to Guarantor at the address set forth on the first page hereof, each in the manner provided in Section 14.5 of the Mezzanine Loan Agreement. Guarantor agrees to give Mezzanine Lender not less than ten (10) days' prior written notice of any change in the location of Guarantor's principal place of business. SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its execution hereof acknowledges receipt of true copies of all of the Loan Documents, the terms and conditions of which are hereby incorporated herein by reference. SECTION 16. INTEREST; EXPENSES. (a) If Guarantor fails to pay all or any sums due hereunder within ten (10) days of demand by Mezzanine Lender, the amount of such sums payable by Guarantor to Mezzanine Lender shall bear interest from the date of demand until paid at the Default Rate in effect from time to time. (b) Guarantor hereby agrees to pay all reasonable out of pocket costs, charges and expenses, including, without limitation, reasonable attorneys' fees and disbursements, that may be incurred by Mezzanine Lender in enforcing the covenants, agreements, obligations and liabilities of Guarantor under this Guaranty. [SIGNATURE PAGE FOLLOWS] 8 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written. GUARANTOR: LODGIAN, INC., a Delaware corporation By: _______________________________ Name: Daniel E. Ellis Title: Senior Vice President EX-10.24.1 13 g87458a3exv10w24w1.txt EX-10.24.1 LOAN & SECURITY AGMT (FIXED RATE #1) EXHIBIT 10.24.1 FORM OF LOAN AND SECURITY AGREEMENT (FIXED RATE #1) DATED AS OF JUNE __, 2004 BETWEEN THE BORROWERS LISTED ON SCHEDULE 1 HERETO AS BORROWERS AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS........................................................................................... 1 SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined.......................................................... 1 SECTION 1.2 ACCOUNTING TERMS.............................................................................. 23 SECTION 1.3 OTHER DEFINITIONAL PROVISIONS................................................................. 23 ARTICLE II TERMS OF THE LOAN.................................................................................... 24 SECTION 2.1 LOAN.......................................................................................... 24 SECTION 2.2 INTEREST...................................................................................... 24 SECTION 2.3 RESERVED...................................................................................... 25 SECTION 2.4 PAYMENTS...................................................................................... 25 SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance with the Loan Documents, the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon, and all other sums then owing to Lender hereunder and under the Note, the Mortgages and the other Loan Documents, shall be due and payable on the Maturity Date................................................................................. 26 SECTION 2.6 PREPAYMENT.................................................................................... 26 SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrowers; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrowers' obligation to pay the Obligations........................................................................... 27 SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrowers shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required
i deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made.......................................................................... 27 SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty......................................................... 27 SECTION 2.10 RESERVED...................................................................................... 28 SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths of one percent (.05%) per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrowers and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrowers be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer.............................................................................. 28 SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF CROSS-COLLATERALIZATION..................... 28 ARTICLE III CONDITIONS TO LOAN.................................................................................. 33 SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to fund the Loan are subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrowers and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender a certificate duly executed by the

ii Borrowers stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading............................................................... 33 ARTICLE IV REPRESENTATIONS AND WARRANTIES....................................................................... 39 SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS................................. 39 SECTION 4.2 AUTHORIZATION OF BORROWING, ETC............................................................... 39 SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the Borrowers, their Affiliates and the Properties which have been furnished by or on behalf of the Borrowers to Lender pursuant to this Loan Agreement present fairly the financial condition of the Persons covered thereby as of the dates thereof and the results of their operations for the periods then ended, and, to the Borrowers' Knowledge after due inquiry, have been prepared in accordance with GAAP consistently applied (except as disclosed therein). Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements.................................................................. 40 SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the Borrowers shall have no outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness.............................................................. 40 SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to the Properties, free and clear of all Liens except for the Permitted Encumbrances. The Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Borrowers as permitted hereunder), subject only to the Permitted Encumbrances. The Mortgages, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) a valid, perfected first lien on each of the Properties, subject only to the Permitted Encumbrances, and (ii) perfected first priority security interests in and to, and perfected collateral assignments of, all personalty (including the Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. Lender will have a perfected first priority security interest in and to the FF&E owned by the Borrowers, if any, not located at the Properties. To the Borrowers' Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual Knowledge of the Borrowers, none is threatened. Except as set forth on SCHEDULE 4.5(A), no Person has any option or other right to purchase all or any portion of any of the Properties or any interest therein. To the Borrowers' Knowledge, there are no mechanic's, materialman's or

iii other similar liens or claims which have been filed for work, labor or materials affecting the Properties which are or will be liens prior to, or equal or coordinate with, the lien of any of the Mortgages. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgages and this Loan Agreement, materially and adversely affect the value of any of the Properties, impair the use or operations of the Properties or impair the Borrowers' ability to pay its obligations in a timely manner.................................. 40 SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrowers' Knowledge, there are no illegal activities relating to controlled substances on any of the Properties. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, all material permits, licenses and certificates for the lawful use, occupancy and operation of each component of each of the Properties in the manner in which it is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, in the event that all or any part of the Improvements located on any Property is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrowers' Knowledge, no legal proceedings are pending or threatened with respect to the zoning of any Property. To the Borrowers' Knowledge, except as set forth in the Title Policies and/or the Surveys, neither the zoning nor any other right to construct, use or operate any Property is in any way dependent upon or related to any real estate other than such Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Borrowers with respect to any Property without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned................................................. 41 SECTION 4.7 LEASES; AGREEMENTS............................................................................ 41 SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as set forth in the Property Condition Reports for the Properties delivered to

iv Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in good condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrowers are not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of each of the Properties (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of each of the Properties as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of each of the Properties as now used or presently contemplated. Except as may be shown on the applicable Survey, to the Borrowers' Knowledge no part of any of the Properties is within a flood plain and none of the Improvements create encroachments over, across or upon the Properties' boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each of the Properties for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrowers' Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at any of the Properties is in good and safe condition and repair and in compliance with all applicable law......................................................... 43 SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, there are no judgments outstanding against any Borrower Party, or affecting any of the Properties or any property of any Borrower, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the Borrowers' Knowledge, threatened against any Borrower Party that could reasonably be expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect............ 43 SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each Primary Borrower Party required to be filed have been timely filed (or each Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon such Person and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrowers' Knowledge, there is

v not presently pending any special assessment against any of the Properties or any part thereof....................................................................................... 43 SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Primary Borrower Parties is a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect.................................................... 43 SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect...................................... 44 SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money.............................................. 44 SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no Primary Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans................................................. 44 SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of any Primary Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from any Borrower Parties' actions..................................................................... 44 SECTION 4.16 INTENTIONALLY DELETED......................................................................... 44 SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the aggregate fair saleable value of the Borrowers' assets exceed and will, immediately following the making of the Loan, exceed the Borrowers' total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The aggregate fair saleable value of the Borrowers' assets is and will, immediately following the making of the Loan, be greater than the Borrowers' probable total liabilities, including the maximum amount of their Contingent Obligations on their debts as such debts become absolute and matured. Each Borrower's assets do not and, immediately following the making of the Loan will not, constitute

vi unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond their ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrowers and the amounts to be payable on or in respect of obligations of the Borrowers).................................................................................... 44 SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrowers that has had or could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrowers.......................................... 44 SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrowers or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System.................. 45 SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate description of all policies of insurance for each Borrower that are in effect as of the Closing Date. No notice of cancellation has been received with respect to such policies, and, to each Borrower's Knowledge, the Borrowers are in compliance with all conditions contained in such policies................................................................................. 45 SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1) or more parcels which constitute separate tax lots. No part of any of the Properties is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lots or parcels comprising any of the Properties.............................................................. 45 SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person (other than the Beverage Companies), or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person............................................................. 45 SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including any Property) is property of the estate, in any voluntary or

vii involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law now or hereafter in effect. No Borrower Party and no property of any of them is under the possession or control of a receiver, trustee or other custodian. No Borrower Party has made any assignment for the benefit of creditors. No such assignment or bankruptcy or similar case or proceeding is now contemplated. Notwithstanding the foregoing, Lender acknowledges that case #01-16402 involving Impac Hotels I, L.L.C. remains pending in the Bankruptcy Court for the Southern District of New York. Borrower represents that the Plan of Reorganization for this case has been approved by the bankruptcy court and that the case remains open solely for the purposes of resolution of certain unsecured claims, which remaining claims are payable solely out of a disputed claims reserve established by Guarantor pursuant to the Plan of Reorganization............................................................................. 45 SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to Lender in writing herein or in any of the Loan Documents, no Default exists..................................... 45 SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrowers have assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan............. 45 SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers are not and will not be subject to state statutes applicable to the Borrowers' regulating investments of and fiduciary obligations with obligations with respect to governmental plans............................................................................ 46 SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person" within the meaning of Section 1445(f)(3) of the IRC...................................................... 46 SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28 no Primary Borrower Party is a party to any collective bargaining agreement.............................. 46 SECTION 4.29 RESERVED...................................................................................... 46 SECTION 4.30 GROUND LEASES................................................................................. 46 SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective officers, directors, partners, members, Affiliates or, to the

viii knowledge of the Borrowers, shareholders is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED PERSON")...................................................................................... 47 ARTICLE V COVENANTS OF BORROWER PARTIES......................................................................... 47 SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS........................................................ 47 SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full force and effect their existence as a limited partnership, limited liability company, or corporation, as the case may be, and all rights and franchises material to its business, including their qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, each Borrower and, to the extent required by applicable law, General Partner and Member, shall at all times be qualified to do business in each of the states where the Properties are located....................................................................................... 52 SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS............................................................. 52 SECTION 5.4 MAINTENANCE OF INSURANCE...................................................................... 53 SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY......................................... 57 SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized representatives designated by Lender to visit and inspect during normal business hours its Property and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with such Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice of at least three (3) Business Days prior to visiting or inspecting any Property or such Borrower's offices............................. 60 SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and delivered to Lender operations and maintenance programs (the "O&M PLANS") with respect to suspected asbestos, asbestos-containing materials, and/or mold located in certain Properties as set forth on Schedule 6.6 attached hereto, which conditions were disclosed in the applicable Environmental Reports for such Properties. Each applicable Borrower shall at all times implement and carry out the O&M Plan in accordance with its terms. Lender's requirement that the applicable Borrowers develop and comply with the O&M Plan shall not be deemed to constitute

ix a waiver or modification of any covenants or agreements of the Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws as set forth in the Environmental Indemnity..................................................................................... 60 SECTION 5.8 RESERVED...................................................................................... 60 SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the operation or value of any Property, (B) maintain all licenses and permits now held or hereafter acquired by any Borrower, the loss, suspension, or revocation of which, or failure to renew, could have a material adverse effect on the operation or value of any Property and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation.............................. 60 SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents..................................................................................... 61 SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party shall duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a material adverse effect on the operation or value of any Property.............................................. 61 SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrowers shall not, nor shall the Borrowers authorize Manager or any other Person to, (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment,

x sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender)....................................................................................... 61 SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS.............................................................. 62 SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become obligated under any Material Agreement pertaining to any Property without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) any Lease that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13 hereof (provided, however, that the foregoing shall not affect Borrowers' obligation to deliver Rating Confirmations with respect to any such Management Agreement if required under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice.............................. 65 SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all Receipts from the Properties into, and otherwise comply with, the Accounts established from time to time hereunder. Subject to Article VII hereof and the Cash Management Agreement, each Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves.................................. 65 SECTION 5.16 ESTOPPEL CERTIFICATES......................................................................... 65 SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"):............................................................................... 65 SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not create, incur, assume or permit to exist any Lien on or with respect to the Properties, any other Collateral or any direct or indirect ownership interest in the Borrowers, except the Permitted Encumbrances and Liens on the ownership interests in the Borrowers securing the Mezzanine Loan..................................................... 66

xi SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Primary Borrower Party shall directly or indirectly create or become or be liable with respect to any Contingent Obligation......................................................................... 66 SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted in this Loan Agreement, no Primary Borrower Party shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of such Borrower Party's partnership agreement, certificate of limited partnership, articles of incorporation, by-laws, articles of organization, operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such Primary Borrower Party........................................................................ 66 SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to the Manager under the Management Agreement, the Borrowers shall not pay any management, consulting, director or similar fees to any Related Person of the Borrowers or to any director, officer or employee of the Borrowers. The Borrowers shall not directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of any of the Borrowers or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrowers and upon fair and reasonable terms and which are no less favorable to any of the Borrowers than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of any Borrower. The Borrowers shall not make any payment or permit any payment to be made to any Related Person of any of the Borrowers when or as to any time when any Event of Default shall exist.................................................................. 66 SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS........................................................ 67 SECTION 5.23 ERISA......................................................................................... 67 SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted to make such filings and disclosures with respect to the Loan as are required by law............................................................... 68 SECTION 5.25 Ground Leases................................................................................. 68 SECTION 5.26 RESERVED...................................................................................... 71 SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrowers shall pay all

xii costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrowers................................................................................. 71 SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion.................................................................................... 71 SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrowers shall not cancel any indebtedness from any Person owing to any Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld.............................................. 71 SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no Borrower Party, nor any of their respective Affiliates, officers, directors, partners or members will knowingly: (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrowers further covenants and agrees to deliver (from time to time) to Lender any such certification or other evidence as may be requested by Lender in its sole and absolute discretion, confirming that: (i) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, has to its Knowledge engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person.............................. 71 ARTICLE VI RESERVES............................................................................................. 72 SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES........................... 72 SECTION 6.2 FUNDS DEPOSITED WITH LENDER................................................................... 72 SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit with Lock Box Account Bank **[$_________]** and, pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the Payment date in July 2004, 1/12th of the annual charges (as reasonably estimated by Lender) for all Impositions and all Insurance Premiums (other than for D&O Insurance) payable with respect to the Properties hereunder (said funds, together with any interest thereon and additions thereto, the

xiii "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made to the Impositions and Insurance Reserve from and after the date hereof is **[$__________]**. The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days of the written demand by Lender, to be added to and included within such reserve, a sum of money which Lender reasonably estimates, together with such monthly deposits, will be sufficient to make the payment of each such charge at least ten (10) Business Days prior to the date initially due. The Borrowers shall provide Lender with bills and all other documents necessary for the payment of the foregoing charges at least thirty (30) days prior to the date on which each payment shall first become subject to penalty or interest if not paid. So long as (i) no Event of Default has occurred and is continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other documents in a timely manner, and (iii) sufficient funds are held by Lender for the payment of the Impositions and Insurance Premiums relating to each of the Properties, Lender shall pay said items or disburse to the Borrowers from such Reserve an amount sufficient to pay said items. Interest shall accrue in favor of the Borrowers on funds in the Impositions and Insurance Reserve and be added to the balance thereof and disbursed in accordance with the terms hereof................................................. 73 SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender shall establish and maintain with Lock Box Bank an account for the purpose of creating a reserve for replacements of FF&E at or in, or used in connection with, the Properties (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget approved by Lender (said funds, together with any interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve shall be held in an Eligible Account entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account shall be under the sole dominion and control of Lender, subject to the terms of the Cash Management Agreement. Pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing with the Payment Date in July 2004, an amount equal to 4.0% of the Operating Revenues generated from the Properties for the prior calendar month (such amount, the "MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the Borrowers, subject in all instances to the terms of the Cash Management Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held in the FF&E Reserve shall be used in connection with the Required Capital Improvements. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than Replacements subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d)...................................... 73 SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At Closing, the Borrowers shall deposit with Lock Box Account Bank

xiv **[$___________]** (said funds, together with any interest thereon, the "CAPITAL IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain Capital Improvements required to be made to the Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5 attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the Borrowers for purposes for which any other Reserve is established or for any other purpose other than completion of the Required Capital Improvements. The Borrowers shall promptly commence and diligently prosecute to completion, subject to Force Majeure, the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds held in the Capital Improvement Reserve shall be disbursed in accordance with Section 6.7. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Capital Improvement Reserve when all Required Capital Improvements are complete, and paid for, in accordance with the terms hereof.............................................................. 74 SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers shall deposit with Lock Box Account Bank, an amount equal to **[$___________]** (said funds, together with any interest thereon and additions thereto, the "HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials on the Properties as indicated in the Environmental Reports for the Properties prepared and delivered prior to the Closing and as such work is more particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by any applicable Governmental Authority or (y) nine (9) months after the Closing, the Borrowers shall, subject to Force Majeure, complete such Environmental Work and shall provide to Lender such closure reports, no-further-action letters, or other evidence of compliance with law as Lender may reasonably require. The funds contained in the Hazardous Materials Remediation Reserve shall be utilized by the Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrowers for purposes for which any other Reserve is established. Subject to the Borrowers' satisfaction of the applicable conditions of Section 6.7, the Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrowers for such Environmental Work, provided that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, in accordance with the terms hereof........................ 74

xv SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK...................................................... 75 SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations in full, a Cash Trap Event shall occur, then for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Lender (or its Servicer or agent) and held in the Lock Box Account in accordance with the terms of the Cash Management Agreement (said funds, together with any interest thereon, the "CASH TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when the Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12) month period ending on such Calculation Date and shall continue to exist until such time as the Minimum Debt Yield test has been satisfied for three (3) consecutive Calculation Dates (on a trailing twelve (12) month basis) following the commencement of the applicable Cash Trap Event. Notwithstanding that the Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no Cash Trap Event shall be deemed to have occurred as a result of such event if the Borrowers make a principal prepayment of the Aggregate Outstanding Principal Balance (which prepayment amount shall be disbursed on the next Payment Date in accordance with the terms of the Cash Management Agreement), within three (3) Business Days after the date of delivery of the financial statements disclosing the existence of such Cash Trap Event (or the date on which such financial statements are required to be delivered pursuant to Section 5.1), in an amount equal to the greater of (x) one percent (1%) of the Aggregate Outstanding Principal Balance, or (y) 120% of the amount, as determined by Lender in its reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the Minimum Debt Yield if such calculation was recalculated as provided above assuming that such amount was applied to reduce the Aggregate Outstanding Principal Balance as of the first day of the relevant measuring period. During the continuance of a Cash Trap Event, provided that no Event of Default shall have occurred and be continuing, any funds on deposit in the Cash Trap Reserve may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be applied to (i) prepayment of the Aggregate Outstanding Principal Balance as provided above, (ii) Capital Expenditures reasonably approved by Lender, or (iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal and interest under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in accordance with the terms of the Cash Management Agreement). Any funds on deposit in the Cash Trap Reserve shall continue to be held as additional Collateral in accordance with this Section 6.8 until the earlier of (a) the date that such funds are applied or disbursed pursuant to the foregoing sentence or (b) the date that the Minimum Debt Yield test has been satisfied for three (3) consecutive months (as determined above), at which time, provided no Event of Default exists, and no Cash Trap Event has commenced, such funds,

xvi together with any and all amounts then held in the Minimum Balance Sub-Account (as defined in the Cash Management Agreement), shall be automatically released to the Borrowers without any further certification requirements on the part of the Borrowers. The existence of a Cash Trap Event shall be determined by Lender in its reasonable good faith determination. If Lender determines that a Cash Trap Event has occurred, Lender shall send the Borrowers written notice thereof. Notwithstanding any provision herein to the contrary, if an Event of Default has occurred and is continuing, all funds on deposit in the Cash Trap Reserve and any subsequent Excess Cash Flow, while such Event of Default is continuing, may be applied by Lender to payment of the Loan (including payment of any Prepayment Consideration) or other Obligations (or to the obligations of the Mezzanine Borrowers to Mezzanine Lender) as Lender may elect................................................................... 79 ARTICLE VII DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT.................................................. 80 SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT......................................... 80 SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement................................................. 82 SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order......................................................................................... 82 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES....................................................................... 82 SECTION 8.1 EVENT OF DEFAULT.............................................................................. 82 SECTION 8.2 ACCELERATION AND REMEDIES..................................................................... 85 SECTION 8.3 PERFORMANCE BY LENDER......................................................................... 86 SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrowers................................................................................. 87 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS.......................... 87 SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower Party hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express

xvii advance written waiver from Lender, which may be withheld in Lender's sole discretion, that such Primary Borrower Party:.................................................................. 87 SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to their respective obligations under Section 9.1, each Borrower, General Partner and Member hereby represents, warrants and covenants, as of the Closing Date and until such time as all Obligations are paid and satisfied in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion:............................... 89 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS..................................................... 91 SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel), to cause the Note and any Mortgage to be split into a first and a second mortgage loan, or into one or more loans evidenced by multiple notes and secured by multiple mortgages and/or by ownership interests in any of the Borrowers in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein................. 91 SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting any such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect

xviii to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything to the contrary contained in this Article X, it is acknowledged and agreed that in no event shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's) internal costs and expenses in connection with any Secondary Market Transaction. Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of each Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower Parties shall not be required to pay any third party (other than, which respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the costs and expenses of the Borrowers' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents.......................................................................... 92 SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as

xix of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other than with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrowers' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent in substance with the opinions covered by the original opinions, addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrowers understand that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrowers and Guarantor shall provide in connection with each (i) preliminary and final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, prepared in connection with any Secondary Market Transaction (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor certifying that the Borrowers and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrowers, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith

xx Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrowers shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrowers or their Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrowers or their Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise................. 92 SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder......... 94 ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES................................ 94 SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, Leases entered into as permitted hereunder, and pledges in connection with the Mezzanine Loan, the Borrowers shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of any Property or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in any Borrower (other than to Mezzanine Lender), irrespective of the number of tiers of ownership, without Lender's consent.................................... 94 SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in any

xxi Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"):.................................................................................. 94 SECTION 11.3 ASSUMABILITY.................................................................................. 95 SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may obtain the release (each, a "RELEASE") of one or more Properties from the Lien of the applicable Mortgage(s) in connection with a partial or total defeasance of the Loan subject to the conditions of the Note and subject to the satisfaction of the following conditions:....... 96 SECTION 11.5 RESERVED...................................................................................... 98 SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may Transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Property free from the lien of the Mortgage, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or on the Properties taken as a whole, will not materially impair the utility of any individual Property or the Properties, taken as a whole, 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 building equipment acquired by the Borrowers (and not so disposed of) shall be subject to the lien of the Mortgage. Lender shall, from time to time, upon the reasonable request of any Borrower, execute a written instrument in form reasonably satisfactory to Lender to confirm that such building equipment which is to be, or has been, sold or disposed of is free from the lien of the Mortgage.................... 98 SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrowers may, without the consent of Lender, (i) make immaterial Transfers of portions of the any Property to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way with respect to any Property in the ordinary course of business 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 such Property or have a Material Adverse Effect on the value of such Property taken as a whole. In connection with any Transfer permitted pursuant to this Section 11.7, Lender 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 such Property affected by such transfer from the lien of the applicable Mortgage or to subordinate the applicable Mortgage to any such easement, restriction, covenant, reservation or right of way within ten (10) days of Lender's receipt of the following:.................................................................................... 98

xxii ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE................................................................... 99 SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrowers to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrowers' obligations under the Note shall be limited to (i) the Properties, (ii) the rents, profits, issues, products and income of the Properties, and (iii) any other Collateral.................................................... 99 SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not their members, partners (other than the General Partners), employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrowers or any Borrower Party or Manager and not deposited into the Deposit Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrowers or of any change in the name of any of the Borrowers or if any of the Borrowers takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrowers, or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste with respect to any of the Properties; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully recourse to the Borrowers and Guarantor upon the happening of any of the following: (i) any Borrower Party's defense of any efforts by Lender to collect or enforce the Obligations following maturity of the

xxiii Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any efforts by Lender to collect or enforce the Obligations without a good faith basis following any other Event of Default, and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents)............................ 99 SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against any Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document............................................................ 100 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES..................................................... 100 SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety............................................ 100 ARTICLE XIV MISCELLANEOUS....................................................................................... 102 SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and

xxiv closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement..................................................... 102 SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrowers of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of

xxv the Properties or Improvements, including claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrowers shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrowers under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Properties by foreclosure or a conveyance in lieu of foreclosure.............................. 103 SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers or other Person to any other or further notice or demand in similar or other circumstances................................................................................. 103 SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrowers to Lender (other than the Note) unless the Borrowers request in writing that same be returned. Upon such request and at the Borrowers' expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated...................................................... 104 SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day)......................... 104 SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan Agreement, the making of the Loan hereunder and

xxvi the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrowers to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement.................... 105 SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available............... 105 SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its 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 and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, 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.......................................................................... 105 SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction........................ 106 SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect............................ 106 SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED

xxvii HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER.................................. 106 SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrowers may not assign their rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI............................... 106 SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties, represent, warrant and acknowledge that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrowers, on behalf of themselves and all Borrower Parties, also acknowledge and agree that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any other Person. The relationship between Lender and the Borrowers is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and any other Borrower are ancillary to such creditor/debtor relationship................................................ 106

xxviii SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment........................................................... 107 SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. Each of the Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender..................................................................................... 107 SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any of the Borrowers or Affiliates thereof, or any other Person....................................................... 107 SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents....................................................... 107

xxix SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrowers and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control....................................................................................... 107 SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.................................. 108 SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,

xxx INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT......................................................................................... 108 SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto............ 109 SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrowers have been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrowers shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrowers in writing as to the identity of the Servicer and any special servicer...................................................... 109 SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them................................................. 109 SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, Lender shall have the right, at the

xxxi Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine..........109

xxxi LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate re: Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 2.12(G) - Crossed Loans/Crossed Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.30 - Ground Leases Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work/O&M Plans Schedule 6.7 - Reserve Funding Conditions i LOAN AND SECURITY AGREEMENT This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as of June __, 2004 and entered into by and between the parties listed as Borrowers on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrowers and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT I. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any other accounts pledged to Lender pursuant to this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, directors, managing members, or general partners of the entity. "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT D. "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Mezzanine Loan and the Loan. "ALLOCABLE PORTION" means 24.54%. "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each Property as set forth on EXHIBIT D. "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7. "ARCHITECT" has the meaning set forth in Section 5.5. "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and Rents of even date herewith from each of the Borrowers to Lender, constituting assignments of each Borrower's right, title and interest in the Leases and proceeds therefrom for each of their respective Properties as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain Conditional Assignments of Hotel Management Agreements of even date herewith executed by each of the Borrowers and the applicable Manager, constituting an assignment of each Management Agreement as Collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "BEVERAGE COMPANY" means any Person (other than any of the Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property. 2 "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Condominium Property Documents. "BORROWER" and "BORROWERS" have the meanings set forth in the preamble; provided that, following a Release, "BORROWERS" means each of the Borrowers remaining as a party to the Loan Documents, and whose Properties remain encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any of such remaining parties. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrowers, General Partner, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing offices of the Servicer, and, if the Loan becomes a "specially serviced mortgage loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1(D) hereof. "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations (including any improvements, repairs or alterations required pursuant to a Property Improvement Plan), FF&E and other capital items (whether paid in cash or property or accrued as liabilities) made by the Borrowers that, in conformity with GAAP, would not be included in the Borrowers' annual financial statements as an Operating Expense of the Properties. "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5. "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank. "CASH TRAP EVENT" has the meaning set forth in Section 6.8. 3 "CASH TRAP RESERVE" has the meaning set forth in Section 6.8. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan. "CLOSING DATE" means the date on which the Closing occurs. "COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan Documents, including without limitation the Properties and the Account Collateral. "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. 4 "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1. "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set forth in Section 7.1. "CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan, each dated as of the date hereof, executed by each of the Crossed Borrowers, and (ii) those certain Guaranties of each of the Crossed Loans, each dated as of the date hereof, executed by each of the Borrowers. "CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G). "CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other "Indebtedness" as defined in each Crossed Loan Agreement. "CROSSED LOANS" shall mean each of the mortgage loans (other than the Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with respect to each Crossed Borrower, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each dated as of the date hereof, between Lender and the Crossed Borrowers for the respective Crossed Loans, each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in each Crossed Loan Agreement for each Crossed Loan, including without limitation the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing and/or securing each Crossed Loan, and each of the Crossed Guaranties relating to the respective Crossed Loans, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and deeds to secure debt, each dated as of the date hereof, from each Crossed Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed Property as security for the respective Crossed Loans, each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan, as described in the respective Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G) hereof. "D&O INSURANCE" has the meaning set forth in Section 5.4. 5 "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the amount of interest that will be required to be paid over the succeeding twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan, plus principal amortization of the Loan and the Allocable Portion of the Mezzanine Loan that would be required in respect of the then outstanding principal amount of the Loan and the Allocable Portion of the Mezzanine Loan over the succeeding twelve (12) months based on a twenty-five (25) year amortization schedule, calculated using the Interest Rate for the Loan and the actual interest rate on the Mezzanine Loan. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. "DEBT YIELD" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the then outstanding principal balance of the Loan and the Allocable Portion of the Mezzanine Loan. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1. "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1. "DEPOSIT BANK" has the meaning set forth in Section 7.1. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "ELIGIBLE ACCOUNT" means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding 6 fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of any of the Borrowers or any current or former ERISA Affiliate or (iii) for which any of the Borrowers or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrowers and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAWS" means all present and future local, state, federal or other governmental authority, statutes, ordinances, codes, orders, decrees, laws, rules or regulations pertaining to or imposing liability or standards of conduct concerning environmental regulation (including, without limitation, regulations concerning health and safety), contamination or clean-up or the handling, generation, release or storage of Hazardous Material affecting the Properties including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, as amended, the Hazardous Substances Transportation Act, as amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as amended, the Safe Drinking Water Act, as amended, the Occupational Safety and Health Act, as amended, any state superlien and environmental clean-up statutes and all regulations adopted in respect of the foregoing laws whether now or hereafter in effect. "ENVIRONMENTAL REPORTS" means those certain environmental reports and audits for the Properties as described on EXHIBIT B. "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6. "EO13224" has the meaning set forth in Section 4.31. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions and which is also a Business Day. 7 "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning set forth in the Cash Management Agreement. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash Management Agreement. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. 8 "FF&E RESERVE" means the reserve established pursuant to Section 6.4. "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the applicable Borrower Parties as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FITCH" means Fitch, Inc. "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrowers or their Affiliates, or other causes beyond the reasonable control of the Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrowers. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT C and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Borrowers, as franchisee, pursuant to which the Borrowers have the right to operate the Properties under names and hotel systems controlled by the Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to each Property or any other successor franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" means, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "FUNDING LOSSES" has the meaning set forth in Section 2.10. "FUNDING PARTY" means any bank or other entity, if any, which is indirectly or directly funding Lender with respect to the Loan, in whole or in part, including, without limitation, any direct or indirect assignee of, or participant in, the Loan. "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. "GENERAL PARTNER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which is now or hereafter becomes a general partner of any of the Borrowers under such Borrower's limited partnership agreement. 9 "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30. "GROUND LEASED PROPERTIES" means the Properties subject to the Ground Leases described on SCHEDULE 4.30 attached hereto. "GROUND LEASES" means the ground leases described on SCHEDULE 4.30 attached hereto. "GROUND LESSORS" means the lessors under the Ground Leases described on SCHEDULE 4.30 attached hereto. "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity. "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse Obligations of even date herewith from Guarantor to Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIAL" means all or any of the following: (A) substances, materials, compounds, wastes, products, emissions and vapors that are defined or listed in, regulated by, or otherwise classified pursuant to, any applicable Environmental Laws, including any so defined, listed, regulated or classified as "hazardous substances", "hazardous materials", "hazardous wastes", "toxic substances", "pollutants", "contaminants", or any other formulation intended to regulate, define, list or classify substances by reason of deleterious, harmful or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (C) any flammable substances or explosives or any radioactive materials; (D) asbestos in any form; (E) electrical or hydraulic equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G) mold; or (H) urea formaldehyde, provided, however, such definition shall not include cleaning materials and other substances commonly used in the ordinary course of the Borrowers' business, which materials exist only in reasonable quantities and are stored, contained, transported, used, released, and disposed of in accordance with all applicable Environmental Laws. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.6. 10 "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Borrowers under each of the Ground Leases and under the Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties. "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, and (v) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of General Partner, Member, any of the Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (except that such individual may be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with General 11 Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to the Borrowers, Member, General Partner or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INITIAL TERM" means the period from the Closing Date to the Scheduled Maturity Date. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Borrowers with respect to the Properties under Section 5.4. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. "INTEREST RATE" has the meaning set forth in Section 2.2. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. "IRS" means the Internal Revenue Service or any successor thereto. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrowers or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation or inquiry unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of each Borrower and Member, with respect to operational issues of any Property or any of the Borrowers; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) the person signing such document or certificate. "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. 12 "LENDER" is defined in the preamble. "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7 "LETTER OF CREDIT" means an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrowers shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrowers that the institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LOAN" has the meaning set forth in Section 2.1. "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the Assignments of Leases, the Assignments of Management Agreements, the Guaranty, the Financing Statements, the Cash Management Agreement and any and all other documents and agreements from any of the Borrowers, General Partner, Member, Guarantor or Manager and accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mezzanine Loan Documents. "LOAN YEAR" means the twelve (12) month period commencing on July 1st of any calendar year during the term of the Loan and ending on June 30th of the following calendar year - provided that the first Loan Year shall commence on the Closing Date and end on June 30, 2005. "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT E, between each Borrower and the applicable Manager described therein, and any management agreement which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. 13 "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT E or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties approved by Lender in accordance with the terms and conditions hereof. "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations, properties, assets or condition (financial or otherwise) of any of the Borrowers or Guarantor, or (B) the impairment of the ability of any of the Borrowers or Guarantor to perform its obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers receives in compensation, more than $500,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers (or all the Borrowers in the aggregate) receives in compensation, not more than $1,000,000 per annum and (y) which is terminable by the Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. "MATERIAL ALTERATION" means any improvement or alteration to a Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget then in effect, or as approved Work under Section 6.7 hereof. "MATERIAL LEASE" means any Lease of space in a Property which (i) is with an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other payments in an amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, or (iv) obligates the Borrowers to make any improvements to the Properties either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. 14 "MATURITY DATE" means July 1, 2009, or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. "MEMBER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the Borrowers which are limited liability companies) and any other entity which is now or hereafter becomes the managing or sole member of any of the Borrowers under such Borrower's limited liability company operating agreement. "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE BORROWER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Mezzanine Borrower". "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its successors and assigns. "MEZZANINE LOAN" means that certain loan being made on the date hereof from Mezzanine Lender to Mezzanine Borrower. "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the Mezzanine Loan, as same may be amended, modified or restated from time to time. "MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii) during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year, 11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th) Loan Year, 13%. "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4. "MOODY'S" means Moody's Investors Service. "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments of Leases and Security Agreements, (ii) those certain Deeds of Trust, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security Agreements, each of even date herewith, from each Borrower to Lender (or deed trustee on behalf of Lender, as applicable), constituting a Lien on such Borrower's respective Property as Collateral for the Loan as same may be modified or amended from time to time. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which any of the Borrowers or any Affiliate has any liability, including contingent liability. 15 "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which Operating Revenues exceed Operating Expenses (excluding Management Fees, interest, income taxes, depreciation, amortization, FF&E reserves, and fees due to all Franchisors for such period). "NOTE" has the meaning set forth in Section 2.1. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrowers under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against any of the Borrowers, and the performance of all other terms, conditions and covenants under the Loan Documents. "OFAC" has the meaning set forth in Section 4.31. "O&M PLANS" has the meaning set forth in Section 5.7. "OPERATING BUDGET" means, collectively, for any period, the Borrowers' budgets setting forth the Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties for such period, which budgets have been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" means, for any period, without duplication, all costs and expenses of operating, maintaining and managing the Properties determined in accordance with GAAP, including, without limitation, Impositions (due and payable during the applicable period of determination), Insurance Premiums, repair and maintenance costs, Management Fees and costs, fees payable to all Franchisors, utilities, accounting, legal and other professional fees, fees relating to environmental and financial audits, wages, salaries, payroll taxes and benefits, business franchise taxes, tips and gratuities paid to employees and staff and other personnel expenses, costs and expenses related to operating and maintaining all guest rooms, restaurants (including inventory and supplies), retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, and all other "costs and expenses" as defined in the Uniform System; but excluding principal and interest payments on the Loan, fees and expenses of a non-operating nature and fees and expenses due and payable to or for the benefit of Lender under this Loan Agreement or any of the other Loan Documents (including, without limitation, all loan servicing fees and expenses, and expenses related to a Cap), expenses which, in accordance with GAAP, should be capitalized, any expense paid by a tenant that would otherwise be an Operating Expense, capital expenditures, tenant improvement allowances and leasing commissions, if any, asset management fees, any payment or expense for which each Borrower was or is to be reimbursed from proceeds of the Loan or insurance or by any third 16 party, any fees or expenses paid to any partner or member of the Borrowers for services provided to any of the Borrowers and any non-cash charges such as depreciation and amortization. Operating Expenses shall not include federal, state or local income taxes or legal and other professional fees unrelated to the operation of the Properties. "OPERATING REVENUES" means, without duplication, all revenues and receipts of the Borrowers from operation of the Properties or otherwise arising in respect of the Properties which are properly allocable to the Properties for the applicable period in accordance with GAAP, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants and bars (including without limitation, service charges for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, health club membership fees, food and beverage wholesale and retail sales, service charges, convention services, special events, audio-visual services, boat cruises, travel agency fees, internet booking fees, telephone charges, laundry services, vending machines and otherwise, all rents, revenues and receipts now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the possession, use or occupancy of all or any portion of the Properties or personalty located thereon, or rendering of service by any of the Borrowers or any operator or manager of the hotel or commercial space (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores and deposits securing reservations of such space (only to the extent such deposits are not required to be returned or refunded to the depositor)), proceeds from rental or business interruption insurance relating to business interruption or loss of income for the period in question and any other items of revenue which would be included in operating revenues under the Uniform System; but excluding proceeds from the sale of FF&E, abatements, reductions or refunds of real estate or personal property taxes relating to the Properties, dividends on insurance policies relating to the Properties, condemnation proceeds arising from a temporary taking of all or a part of any Properties, security and other deposits until they are forfeited by the depositor, advance rentals until they are earned, proceeds from a sale, financing or other disposition of the Properties or any part thereof or interest therein and other non-recurring revenues as determined by Lender, insurance proceeds (other than proceeds from rental or business interruption insurance), other condemnation proceeds, capital contributions or loans to any of the Borrowers, disbursements to any of the Borrowers from the Reserves, sales, use and occupancy taxes collected from customers or patrons of the Properties to be remitted to the applicable taxing authorities, and gratuities or service charges collected on behalf of and remitted to employees or contractors of the Properties. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. "PAYMENT DATE" means the first day of each calendar month occurring during the term of the Loan (or if such day is not a Business Day, the immediately succeeding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the other Liens of the Loan Documents in favor of Lender, (ii) the items shown in Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not yet due and payable or Liens arising after the date hereof which are being contested in good faith by appropriate proceedings promptly 17 instituted and diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case of Liens arising after the date hereof, statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business and discharged by the Borrowers by payment, bonding or otherwise within forty-five (45) days after the filing thereof or which are being contested in good faith in accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and customary purchase money financing of personal property and equipment leasing to the extent the same are created in the ordinary course of business in accordance with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against real property which do not materially adversely affect (A) the ability of the Borrowers to pay any of their obligations to any Person as and when due, (B) the marketability of title to the Properties, (C) the fair market value of the Properties, or (D) the use or operation of the Properties as of the Closing Date and thereafter; (vii) rights of existing and future tenants, as tenants only, pursuant to the Leases; (viii) any other Lien to which Lender may expressly consent in writing; and (ix) Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or 18 (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5. "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6. "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General Partner and Member. "PROHIBITED PERSON" has the meaning set forth in Section 4.31. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT A, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the Borrowers and which shall be encumbered by and are more particularly described in the respective Mortgages: provided that, following a Release, "PROPERTIES" means each of the Properties that remain encumbered by the Mortgages as Collateral for the Loan. "PROPERTY CONDITION REPORT" means those certain property condition reports for the Properties as described on EXHIBIT J. "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties described on EXHIBIT G and any future Property Improvement Plans required to be implemented by the applicable Franchisor. "PROPERTY RELEASE" has the meaning set forth in Section 11.4. "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization; 19 and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. "RATING CRITERIA" with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" means all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties received by the Borrowers or any Related Person of the Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which any of the Borrowers or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE" has the meaning set forth in Section 11.4. "RELEASE DATE" has the meaning set forth in Section 11.4. "RELEASE PRICE" means an amount equal to one hundred twenty-five percent (125%) of the Allocated Loan Amount of the applicable Property. "RENT ROLL" has the meaning set forth in Section 3.1. "RENTS" has the meaning set forth in the Mortgages. "REPLACEMENTS" has the meaning set forth in Section 6.4. "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5. "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "RESERVES" means the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Document, including without limitation, the reserves established pursuant to Article VI. "RESTORATION" has the meaning set forth in Section 5.5. 20 "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five percent (5%) of the Aggregate Allocated Loan amount of the applicable Property, not to exceed $500,000, per Property per occurrence. "REVPAR" means average room revenues per available room per day. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto; which payment amounts were calculated based upon a twenty-five (25) year amortization schedule at the Interest Rate. In the event that the amount of principal prepayments on the Loan from application of casualty insurance proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in the aggregate, from the Closing Date or from the date of the last re-amortization of the Loan under this sentence, Lender shall recalculate the Scheduled Mortgage Principal Payments based upon the then remaining principal amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE 2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto in its entirety. "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" means a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEE" has the meaning set forth in Section 2.11. "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the date of formation of the applicable Person in its respective jurisdiction of formation. "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period, (iii) a calculation of the Debt Service Coverage Ratio and the Debt Yield for the applicable period (which shall not be 21 binding on Lender), and (iv) such other financial reports as the subject entity shall routinely and regularly prepare. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TIER 1 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT I. "TIER 2 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT I. "TIER 3 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT I. "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart Title Insurance Company, as co-insurers, and/or such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title insurance pertaining to the Mortgages issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, (y) the failure to pay to any Franchisor any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT") and the continuance thereof beyond any applicable notice and grace period under such Franchise Agreement or the occurrence of one or more breaches or defaults (other than Franchise Payment Defaults) and the continuance thereof beyond all applicable notice and grace periods, if any, under such Franchise Agreements (or such other cure periods as may be provided by the applicable Franchisors in writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or more of the outstanding principal balance of the Loan; provided, however, no Uncured Franchise Default shall be deemed to have occurred under clause (x) above with respect to any Property following the voluntary or involuntary termination of the applicable Franchise Agreement if (a) within ten (10) Business Days of the termination of such Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)), the applicable Borrower delivers to Lender evidence reasonably satisfactory to Lender that such Borrower is diligently pursuing efforts to enter into a new Franchise Agreement with an Acceptable Franchisor for the applicable Property and such Borrower shall thereafter diligently and continuously pursue such efforts to enter into a new Franchise Agreement, (b) at the time of such termination no other Property shall be in 22 operation without being subject to a Franchise Agreement, (c) the Allocated Loan Amount of the Property covered by such Franchise Agreement is not more than five percent (5%) of the outstanding principal balance of the Loan or such Property shall not be in operation for more than five (5) consecutive days without being subject to a Franchise Agreement, and (d) no Property shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. "WORK" has the meaning set forth in Section 6.7. "WORK RESERVES" has the meaning set forth in Section 6.7. "ZONING REPORTS" means those certain zoning and site requirements summaries for the Properties as described on EXHIBIT K. SECTION 1.2 ACCOUNTING TERMS. For purposes of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any reference to any Person may include such Person's respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. 23 ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrowers contained herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to borrow from Lender, a loan in the original principal amount of $___________ (the "LOAN"). (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to Lender a Promissory Note, dated of even date herewith (as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the order of Lender, in the original principal amount of $____________. (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be used to (i) refinance existing indebtedness; (ii) pay all recording fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable legal fees and expenses of counsel to Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) establish the Reserves required hereunder; and (iv) provide for general corporate purposes, including, without limitation, payment of transaction costs and expenses incurred by the Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrowers. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall bear interest at a rate per annum equal to _____ percent (__%) (the "INTEREST RATE"). (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is four percent (4%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT RATE"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in arrears. (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this 24 subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 RESERVED. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments of interest and principal on the Note as follows: (i) The Borrowers shall make a payment to Lender of interest only on the Closing Date for the period from and including the Closing Date through and including the last day of the calendar month in which the Closing occurs; and (ii) Commencing on August 1, 2004 and on each Payment Date thereafter through but not including the Maturity Date, the Borrowers shall make a payment of interest on the Loan for the prior calendar month, and in addition shall make a payment of principal on the Loan in an amount equal to the Scheduled Mortgage Principal Payment for such Payment Date. (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such 25 day, or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrowers on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to have satisfied their obligations to make such payments. Upon the occurrence and during the continuance of an Event of Default, payments shall be applied to the Obligations in such order as Lender shall determine in its sole and absolute discretion. SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance with the Loan Documents, the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon, and all other sums then owing to Lender hereunder and under the Note, the Mortgages and the other Loan Documents, shall be due and payable on the Maturity Date. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or in part at any time, except as expressly set forth in this provision. On and after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part, without payment of Prepayment Consideration, provided that (i) the Borrowers shall provide to Lender not less than fifteen (15) days prior written notice of such prepayment, (ii) together with such prepayment the Borrowers also shall pay all accrued and unpaid interest and all other Obligations then due and owing, (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith the Borrowers also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to the end of such calendar month. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur prior to May 1 2009, on account of acceleration of the Loan (whether or not due to an Event of Default), or otherwise, then except only as expressly provided in this Loan Agreement or the other Loan Documents to the contrary, the Borrowers shall pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due as to a prepayment of the Loan in connection with (i) application of insurance or condemnation proceeds required by Lender pursuant to this Loan Agreement or the Mortgages in the absence of 26 an Event of Default, (ii) Scheduled Mortgage Principal Payments. The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. (C) DEFINITIONS. The following terms shall have the meanings indicated: "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii) the Yield Maintenance Amount. "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if any, between (i) the present value on the date of prepayment (by acceleration or otherwise) of all future installments of principal and interest which the Borrowers would otherwise be required to pay under the Note from the date of such prepayment until the Maturity Date absent such prepayment, including the unpaid principal amount which might otherwise be due upon the Maturity Date absent such prepayment, with such present value being determined by the use of a discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent Basis" pursuant to the standards and practices of the Securities Industry Association), on the date of such prepayment of the United States Treasury Security having the term to maturity closest to what otherwise would have been the remaining term hereof absent such prepayment and (ii) the principal balance of the Loan on the date of such prepayment. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrowers; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrowers' obligation to pay the Obligations. SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrowers shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under 27 the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 RESERVED. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths of one percent (.05%) per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrowers and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrowers be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF CROSS-COLLATERALIZATION. (A) Until repayment of the Indebtedness and the Crossed Indebtedness and satisfaction of all obligations under this Agreement and the Crossed Loan Agreement, each Borrower acknowledges and agrees (subject to Lender's election(s) at Lender's sole discretion from time to time pursuant to Section 2.12(G) below): (i) that the Properties shall secure not only the Loan but also the Crossed Loans, and that the Liens of the Loan Documents shall constitute Liens securing not only the Loan but also the Crossed Loans; (ii) that the Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured by such Crossed Properties; and (iii) that Lender would not make the Loan to the Borrowers or the loans constituting the Crossed Loans unless the Borrowers and the Crossed Borrowers granted liens on the Properties and, in addition, the Crossed Properties of the Crossed Borrowers to secure the payment of the Loan and the Crossed Loans. (B) Until the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, the Borrowers (i) shall have no right of subrogation with respect to the Crossed Loans and (ii) waive any right to enforce any remedy which Lender now has or may hereafter have against the Crossed Borrowers, any endorser or any guarantor of all or any part of the Crossed Loans or any other individual or entity, and the Borrowers waive any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of the Crossed Loans or any other liability of any of the Crossed Borrowers to Lender. Should any Borrower have the right, notwithstanding the foregoing, to exercise its subrogation rights, each Borrower hereby expressly and irrevocably (1) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that such Borrower may have to the payment in full in cash of the Loan 28 and the Crossed Loans and (2) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Loan and the Crossed Loans are paid in full in cash. Each Borrower acknowledges and agrees that this subordination is intended to benefit Lender and shall not limit or otherwise affect any Borrower's liability hereunder or the enforceability of this Loan Agreement or the Crossed Loan Documents. (C) Each Borrower agrees that any and all claims of such Borrower against any of the Crossed Borrowers or any endorser or any guarantor of all or any part of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with respect to any obligations, liabilities or indebtedness now or hereafter owing by the Crossed Obligors, or any of them, to such Borrower, or otherwise existing or claimed to be owed or to exist on the part of any of the Crossed Obligors, or against any of their respective properties (collectively, the "CROSSED PARTY OBLIGATIONS") shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any right of any Borrower to ask, demand, sue for, take or receive any payment from any of the Crossed Obligors, all rights, liens and security interests of each Borrower, whether now or hereafter arising and howsoever existing, in and to any assets of any of the Crossed Obligors shall be and are subordinated to the rights of Lender in those assets under the Loan Documents, the Crossed Loan Documents or otherwise, and no Borrower shall, until the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, (i) assert, collect, sue upon, or enforce all or any part of the Crossed Party Obligations; (ii) commence or join with any other creditors of any of the Crossed Obligors in commencing any bankruptcy, reorganization, receivership or insolvency proceeding against any of the Crossed Obligors; (iii) take, accept, ask for, sue for, receive, set off or demand any payments upon the Crossed Party Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to be created liens, security interests, mortgages, deeds of trust or pledges of or with respect to any of the assets of any of the Crossed Obligors in favor of or for the benefit of such Borrower. (D) If all or any part of the assets of any of the Crossed Obligors, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Crossed Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Crossed Obligor is dissolved or if substantially all of the assets of any such Crossed Obligor are sold, then, and in any such event (such events being herein referred to as an "CROSSED OBLIGOR INSOLVENCY EVENT"), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable to any Borrower upon or with respect to any Crossed Party Obligations shall be paid or delivered directly to the Lender for application on the Loan and the Crossed Loans, due or to become due, until such Loan and Crossed Loans shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by any Borrower upon or with respect to the Crossed Party Obligations after any Crossed Obligor Insolvency Event and prior to the payment in full and satisfaction of all of the Loan and Crossed Loans, such Borrower shall receive and hold the same in trust, as trustee, for the benefit of Lender and shall forthwith deliver the same to Lender in precisely the form received (except for the endorsement or assignment of such Borrower where necessary), for application to any of the Loan or Crossed Loans, due or not due, and, until so delivered, the same shall be held in trust by such Borrower as the property of Lender. If such Borrower fails to make 29 any such endorsement or assignment to Lender, Lender or any of its officers or employees is irrevocably authorized to make the same. Each Borrower agrees that until the Loan and Crossed Loans have been paid in full (in cash) and satisfied, no Borrower will assign or transfer to any individual or entity (other than Lender) any claim such Borrower has or may have against any Crossed Obligor. (E) Subject to the provisions of Section 2.12(G), to the extent that any collection upon any of the Loan or the Crossed Loans is made by Lender from one of the Crossed Borrowers or the Crossed Properties or other assets of the Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all other Crossed Loans Collections then previously or concurrently made by such Crossed Borrower, exceeds the amount which otherwise would have been collected from such Crossed Borrower if each Borrower and each Crossed Borrower had paid the portion of the Loan and Crossed Loans satisfied by such Crossed Loans Collection in the same proportion as such Crossed Borrower's Allocable Amount (as defined below) (as determined immediately prior to such Crossed Loans Collection) bore to the aggregate Allocable Amounts of each Borrower and each Crossed Borrower as determined immediately prior to the making of such Crossed Loans Collection, then, following payment in full in cash of the entire Loan and Crossed Loans, such Crossed Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each Borrower and each of the other Crossed Borrowers for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Crossed Loans Collection. As of any date of determination, the "ALLOCABLE AMOUNT" of any Borrower or any Crossed Borrower shall be equal to the maximum amount of the claim which could then be recovered from such Borrower or Crossed Borrower under the Loan Documents and Crossed Loan Documents without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. The foregoing provision shall be for the benefit of each of the Crossed Borrowers and Lender, but shall be subject to modification as provided in Section 2.12(G) below and to amendment by agreement of the Borrowers and Lender, in each case without necessity of any agreement, acknowledgment or approval of any Crossed Borrower or any notice to any Crossed Borrower. Section 2.12(E) of each of the Crossed Loan Agreements contains provisions similar to this Section 2.12(E) for the benefit of Lender and (subject to the terms thereof) the Crossed Borrowers. This Section 2.12(E) and Section 2.12(E) of each of the Crossed Loan Agreements are intended only to define the relative rights of the Borrowers and Crossed Borrowers, and nothing set forth in this Section 2.12(E) or in Section 2.12(E) of each of the Crossed Loan Agreements is intended to or shall impair the liens and security interests of the Loan Documents and the Crossed Loan Documents or the obligations of the Borrowers and the Crossed Borrowers thereunder. Each Borrower acknowledges that the rights of contribution and indemnification under this Section 2.12(E) and under Section 2.12(E) of the Crossed Loan Agreements constitute assets of the Borrowers or Crossed Borrowers to which such contribution and indemnification is owing, and any such right of contribution and indemnification owing to any Borrower under Section 2.12(E) of any of the Crossed Loan Agreements shall constitute additional Crossed Party Obligations for all purposes under this Section 2.12. (F) Each Borrower hereby consents and agrees to each of the following, and agrees that such Borrower's obligations under this Loan Agreement and the other Loan Documents and 30 the Liens created under this Loan Agreement and the other Loan Documents securing the Loan and the Crossed Loans shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) that such Borrower might otherwise have as a result of or in connection with any of the following: (i) Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Crossed Loans, the Crossed Loan Documents, or other document, instrument, contract or understanding between the Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed Loans or any failure of Lender to notify such Borrower of any such action. (ii) Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to the Crossed Borrowers. (iii) The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of any of the Crossed Borrowers or any other party at any time liable for the payment of all or part of the Crossed Loans; or any dissolution of any of the Crossed Borrowers, or any sale, lease or transfer of any or all of the assets of any of the Crossed Borrowers, or any changes in the shareholders, partners or members of any of the Crossed Borrowers; or any reorganization of any of the Crossed Borrowers. (iv) The invalidity, illegality or unenforceability of all or any part of the Crossed Loans, or any document or agreement executed in connection therewith, for any reason whatsoever, including without limitation the fact that (A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law, (B) the act of creating the Crossed Loans or any part thereof is ultra vires, (C) the officers or representatives executing the Crossed Loan Documents or otherwise creating the Crossed Loans acted in excess of their authority, (D) the Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Crossed Loans wholly or partially uncollectible from the Crossed Borrowers, (F) the creation, performance or repayment of the Crossed Loans (or the execution, delivery and performance of any document or instrument representing part of the Crossed Loans or executed in connection with the Crossed Loans, or given to secure the repayment of the Crossed Loans) is illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that each Borrower shall remain liable hereon regardless of whether the Crossed Borrowers or any other person be found not liable on the Crossed Loans or any part thereof for any reason. (v) Any full or partial release of the liability of the Crossed Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Crossed Loans, or any part thereof, it being recognized, acknowledged and agreed by each Borrower that such Borrower has not been induced to enter into this Loan Agreement or the other Loan Documents on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or 31 perform the Loan or such Borrower's obligations under the Loan Agreement or the other Loan Documents, or that Lender will look to other parties to pay or perform the Crossed Loans. (vi) The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Crossed Loans. (vii) Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Crossed Loans. (viii) The failure of or refusal of Lender or any other party acting on behalf of Lender to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (A) to take or prosecute any action for the collection of any of the Crossed Loans, (B) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (C) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Crossed Loans. (ix) The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Crossed Loans, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by each Borrower that it is not entering into this Loan Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Crossed Loans. (x) Any payment by any of the Crossed Borrowers to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to any of the Crossed Borrowers or someone else. (xi) Any other action taken or omitted to be taken with respect to the Crossed Loan Documents, the Crossed Loans, or the security and collateral therefor. (G) Notwithstanding anything to the contrary set forth in this Loan Agreement, Lender may, at its sole option and in its sole discretion, from time to time (one or more times) deliver written notice to the Borrowers stating that this Loan Agreement, the Mortgages and the other Loan Documents shall no longer secure one or more (at Lender's sole election) of the Crossed Loans (each a "CROSS RELEASE NOTICE"), whereupon (i) this Loan Agreement and the other Loan Documents shall no longer secure any of the Crossed Loans for which a Cross Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and, collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side Agreement and other Crossed Loan Documents executed and delivered by the Excluded Borrowers with respect to any Excluded Loan are herein referred to as the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT" and 32 "EXCLUDED LOAN DOCUMENTS", respectively, and each Crossed Property encumbered by the Excluded Loan Documents is herein referred to as an "EXCLUDED PROPERTY"), (ii) each Cross Guaranty of the Loan executed by each Excluded Borrower, together with each Cross Guaranty of an Excluded Loan executed by the Borrowers (herein collectively referred to as the "EXCLUDED GUARANTIES") shall be deemed automatically terminated and of no further force or effect, (iii) each reference herein and in the other Loan Documents to the "Crossed Loans" shall be deemed to exclude the Excluded Loans, (iv) each reference herein and in the other Loan Documents to the "Crossed Loan Agreements", "Crossed Mortgages", "Crossed Loan Documents", "Crossed Properties", "Cross Side Agreements" and "Cross Guaranties" shall be deemed to exclude the Excluded Loan Agreement, the Excluded Mortgages, the Excluded Loan Documents, the Excluded Property, the Excluded Side Agreements and the Excluded Guaranties, respectively, (v) each reference herein and in the other Loan Documents to the "Crossed Borrowers" and the "Crossed Obligors" shall be deemed to exclude each Excluded Borrower, (vi) the provisions of Section 2.12(E) of this Loan Agreement shall not apply to any Crossed Loans Collection from any Excluded Borrower or its Excluded Property and the Borrowers shall have no obligation or liability on account thereof; and (vii) Borrowers shall no longer be beneficiaries of the covenants and agreements set forth in Section 2.12(E) of any Excluded Loan Agreement, and the Borrowers shall have no rights or claims on account of any contribution or indemnification obligations of any Excluded Borrower under Section 2.12(E) of any Excluded Loan Agreement. In addition to and without limiting the foregoing, the Borrowers hereby agree to fully cooperate with Lender, if Lender is considering the termination of the cross collateralization and cross default of the Loan and Loan Documents with any of the Crossed Loans, including, but not limited to (x) amending this Loan Agreement and the other Loan Documents as may be required by Lender to effectuate such termination of the cross collateralization and cross default provisions thereof, and (y) updating and/or endorsing the title insurance policies (at Lender's cost as to additional premium charges, if any) to reflect the continuation of the first priority lien of this Loan Agreement. (H) In the event the Loan is repaid or defeased in full in accordance with the provisions of this Loan Agreement and the other Loan Documents, then provided no Event of Default then exists hereunder, and no "Event of Default" (as defined in any of the Other Crossed Loan Agreements) exists under any of the Other Crossed Loan Documents, the cross collateralization and cross default of the Loan and Loan Documents with the Other Crossed Loans shall terminate and all the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan and the provisions of Section 2.12(G) above shall become automatically applicable with respect thereto. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to fund the Loan are subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrowers and Lender). Where in this Section any 33 documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender a certificate duly executed by the Borrowers stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. (B) DEPOSITS. The deposits required herein, including without limitation, the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrowers' option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower Party and all other Persons executing any agreement on behalf of any Borrower Party shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of each Borrower by the chief financial officer (or similar officer of the Borrowers) stating that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrowers or the projected cash flow of the Borrowers or the Properties, in each case taken as a whole, has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, specifying such change in detail), and that, to the Borrowers' Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operations of the Borrowers and the Properties, in each case taken as a whole, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrowers' Knowledge, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Morris, Manning & Martin, LLP or other legal counsel for the Borrowers satisfactory to Lender, written legal opinions, each in form and substance acceptable to Lender, as to such 34 matters as Lender shall request, including opinions to the effect that (i) each of the Borrower Parties is duly formed, validly existing, and in good standing in its state of organization and, in the case of each Borrower, in each state where its Property is located, (ii) this Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Deposit Account Agreement and Cash Management Agreement have been duly authorized, executed and delivered by Borrower and Manager and are enforceable in accordance with their terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) no Borrower, Member or General Partner would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrowers' local counsel in each state where the Properties are located as to the enforceability of, and the creation and perfection of Liens under, the Mortgages and the Assignments of Leases and such other matters as Lender may reasonably request; (b) [intentionally omitted]; (c) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for each Borrower that is a single member limited liability company formed under the laws of the State of Delaware that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous written consent of the board of directors of Member including the Independent Directors, or the unanimous prior written consent of the board of managers' of each Borrower, including the Independent Directors') would be required for a voluntary bankruptcy filing by each such Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors) would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law the bankruptcy or dissolution of Member would not cause the dissolution of any of the Borrowers and the bankruptcy or dissolution of the sole shareholder or member would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of any of the Borrowers and creditors of Guarantor shall have no legal or equitable remedies with respect to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of each Borrower and Member; and (d) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received and approved pro forma Title Policies for the Mortgages, and as of the Closing, each Title Company shall be irrevocably committed and prepared immediately to issue the Title Policies or binding commitments. The Title Policies shall be in form and substance satisfactory to Lender. Without limitation, each Title Policy shall be issued on an ALTA form acceptable to Lender by each Title Company or if an ALTA form is not available in the applicable jurisdiction, another form acceptable to Lender, together with such reinsurance and direct access agreements as Lender may require, insuring that the Mortgages are valid first and prior enforceable liens on each Borrower's fee simple interest or ground leasehold interest, as the case may be, in the applicable Property (including any easements appurtenant thereto) subject only to such exceptions to coverage as are acceptable to Lender, including the Permitted Exceptions. Each Title Policy shall contain such endorsements as Lender may require (to the extent available in the state where 35 the Properties is located) in form acceptable to Lender, including deletion of the creditors' rights exception and affirmative endorsement coverage for creditors' rights risks. (G) SURVEY. Lender shall have received a survey of each of the Properties, certified to Lender and its successors, assigns and designees and to each Title Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or Lender shall have received both (x) a "no change" affidavit from each Borrower with respect to such Borrower's most recent Survey sufficient to cause the Title Company to provide current survey coverage to Lender in the applicable Title Policy without exception for matters that would be revealed by a current and accurate survey of the applicable Property, except for matters specifically shown on such most recent Survey, and (y) a reliance letter (to the extent any such surveys are not currently addressed to Lender) in form and substance satisfactory to Lender, permitting Lender to rely on the Survey (and any certification thereof) as if originally addressed and certified to Lender. Each Survey shall contain the minimum detail for land surveys as most recently adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall contain Lender's standard form certification, and shall show no state of facts or conditions reasonably objectionable to Lender. (H) ZONING. On or before the Closing Date, Lender shall have received evidence reasonably satisfactory to Lender as to the zoning and subdivision compliance of each of the Properties. (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business (including without limitation, each state in which the Properties are located for the applicable Borrower(s) and, to the extent required by law, Member and General Partner). Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to Lender for each Borrower Party (including for Guarantor) and for the Properties. If any such 36 statements are not available for the Properties, then the Borrowers shall provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year. (M) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the applicable Borrower. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements (including any Property Improvement Plan) and Franchisor Letters for each of the Properties duly executed by the applicable Franchisors. (O) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL") in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases, and the amount of security deposit being held by the Borrowers under each Material Lease, if any. (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases, as amended. (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender shall have received copies of the final, unconditional certificates of occupancy issued with respect to each of the Properties, together with all other applicable licenses (including, without limitation, each liquor license and beer permit), permits and approvals required for each Borrower to own, use, occupy, operate and maintain each of the Properties as a hotel. (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date, Lender shall have received copies of certificates of insurance (dated not more than twenty (20) days prior to the Closing Date) regarding insurance required to be maintained under this Loan Agreement and the other Loan Documents, together with endorsements satisfactory to Lender naming Lender as an additional insured and loss payee, as required by this Loan Agreement, under such policies. In addition, as to any insurance matters arising under Environmental Laws or pertaining to any environmental insurance that any of the Borrowers has with respect to any Property, the same shall be endorsed to Lender as required by this Loan Agreement and shall name Lender as an insured, additional insured and/or loss payee, as applicable. 37 (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to each of the Properties, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender shall have received a property condition report for each of the Properties, which shall be prepared by an engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion. Each such report shall set forth any items of deferred maintenance at the applicable Property. (U) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of each of the Properties from a state certified appraiser engaged by Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search reports with respect to the Borrowers, Guarantor, Managers, General Partner and Member, all dated not more than thirty (30) days prior to the Closing Date. (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days prior to the Closing Date, Lender shall have received payoff demand letters and wiring instructions from each lender or other obligee of any existing indebtedness which is required to be repaid pursuant to this Loan Agreement. (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (Z) OTHER REVIEW. Lender shall have completed all other review of the Borrower Parties, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrower Parties shall have satisfied such other reasonable criteria as Lender may reasonably specify. (AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date, Lender shall have received (i) true and complete copies of each of the Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements acceptable to Lender, duly executed by each Ground Lessor. 38 ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, each Borrower represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrowers, General Partners and Members. SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower Party of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower Party; (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower Party; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower Party or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower Party or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or imposition of any material Lien (other than the Lien of the Loan Documents) upon the Properties or assets of any Borrower Party; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower Party, which approvals or consents as set forth on SCHEDULE 4.2 have been obtained on or before the 39 dates required under such material Contractual Obligation, but in no event later than the Closing Date. (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower Party that is a party thereto, enforceable against each of the Borrower Parties, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No Borrower Party has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower Party has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the Borrowers, their Affiliates and the Properties which have been furnished by or on behalf of the Borrowers to Lender pursuant to this Loan Agreement present fairly the financial condition of the Persons covered thereby as of the dates thereof and the results of their operations for the periods then ended, and, to the Borrowers' Knowledge after due inquiry, have been prepared in accordance with GAAP consistently applied (except as disclosed therein). Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements. SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the Borrowers shall have no outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to the Properties, free and clear of all Liens except for the Permitted Encumbrances. The Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Borrowers as permitted hereunder), subject only to the Permitted Encumbrances. The Mortgages, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) a valid, perfected first lien on each of the Properties, subject only to the Permitted Encumbrances, and (ii) perfected first priority security interests in and to, and perfected collateral assignments of, all personalty (including the Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. Lender will have a perfected first priority security interest in and to the FF&E owned by the Borrowers, if any, not located at the Properties. To the Borrowers' Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual Knowledge of the Borrowers, none is threatened. Except as set forth on SCHEDULE 4.5(A), no Person has any option or other right to 40 purchase all or any portion of any of the Properties or any interest therein. To the Borrowers' Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties which are or will be liens prior to, or equal or coordinate with, the lien of any of the Mortgages. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgages and this Loan Agreement, materially and adversely affect the value of any of the Properties, impair the use or operations of the Properties or impair the Borrowers' ability to pay its obligations in a timely manner. SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrowers' Knowledge, there are no illegal activities relating to controlled substances on any of the Properties. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, all material permits, licenses and certificates for the lawful use, occupancy and operation of each component of each of the Properties in the manner in which it is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, in the event that all or any part of the Improvements located on any Property is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrowers' Knowledge, no legal proceedings are pending or threatened with respect to the zoning of any Property. To the Borrowers' Knowledge, except as set forth in the Title Policies and/or the Surveys, neither the zoning nor any other right to construct, use or operate any Property is in any way dependent upon or related to any real estate other than such Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Borrowers with respect to any Property without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and complete copies (in all material respects) of all (i) Leases for more than five hundred (500) square feet of space at any Property and (ii) Material Agreements affecting the operation and management of the Properties, and such Leases and Material Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Except for the rights of each of the current Managers pursuant to the existing Management Agreements, no Person has any right or obligation to manage any of the Properties or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the 41 Properties, or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, none of the Properties are subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrowers' Knowledge, (i) the Material Leases are in full force and effect; (ii) the Borrowers have not given any notice of default to any tenant under any Material Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Material Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrowers, threatened) against the Borrowers by any tenant or former tenant. No rental in excess of one month's rent has been prepaid under any of the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. (C) NO RESIDENTIAL UNITS. There are no residential units in any of the Properties and, to each Borrower's Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Properties for dwelling purposes other than on a transient basis. (D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true and complete copy of each of the Management Agreements to which they are a party that will be in effect on the Closing Date, and such Management Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. The Management Agreements are in full force and effect and no default by any of the Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have delivered to Lender a true and complete copy of each of the Franchise Agreements to which they are a party, and such Franchise Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material default by the Borrowers, Manager or the applicable Franchisor exists thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the aggregate, do not and will not have a Material Adverse Effect. Except for the Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no other property improvement plans or similar capital improvement plans or obligations required by any Franchisor pursuant to any Franchise Agreement, in effect for any of the Properties. 42 SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as set forth in the Property Condition Reports for the Properties delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in good condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrowers are not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of each of the Properties (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of each of the Properties as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of each of the Properties as now used or presently contemplated. Except as may be shown on the applicable Survey, to the Borrowers' Knowledge no part of any of the Properties is within a flood plain and none of the Improvements create encroachments over, across or upon the Properties' boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each of the Properties for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrowers' Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at any of the Properties is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, there are no judgments outstanding against any Borrower Party, or affecting any of the Properties or any property of any Borrower, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the Borrowers' Knowledge, threatened against any Borrower Party that could reasonably be expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each Primary Borrower Party required to be filed have been timely filed (or each Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon such Person and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrowers' Knowledge, there is not presently pending any special assessment against any of the Properties or any part thereof. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Primary Borrower Parties is a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. 43 SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no Primary Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of any Primary Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from any Borrower Parties' actions. SECTION 4.16 INTENTIONALLY DELETED. SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the aggregate fair saleable value of the Borrowers' assets exceed and will, immediately following the making of the Loan, exceed the Borrowers' total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The aggregate fair saleable value of the Borrowers' assets is and will, immediately following the making of the Loan, be greater than the Borrowers' probable total liabilities, including the maximum amount of their Contingent Obligations on their debts as such debts become absolute and matured. Each Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond their ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrowers and the amounts to be payable on or in respect of obligations of the Borrowers). SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided 44 by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrowers that has had or could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrowers. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrowers or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate description of all policies of insurance for each Borrower that are in effect as of the Closing Date. No notice of cancellation has been received with respect to such policies, and, to each Borrower's Knowledge, the Borrowers are in compliance with all conditions contained in such policies. SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1) or more parcels which constitute separate tax lots. No part of any of the Properties is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lots or parcels comprising any of the Properties. SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person (other than the Beverage Companies), or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including any Property) is property of the estate, in any voluntary or involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law now or hereafter in effect. No Borrower Party and no property of any of them is under the possession or control of a receiver, trustee or other custodian. No Borrower Party has made any assignment for the benefit of creditors. No such assignment or bankruptcy or similar case or proceeding is now contemplated. Notwithstanding the foregoing, Lender acknowledges that case #01-16402 involving Impac Hotels I, L.L.C. remains pending in the Bankruptcy Court for the Southern District of New York. Borrower represents that the Plan of Reorganization for this case has been approved by the bankruptcy court and that the case remains open solely for the purposes of resolution of certain unsecured claims, which remaining claims are payable solely out of a disputed claims reserve established by Guarantor pursuant to the Plan of Reorganization. SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to Lender in writing herein or in any of the Loan Documents, no Default exists. SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in 45 Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrowers have assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers are not and will not be subject to state statutes applicable to the Borrowers' regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28 no Primary Borrower Party is a party to any collective bargaining agreement. SECTION 4.29 RESERVED. SECTION 4.30 GROUND LEASES. (A) Each Ground Lease contains the entire agreement of the Ground Lessor and the applicable Borrower pertaining to each Ground Leased Property covered thereby. The Borrowers have no estate, right, title or interest in or to the Ground Leased Properties except under and pursuant to the Ground Leases. The Borrowers have delivered true and correct copies of each of the Ground Leases to Lender and the Ground Leases have not been modified, amended or assigned except as set forth on SCHEDULE 4.30. (B) To the Knowledge of the Borrowers, each Ground Lessor is the exclusive fee simple owner of its Ground Leased Property, subject only to the Ground Lease and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the lessor's interest in the applicable Ground Lease. (C) There are no rights to terminate any Ground Lease other than any Ground Lessor's right to terminate by reason of default, casualty, condemnation or other reasons, in each case as expressly set forth in the applicable Ground Lease. (D) Each Ground Lease is in full force and effect and to the Borrowers' Knowledge, no breach or default or event that with the giving of notice or passage of time would constitute a breach or default under any Ground Lease (a "GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or on the part of any Ground Lessor under any Ground Lease. All base rent and additional rent due and payable under the Ground Leases has been paid through the date hereof and the Borrowers are not required to pay any deferred or accrued rent after the date 46 hereof under any of the Ground Leases. The Borrowers have not received any written notice that a Ground Lease Default has occurred or exists, or that any Ground Lessor or any third party alleges the same to have occurred or exist. (E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive owner of the lessee's interest under and pursuant to the applicable Ground Lease and has not assigned, transferred, or encumbered its interest in, to, or under any Ground Lease (other than assignments that will terminate on or prior to Closing), except in favor of Lender pursuant to this Loan Agreement and the other Loan Documents. SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective officers, directors, partners, members, Affiliates or, to the knowledge of the Borrowers, shareholders is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED PERSON"). ARTICLE V COVENANTS OF BORROWER PARTIES The Borrowers covenant and agree that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrowers shall perform and comply with all covenants in this Article V applicable to such Person. SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrowers (on a consolidated basis), and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of their Financial Statements for such year to Lender. All such Financial Statements shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information for such calendar year. The annual Financial Statements for the Borrowers (on a consolidated basis) and Guarantor shall also be accompanied by a certification executed by the entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). 47 (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days after the end of each calendar quarter, the Borrowers on a consolidated basis (other than with respect to income statements, which shall be on an individual property basis) shall provide copies of their Financial Statements for such quarter to Lender, together with a certification executed on behalf of each of the Borrowers by their respective chief executive officers or chief financial officers (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after the end of each calendar year, each Borrower shall provide to Lender a certified Rent Roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after the end of each calendar year, each Borrower shall also provide to Lender (a) a schedule of any retail Material Leases that expired during such calendar year and a schedule of retail Material Leases scheduled to expire within the next calendar year and (b) to the extent the Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar year. Within ninety (90) days after the end of each calendar year, each Borrower shall provide to Lender a statement of income and expenses for all retail space at each of the Properties owned and operated by the Borrowers and, to the extent provided to the Borrowers and not subject to confidentiality restrictions, sales reports for retail tenants for such year. (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, each Borrower shall provide, or cause Manager to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for each of the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly, and year to date operating statements prepared for such calendar month and for the trailing twelve (12) month period then ended, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of each of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a detailed explanation for any material deviations from budget) and setting forth that all disbursements and/or withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E Reserve have been made with respect to items of Capital Improvement only (as opposed to items that, in accordance with GAAP, would be included as an Operating Expense); (e) monthly and year to date detailed reports of Operating Expenses for each of the Properties, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement) for which Lender has approved a disbursement 48 from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently available "OSI", or similar quality index, scores (including detailed information regarding criteria and thresholds); (g) prior to Securitization of the Loan, market segmentation reports for the trailing twelve (12) month period for each of the Properties; and (h) a report setting forth (i) the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has continued beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the original Aggregate Allocated Loan Amount represented by such Properties), (iii) a summary report establishing that the Borrowers are diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. All of the above statements, reports and information shall be provided to Lender by email in Microsoft Excel format or other spreadsheet format reasonably acceptable to Lender (in the case of any statements, reports or information provided by third parties that are not Affiliates of the Borrowers, to the extent same are available in such format). Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of such Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to Lender such further documents and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice to the Borrowers. (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender by or on behalf of the Borrowers or Guarantor under this Section, the Borrowers or Guarantor also shall deliver to Lender a certification to Lender, executed on behalf of the Borrowers or Guarantor by their respective chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of the Borrowers, Guarantor and/or the Properties 49 for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating (a) that, to their Knowledge after due inquiry, there does not exist any Default or Event of Default under the Loan Documents (or if any exists, specifying the same in detail), and (b) the Borrowers and Guarantor have complied with the applicable reporting requirements of this Section 5.1. (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and that of the Guarantor ends on December 31, and agrees that no change shall be made to each such fiscal year, without Lender's prior written consent. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business operations of such Borrower made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, each Borrower shall deliver to Lender a copy of its Federal income tax returns (or the return of the applicable Person into which such Borrower's Federal income tax return is consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of each calendar year, each Borrower shall deliver to Lender for its review for its Property a proposed Operating Budget and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap Event or Event of Default exists, the Borrowers may make changes to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Borrower, provided no such modification (together with all prior modifications taken as a whole) shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without Lender's prior written approval, which approval shall not be unreasonably withheld; provided, however, notwithstanding the foregoing during a Cash Trap Event, increases to the Operating Budget for any Property (not to exceed ten percent (10%) of the Operating Budget for such Property as a whole) will be permitted without Lender's consent for actual verifiable increases in utilities, water and sewer assessments and charges and real property taxes for the applicable Property over the amounts therefor set forth in the Operating Budget for such Property for the prior period. Notice of any modifications to the Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating Budget shall identify and set forth each Borrower's reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating 50 Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and the Borrowers shall promptly amend and resubmit for approval revised budgets or plans, as applicable, making such changes as are necessary to comply with the reasonable requirements of Lender. Until any such budget or plan for any year requiring Lender's approval has been approved or deemed approved, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is approved or deemed approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. (E) MATERIAL NOTICES. (i) The Borrowers shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of any Borrower, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrowers shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plan received from a Franchisor related to such Borrower's Property. (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining knowledge of any of the following events or conditions, such Borrower shall deliver a certificate executed on its behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action such Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. 51 (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrowers or any of the Properties not previously disclosed in writing by the Borrowers to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrowers or the Properties which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect, the Borrowers will give notice thereof to Lender and, upon request from Lender, provide such other information as may be reasonably available to them to enable Lender and its counsel to evaluate such matter. (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Borrowers, the Borrowers will deliver certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Borrowers and all material insurance coverage planned to be maintained by the Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver such other information and data with respect to such Person and its Affiliates or the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full force and effect their existence as a limited partnership, limited liability company, or corporation, as the case may be, and all rights and franchises material to its business, including their qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, each Borrower and, to the extent required by applicable law, General Partner and Member, shall at all times be qualified to do business in each of the states where the Properties are located. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) Except for those matters being contested pursuant to clause (B) below, the Borrowers will pay (i) all Impositions; (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrowers on their business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrowers shall not be required to pay, discharge or remove any Imposition or Claim relating to a Property so long as the Borrowers contest in good faith such Imposition, Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Property or any portion thereof, and so long as: (i) no Event of Default shall have occurred and be continuing, (ii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have given Lender prior written notice of their intent to contest 52 said Imposition or Claim; (iii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have deposited with Lender (or with a court of competent jurisdiction or other appropriate body reasonably approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss of any interest in the applicable Property or any part thereof arises, in Lender's reasonable judgment, during the pendency of such contest; (v) such contest does not, in Lender's reasonable determination, have a Material Adverse Effect; and (vi) such contest is based on bona fide, material, and reasonable claims or defenses. Any such contest shall be prosecuted with due diligence, and the Borrowers shall promptly pay the amount of such Imposition or Claim as finally determined, together with all interest and penalties payable in connection therewith. Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture of the applicable Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Claim for which a deposit was made shall be promptly repaid to the Borrowers unless an Event of Default shall have occurred, in which case said surplus may be retained by Lender to be applied to the Obligations. Notwithstanding any provision of this Section to the contrary, the Borrowers shall pay any Imposition or Claim which they might otherwise be entitled to contest if an Event of Default shall occur and be continuing, or if, in the reasonable determination of Lender, the applicable Property is in danger of being forfeited or foreclosed. If the Borrowers refuse to pay any such Imposition or Claim, Lender may (but shall not be obligated to) make such payment and the Borrowers shall reimburse Lender on demand for all such advances. SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrowers will continuously maintain the following described policies of insurance on each of the respective Properties without cost to Lender (the "INSURANCE POLICIES"): (i) Property insurance against loss and damage by all risks of physical loss or damage, including fire, sprinkler leakage, windstorm, hurricane, terrorism, and other risks covered by the so-called extended coverage endorsement covering the Improvements and personal property in amounts not less than the full insurable replacement value of all Improvements (less building foundations and footings) and personal property from time to time on the Properties and without sublimits, and bearing a replacement cost agreed-amount endorsement; (ii) Commercial general liability insurance, including death, bodily injury, innkeeper legal liability and broad form property damage coverage with a combined single limit in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate for any policy year; (iii) If any of the Properties are in an area prone to geological phenomena, including, but not limited to, sinkholes, mine subsidence or earthquakes, insurance covering such 53 risks in an amount equal to 100% of the full replacement cost of all improvements (without any deductions for depreciation) and with a maximum permissible deductible equal to the lesser of $25,000 or 10% of the face value of the policy; (iv) For each Property located in whole or in part in a federally designated "special flood hazard area", flood insurance in the maximum available amount; (v) An umbrella excess liability policy with a limit of not less than Twenty Million Dollars ($20,000,000) over primary insurance, which policy shall include coverage for so-called assumed and contractual liability coverage and automobile liability coverage, and coverage for safeguarding of personalty and shall also include such additional coverages and insured risks which are acceptable to Lender; (vi) Business interruption and/or rent loss insurance with an aggregate limit equal to at least the gross income from the Properties for an indemnity period commencing on the date of such casualty and ending at least six (6) months after completion of the Restoration (such amount being adjusted annually); (vii) Crime protection insurance covering all employees with access to funds and located in Guarantor's corporate offices with a limit of not less than One Million Dollars ($1,000,000) and with the same coverages and deductibles as currently in place at the Properties; (viii) Steam boiler, machinery and pressurized vessel insurance insuring against breakdown or explosion of such equipment on a replacement cost value basis, which shall not contain any exclusions for testing procedures; (ix) Worker's Compensation Insurance in statutory amounts, if any, at all times; (x) Insurance against loss or damage from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), in an amount at least equal to the Aggregate Allocated Loan Amount; (xi) During any period of construction, repair or restoration, builder's "all risk" insurance in an amount equal to not less than the full insurable value of the Properties (excluding building foundations and footings) against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may reasonably request; (xii) If the Properties are or become a "non-conforming use" under applicable zoning and building ordinances, or other requirements of the applicable Governmental Authority, law or ordinance coverage to compensate for the cost of demolition and the increased cost of construction, if available; (xiii) If the Borrowers, Manager or any of their respective Affiliates holds a liquor license for the Properties, liquor liability insurance (including "dram shop" liability) in an 54 amount not less than $1,000,000 for each common cause and $3,000,000 in the aggregate; provided that if such liquor license is held by any tenant under a Lease, the Borrowers shall cause such tenant to cause liquor liability insurance in an amount not less than the limits set forth above to be carried in such tenant's name, and shall include the Borrowers and Lender as additional insureds thereunder; (xiv) If reasonably required by Lender as a result of the release, disposal or existence of any Hazardous Materials on or about any Property after the date hereof (or as to which Lender obtains knowledge after the date hereof) or if such insurance is then customarily required by institutional lenders for securitized loans, environmental insurance, including mold coverage, in form and with coverages (including business interruption coverage) reasonably satisfactory to Lender; provided, however, without limiting or affecting Lender's right to require such environmental insurance with respect to any other Properties after the date hereof, Lender acknowledges that, as of the date hereof, environmental insurance shall only be required with respect to the Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford, Connecticut; (xv) Fiduciary liability insurance and directors and officers liability insurance ("D&O INSURANCE") with coverages at levels in effect as of the Closing Date; (xvi) Insurance against acts of terrorism, or insurance policies without an exclusion for damages resulting from acts of terrorism on terms consistent with the commercial property insurance policies required under subsection (i), (ii), (v) and (vi) above; (xvii) Such other insurance as may from time to time be reasonably required by Lender and which is then customarily required by institutional lenders for securitized loans secured by similar properties similarly situated, against other insurable hazards, including, but not limited to, malicious mischief, vandalism, windstorm and or earthquake, due regard to be given to the size and type of the Properties, Improvements, fixtures and equipment and their location, construction and use. Additionally, the Borrowers shall carry such insurance coverage as Lender may from time to time require if the failure to carry such insurance would result in a downgrade, qualification or withdrawal of any class of securities issued in connection with a Securitization. All Insurance Policies shall be in content (including, without limitation, endorsements or exclusions, if any), form, and amounts, and issued by companies, satisfactory to Lender from time to time and shall name Lender and its successors and assignees as their interests may appear as (x) an "additional insured" for each of the liability policies under this Section 5.4 hereof, and (y) a "mortgagee" for each of the property and casualty policies under this Section hereof, and shall (except for Worker's Compensation Insurance) contain a waiver of subrogation clause reasonably acceptable to Lender. Other than with respect to D&O Insurance, an insurance company shall not be satisfactory unless such insurance company (a) is licensed or authorized to issue insurance in the State where the applicable Property is located and (b) has a claims paying ability rating by the Rating Agencies of AA- (or its equivalent). Notwithstanding the foregoing, a carrier which does not meet the foregoing ratings requirement shall nevertheless be deemed acceptable hereunder provided that such carrier is reasonably acceptable to Lender and the Borrowers shall obtain and deliver to Lender a Rating Confirmation with respect to such carrier 55 from each of the Rating Agencies, provided, however, that: (a) if any insurance coverage required under this Section 5.4 is maintained by a syndicate of insurers, the preceding ratings requirements shall be deemed satisfied (without any required Rating Confirmation) as long as at least seventy five percent (75%) of the coverage (if there are four or fewer members of the syndicate) or at least sixty percent (60%) of the coverage (if there are five or more members of the syndicate) is maintained with carriers meeting the claims-paying ability ratings requirements by S&P and Moody's (if applicable) set forth above and all carriers in such syndicate have a claims-paying ability rating by S&P of not less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier providing the insurance described in clause (ii) above, so long as such carrier maintains a claims paying ability of not less than A- by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby) and (c) until the expiration of the current term of the applicable policies, Lender hereby approves Landmark American as the carrier providing the insurance described in clauses (i), (iv) and (vi) above (covering losses over the first $25,000,000 of coverage), so long as thereafter such carrier or any other carrier providing the above coverages maintains a claims paying ability of not less than A by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby). All Insurance Policies under Sections 5.4 (i), (iv), (vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438 BFU NS), or their equivalents (such endorsements shall entitle Lender to collect any and all proceeds payable under all such insurance, with the insurance company waiving any claim or defense against Lender for premium payment, deductible, self-insured retention or claims reporting provisions). All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Lender without ten (10) days' advance written notice to Lender. The Borrowers may obtain any insurance required by this Section through blanket policies; provided, however, that such blanket policies shall separately set forth the amount of insurance in force with respect to the Properties (which shall not be reduced by reason of events occurring on property other than the Properties) and shall afford all the protections to Lender as are required under this Section. Except as may be expressly provided above, all policies of insurance required hereunder shall contain no annual aggregate limit of liability, other than with respect to liability insurance. If a blanket policy is issued, a certified copy of said policy shall be furnished, together with a certificate indicating that Lender is an additional insured (and, if applicable, loss payee) under such policy in the designated amount. The Borrowers will deliver duplicate originals of all Insurance Policies, premium prepaid through the current expiration dates of such Insurance Policies, to Lender and, in case of Insurance Policies about to expire, the Borrowers will deliver duplicate originals of replacement policies satisfying the requirements hereof to Lender not less than ten (10) days prior to the date of expiration; provided, however, if such replacement policy is not yet available, the Borrowers shall provide Lender with an insurance certificate executed by the insurer or its authorized agent evidencing that the insurance required hereunder is being maintained under such policy, which certificate shall be acceptable to Lender on an interim basis until the duplicate original of the policy is available. The Borrowers shall furnish Lender receipts for the payment of premiums on such insurance policies or other evidence of such payment reasonably satisfactory to Lender in the event that such premiums have not been paid by Lender pursuant to the Loan Agreement. The requirements of this Section 5.4 shall apply to any separate policies of insurance taken out by the Borrowers 56 concurrent in form or contributing in the event of loss with the Insurance Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure to act or negligence of the Borrowers or their agents or employees, Lender or any other insured party which might, absent such agreement, result in a forfeiture or all or part of such insurance payment, other than the willful misconduct of Lender knowingly in violation of the conditions of such policy, (2) the occupation or use of the Properties or any part thereof for purposes more hazardous than permitted by the terms of such policy, (3) any foreclosure or other action or proceeding taken pursuant to this Loan Agreement or (4) any change in title to or ownership of the Properties or any part thereof. The property insurance and the boiler and machinery insurance described in Sections 5.4(i) and (x) hereof shall include "underground hazards" coverage; "time element" coverage by which Lender shall be assured payment of all amounts due under the Note, this Loan Agreement and the other Loan Documents; "extra expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage; and "expediting expense" coverage to facilitate rapid repair or restoration of the Properties. The Insurance Policies shall not contain any deductible in excess of $250,000. SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrowers will operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Borrowers, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each Borrower, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, each Borrower will operate and maintain its Property substantially in accordance with the applicable Operating Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrowers may, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Borrowers shall not perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the Properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Borrowers may perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrowers deliver notice to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Borrowers have cash available for 57 payment of the cost of such Material Alteration or, if the Borrowers fail to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an amount equal to 125% of the cost of such Material Alteration as reasonably estimated by Lender. Cash deposited by the Borrowers with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the conditions for disbursement of amounts from the Capital Improvement Reserve under Section 6.5 (including the requirements set forth under Section 6.7). Upon completion of the Material Alteration, the Borrowers shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. The Borrowers shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrowers shall give immediate written notice of the same to the insurance carrier and to Lender and shall promptly commence and diligently prosecute to completion, in accordance with the terms hereof, the repair and restoration of the Property as nearly as possible to the Pre-Existing Condition (a "RESTORATION"). The Borrowers hereby authorize and empower Lender as attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event of Default has occurred and is continuing), or any of them, to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this Section shall require Lender to incur any expense or take any action hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to hold the balance of such proceeds to be used to reimburse the Borrowers for the cost of Restoration of any of the Properties or (ii) subject to Subsection 5.5(C), to apply such proceeds to payment of the Obligations whether or not then due, in any order. Notwithstanding the foregoing, in the event of a casualty where the loss does not exceed the Restoration Threshold, the Borrowers may settle and adjust such claim; provided that (a) no Event of Default has occurred and is continuing and (b) such adjustment is carried out in a commercially reasonable and timely manner. (C) Lender shall not exercise Lender's option to apply insurance proceeds to payment of the Obligations if all of the following conditions are met: (i) no Event of Default then exists; (ii) Lender reasonably determines that there will be sufficient funds to complete the Restoration of the Property to at least substantially the Pre-Existing Condition and to timely make all payments due under the Loan Documents during the Restoration of the affected Property; (iii) Lender reasonably determines that the Net Operating Income of the Properties (including rental income or business interruption insurance) will be sufficient to pay principal and interest 58 on the Loan and the Mezzanine Loan and Operating Revenues of the Properties, after the Restoration thereof to the Pre-Existing Condition, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Note and the Mezzanine Loan; (iv) Lender determines that the Restoration of the affected Property to the Pre-Existing Condition will be completed not later than five (5) months prior to the expiration of any business interruption insurance, but in no event later than six (6) months prior to the Maturity Date; (v) less than fifty percent (50%) of the total floor area of the Improvements has been damaged, destroyed or rendered unusable as a result of such fire or other casualty; and (vi) such Property can be restored and repaired substantially to the condition it was in immediately prior to such casualty and in compliance with all applicable zoning, building and other laws and codes (the "PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to payment of the Obligations, such application shall be made on the Payment Date immediately following such election in accordance with the terms of the Cash Management Agreement. (D) If Lender elects or is obligated to make the insurance proceeds available for the Restoration of any Property and Lender is holding such proceeds, the Borrowers agree that, if at any time during the Restoration, the cost of completing such Restoration, as reasonably determined by Lender, exceeds the undisbursed insurance proceeds, the Borrowers shall, within ten (10) Business Days following the written demand by Lender, deposit the amount of such excess with Lender, and Lender shall first disburse such deposit to pay for the costs of such Restoration on the same terms and conditions as the insurance proceeds are disbursed. If the Borrowers deposit such excess with Lender and if, after completion of the Restoration, any funds remain from the combination of insurance proceeds and the funds so deposited with Lender by the Borrowers, and if no Event of Default shall have occurred and be continuing, then Lender shall promptly disburse to the Borrowers such remaining funds. (E) Lender may, at Lender's option, condition disbursement of any insurance proceeds on Lender's approval (which approval shall not be unreasonably withheld) of plans and specifications of an independent architect licensed in the state where the Property is located and reasonably satisfactory to Lender (the "ARCHITECT"), any and all contractors, subcontractors and materialmen engaged in the Restoration and the contracts under which they have been engaged, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. Lender shall not be obligated to disburse insurance proceeds more frequently than once every calendar month. If insurance proceeds are applied to the payment of the Obligations and provided no Event of Default exists, any such application of proceeds to principal shall be without any Prepayment Consideration and shall not extend or postpone the due dates of the monthly payments due under the Note or otherwise under the Loan Documents, or change the amounts of such payments. If Lender elects to apply all of such insurance proceeds toward the repayment of the Obligations, the Borrowers shall (subject to compliance with clauses (A), (B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property Release (without representation or warranty) of the applicable Property from the Lien of the Mortgage relating to such Property (in which event the Borrowers shall not be obligated to restore the applicable Property pursuant to Section 5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by which the Release Price for such Property exceeds the insurance proceeds received by Lender and applied to repayment of the Obligations. If any proceeds are applied to 59 reduce the Obligations under this Section 5.5, provided that no Event of Default has occurred and is continuing, no Prepayment Consideration shall be due and payable in connection with such application. Any amount of insurance proceeds remaining in Lender's possession after full and final payment and discharge of all Obligations shall be refunded to, or as directed by, the Borrowers or otherwise paid in accordance with applicable law. If the Property is sold at foreclosure or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of the applicable Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to such Property prior to such sale or acquisition. (F) In no event shall Lender be obligated to make disbursements of insurance proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Architect, less a retainage equal to the lesser of (x) the actual retainage required pursuant to the permitted contract, or (y) ten percent (10%) of such costs incurred until the Restoration has been completed. The retainage shall in no event be less than the amount actually held back by the Borrowers from contractors, subcontractors and materialmen engaged in the Restoration. The retainage shall not be released until the Architect certifies to Lender, or, if no Architect has been retained by Lender, Lender is reasonably satisfied, that the Restoration has been completed in accordance with the provisions of this Section 5.5 and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental authorities, and Lender receives final lien waivers and such other evidence reasonably satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the retainage. SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized representatives designated by Lender to visit and inspect during normal business hours its Property and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with such Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice of at least three (3) Business Days prior to visiting or inspecting any Property or such Borrower's offices. SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and delivered to Lender operations and maintenance programs (the "O&M PLANS") with respect to suspected asbestos, asbestos-containing materials, and/or mold located in certain Properties as set forth on Schedule 6.6 attached hereto, which conditions were disclosed in the applicable Environmental Reports for such Properties. Each applicable Borrower shall at all times implement and carry out the O&M Plan in accordance with its terms. Lender's requirement that the applicable Borrowers develop and comply with the O&M Plan shall not be deemed to constitute a waiver or modification of any covenants or agreements of the Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws as set forth in the Environmental Indemnity. SECTION 5.8 RESERVED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will (A) comply with the requirements of all present and future applicable laws, rules, regulations and 60 orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the operation or value of any Property, (B) maintain all licenses and permits now held or hereafter acquired by any Borrower, the loss, suspension, or revocation of which, or failure to renew, could have a material adverse effect on the operation or value of any Property and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party shall duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a material adverse effect on the operation or value of any Property. SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrowers shall not, nor shall the Borrowers authorize Manager or any other Person to, (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrowers shall furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification 61 of any Material Lease, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Borrowers shall not under any circumstances collect any such rent more than one month in advance. The Borrowers, at Lender's request, shall furnish Lender with executed copies of all Material Leases hereafter made. Each new Material Lease or a separate agreement with the tenant of such Material Lease shall be in recordable form and shall specifically provide that such Material Lease (i) is subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; (iii) that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; (iv) that the attornment of the tenant shall not be terminated by foreclosure; (v) that in no event shall Lender, as holder of the Mortgages or as successor landlord, be liable to the tenant for any act or omission of any prior landlord or for any liability or obligation of any prior landlord occurring prior to the date that Lender or any subsequent owner acquire title to the Property; and (vi) that Lender may, at Lender's option, accept or reject such attornment. SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS. (A) The Borrowers shall cause each Manager to manage the Properties in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and types customary for hotels comparable to each Property. The Borrowers shall (i) perform and observe all of the material terms, covenants and conditions of the Management Agreement on the part of each Borrower to be performed and observed, and (ii) promptly notify Lender of any notice to any of the Borrowers of any material default under the Management Agreement of which it is aware. If any of the Borrowers shall default in the performance or observance of any material term, covenant or condition of the applicable Management Agreement on the part of the Borrowers to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrowers from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrower, but shall be under no obligation, to pay any sums and to perform any act as may be 62 reasonably appropriate to cause such material conditions of the applicable Management Agreement on the part of the Borrowers to be performed or observed. (B) The Borrowers shall not surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager, or consent to the assignment by the Manager of its interest under the Management Agreement, in each case without (i) prior to a Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies. The Borrowers shall cause any new Manager with respect to any Property to execute and deliver a subordination of management agreement in substantially the form delivered in connection with the closing of the Loan. (C) Lender shall have the right to require any of the Borrowers to replace any Manager with a Person chosen by the Borrowers and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrowers if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrowers shall not terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. Notwithstanding the foregoing, the following changes to Franchise Agreements shall be permitted without Lender's prior written consent: (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with another Franchisor within the same Category, provided that the Borrowers shall not replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(ii) with respect to more than the lesser of (x) two (2) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided that the Borrowers shall not replace Franchise Agreements for more than one (1) Property, or for any Property with an Allocated Loan Amount of more than five percent 63 (5%) of the outstanding principal balance of the Loan pursuant to this Section 5.13(D)(iii); and (iv) Entering into new Franchise Agreements (or amendments or addenda to existing Franchise Agreements) with the existing Franchisors for the applicable Properties for the same franchise brand, each in form substantially similar to the forms previously approved for the respective Properties by Lender, as required by the existing Franchisors under the respective Franchise Agreements in connection with the transfers of the applicable Properties and the direct and indirect ownership interests in the Borrowers made by the Borrower Parties and their Affiliates in connection with the Closing of the Loan. In connection with the replacement of any Franchisors permitted hereunder, the applicable Borrower shall, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender a Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, each Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants required to be performed and observed by the Franchisor under the Franchise Agreement. In addition, the Borrowers shall not, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. 64 SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become obligated under any Material Agreement pertaining to any Property without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) any Lease that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13 hereof (provided, however, that the foregoing shall not affect Borrowers' obligation to deliver Rating Confirmations with respect to any such Management Agreement if required under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all Receipts from the Properties into, and otherwise comply with, the Accounts established from time to time hereunder. Subject to Article VII hereof and the Cash Management Agreement, each Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrowers shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Mortgages and the other Loan Documents are legal, valid and binding obligations of the Borrowers and have not been modified or amended, or if modified or amended, describing such modification or amendments. (B) Within ten (10) Business Days following a written request by the Borrowers, Lender shall provide to the Borrowers a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrowers with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): (A) the Obligations and Crossed Indebtedness; 65 (B) (i) unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the financing of equipment or other personal property used at any Property in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days, and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal property or otherwise referred to in clauses (i) and (ii) above (excluding therefrom utility expenses of the Properties and fees payable to the Franchisors pursuant to the terms of the Franchise Agreements) outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan; and (C) the Mezzanine Loan. In no event shall any Indebtedness other than the Loan be secured, in whole or in part, by the Properties or any portion thereof or interest therein. SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not create, incur, assume or permit to exist any Lien on or with respect to the Properties, any other Collateral or any direct or indirect ownership interest in the Borrowers, except the Permitted Encumbrances and Liens on the ownership interests in the Borrowers securing the Mezzanine Loan. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Primary Borrower Party shall directly or indirectly create or become or be liable with respect to any Contingent Obligation. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted in this Loan Agreement, no Primary Borrower Party shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of such Borrower Party's partnership agreement, certificate of limited partnership, articles of incorporation, by-laws, articles of organization, operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such Primary Borrower Party. SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to the Manager under the Management Agreement, the Borrowers shall not pay any management, consulting, director or similar fees to any Related Person of the Borrowers or to any director, officer or employee of the Borrowers. The Borrowers shall not directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of any of the Borrowers or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrowers and upon fair and reasonable terms and which are no less favorable to any of the Borrowers than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of any Borrower. The Borrowers shall not make any payment or permit any payment to be made to any 66 Related Person of any of the Borrowers when or as to any time when any Event of Default shall exist. SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of any Borrower. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which any of the Borrowers is a debtor or any portion of the Properties is property of the estate therein. The Borrowers shall not file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or support any motion (irrespective of the subject of the motion), and the Borrowers shall not file or support any plan of reorganization. The Borrowers having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrowers or any ERISA Affiliate or increase the obligation of the Borrowers, provided that the Borrower shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC. 67 (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrowers regulating investments of governmental plans. SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 Ground Leases. (A) NO MODIFICATION. The Borrowers shall not modify or amend, or terminate or surrender any Ground Lease, in each case without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any attempted or purported modification, amendment, or any surrender or termination of any Ground Lease without Lender's prior written consent shall be null and void and of no force or effect. (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and when due each and all of its obligations under each Ground Lease in accordance with the terms of such Ground Lease, and shall not cause or suffer to occur any material breach or default in any of such obligations. The Borrowers shall keep and maintain each Ground Lease in full force and effect. The Borrowers shall exercise any option to renew or extend any Ground Lease and give written confirmation thereof to Lender within thirty (30) days after such option is exercised. Notwithstanding that certain of the obligations of the Borrowers under this Loan Agreement may be similar or identical to certain of the obligations of the Borrowers under the Ground Leases, all of the obligations of the Borrowers under this Loan Agreement are and shall be separate from and in addition to its obligations under the Ground Leases. (C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any written notice that any Ground Lease Default has occurred, then the Borrowers immediately shall notify Lender in writing of the same and immediately deliver to Lender a true and complete copy of each such notice. Further, the Borrowers shall provide such documents and information as Lender shall reasonably request concerning the Ground Lease Default. (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be continuing, or if any Ground Lessor asserts that a Ground Lease Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Ground Lease, Lender, upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary, including, without limitation, 68 (i) performance or attempted performance of the applicable Borrower's obligations under the applicable Ground Lease, (ii) curing or attempting to cure any actual or purported Ground Lease Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the applicable Ground Leased Property for any or all of such purposes. Upon Lender's request, each Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each Ground Lease. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender, together with interest thereon from the date of expenditure at the Default Rate. (E) LEGAL ACTION. The Borrowers shall not commence any action or proceeding against any Ground Lessor or affecting or potentially affecting any Ground Lease or the Borrowers' or Lender's interest therein, the effect of which could cause an event of default or termination of any such Ground Lease, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrowers shall notify Lender immediately if any action or proceeding shall be commenced between any Ground Lessor and either Borrower, or affecting or potentially affecting any Ground Lease or either Borrower's or Lender's interest therein (including, without limitation, any case commenced by or against any Ground Lessor under the Bankruptcy Code). Lender shall have the option, exercisable upon notice from Lender to the Borrowers, to participate in any such action or proceeding with counsel of Lender's choice. The Borrowers shall cooperate with Lender, comply with the reasonable instructions of Lender, execute any and all powers, authorizations, consents or other documents reasonably required by Lender in connection therewith, and shall not settle any such action or proceeding without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the applicable Ground Lease, from time to time, at Lender's request, the Borrowers shall use commercially reasonable efforts to obtain and deliver to Lender within the time period required under the applicable Ground Lease, an estoppel certificate from each Ground Lessor setting forth (A) (i) the identities of the original lessor and lessee under the applicable Ground Lease and each of their respective successors, (ii) that the Ground Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modification), (iii) the rent payable under the Ground Lease, (iv) the dates to which all rent and other charges have been paid, (v) whether there are any alleged Ground Lease Defaults and, if so, setting forth the nature thereof in reasonable detail, and (vi) such other matters as Lender may reasonably request or (B) the matters required to be certified by the Ground Lessor under the applicable Ground Lease. The Borrowers shall not be required to request an estoppel from any Ground Lessor more than two (2) times in any calendar year. (G) BANKRUPTCY. (i) If any Ground Lessor shall reject any Ground Lease under or pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall not elect to treat the Ground Lease as terminated but shall elect to remain in possession of the applicable Ground Leased Property and the leasehold estate under such Ground Lease. The lien of the Mortgage covering 69 such Property does and shall encumber and attach to all of the Borrowers' rights and remedies at any time arising under or pursuant to Section 365 of the Bankruptcy Code, including without limitation, all of such Borrower's rights to remain in possession of such Property and the leasehold estate. (ii) The Borrowers acknowledge and agree that in any case commenced by or against the Borrowers under the Bankruptcy Code, Lender by reason of the liens and rights granted under the Mortgage covering such Property and the Loan Documents shall have a substantial and material interest in the treatment and preservation of such Borrower's rights and obligations under such Ground Lease, and that such Borrower shall, in any such bankruptcy case, provide to Lender immediate and continuous reasonably adequate protection of such interests. Each Borrower and Lender agree that such adequate protection shall include but shall not necessarily be limited to the following: (a) Lender shall be deemed a party to the Ground Lease (but shall not have any obligations thereunder) for purposes of Section 365 of the Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such action by Lender would adversely and materially affect the Borrowers' ability to prosecute, or defend, any such claims asserted therein, have standing to appear and act as a party in interest in relation to any matter arising out of or related to the Ground Lease or such Property. (b) The Borrowers shall serve Lender with copies of all notices, pleadings and other documents relating to or affecting the Ground Lease or the applicable Property. Any notice, pleading or document served by the Borrowers on any other party in the bankruptcy case shall be contemporaneously served by such Borrower on Lender, and any notice, pleading or document served upon or received by such Borrower from any other party in the bankruptcy case shall be served by such Borrower on Lender promptly upon receipt by such Borrower. (c) Upon written request of Lender, the Borrowers shall assume the Ground Lease, and shall take such steps as are necessary to preserve such Borrower's right to assume the Ground Lease, including without limitation using commercially reasonable efforts to obtain extensions of time to assume or reject the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it is applicable. (H) ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground Lessor seeks to reject any Ground Lease or have the Ground Lease deemed rejected, then prior to the hearing on such rejection Lender shall, subject to applicable law, be given no less than twenty (20) days' notice and opportunity to elect in lieu of rejection to have the Ground Lease assumed and assigned to a nominee of Lender. If Lender shall so elect to assume and assign the Ground Lease, then the Borrowers shall, subject to applicable law, continue any request to reject the Ground Lease until after the motion to assume and assign has been heard. If Lender shall not elect to assume and assign the Ground Lease, then Lender may, subject to applicable law, obtain in connection with the rejection of the Ground Lease a determination that the applicable Ground Lessor, at Lender's option, shall (1) agree to terminate the Ground Lease and enter into a new lease with Lender on the same terms and conditions as the Ground Lease, for the remaining term of the Ground Lease, or (2) treat the Ground Lease as breached and provide Lender with the 70 rights to cure defaults under the Ground Lease and to assume the rights and benefits of the Ground Lease. Each Borrower shall join with and support any request by Lender to grant and approve the foregoing as necessary for adequate protection of Lender's interests. Notwithstanding the foregoing, Lender may seek additional terms and conditions, including such economic and monetary protections as it deems reasonably appropriate to adequately protect its interests, and any request for such additional terms or conditions shall not delay or limit Lender's right to receive the specific elements of adequate protection set forth herein. Each Borrower hereby appoints Lender as its attorney in fact to act on behalf of Lender in connection with all matters relating to or arising out of the assumption or rejection of any Ground Lease, in which the other party to the lease is a debtor in a case under the Bankruptcy Code. This grant of power of attorney is present, unconditional, irrevocable, durable and coupled with an interest. SECTION 5.26 RESERVED. SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrowers shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrowers. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrowers shall not cancel any indebtedness from any Person owing to any Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no Borrower Party, nor any of their respective Affiliates, officers, directors, partners or members will knowingly: (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrowers further covenants and agrees to deliver (from time to time) to Lender any such certification or other evidence as may be 71 requested by Lender in its sole and absolute discretion, confirming that: (i) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, has to its Knowledge engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person. ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrowers hereby pledge, assign and grant to Lender a security interest in and to all of the Borrowers' right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any Default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. SECTION 6.2 FUNDS DEPOSITED WITH LENDER. (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein, all funds of the Borrowers which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrowers and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After 72 repayment of all of the Obligations, all funds held as Reserves will be promptly returned to, or as directed by, the Borrowers. (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the amounts necessary to fund each of the Reserves as set forth below. Deposits into the Reserves at Closing may occur by deduction from the amount of the Loan that otherwise would be disbursed to the Borrowers, followed by deposit of the same into the applicable Sub-Account or Account of the Lock Box Account in accordance with the Cash Management Agreement on the Closing Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes to be fully disbursed at Closing. SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit with Lock Box Account Bank **[$_________]** and, pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the Payment date in July 2004, 1/12th of the annual charges (as reasonably estimated by Lender) for all Impositions and all Insurance Premiums (other than for D&O Insurance) payable with respect to the Properties hereunder (said funds, together with any interest thereon and additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made to the Impositions and Insurance Reserve from and after the date hereof is **[$__________]**. The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days of the written demand by Lender, to be added to and included within such reserve, a sum of money which Lender reasonably estimates, together with such monthly deposits, will be sufficient to make the payment of each such charge at least ten (10) Business Days prior to the date initially due. The Borrowers shall provide Lender with bills and all other documents necessary for the payment of the foregoing charges at least thirty (30) days prior to the date on which each payment shall first become subject to penalty or interest if not paid. So long as (i) no Event of Default has occurred and is continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other documents in a timely manner, and (iii) sufficient funds are held by Lender for the payment of the Impositions and Insurance Premiums relating to each of the Properties, Lender shall pay said items or disburse to the Borrowers from such Reserve an amount sufficient to pay said items. Interest shall accrue in favor of the Borrowers on funds in the Impositions and Insurance Reserve and be added to the balance thereof and disbursed in accordance with the terms hereof. SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender shall establish and maintain with Lock Box Bank an account for the purpose of creating a reserve for replacements of FF&E at or in, or used in connection with, the Properties (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget approved by Lender (said funds, together with any interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve shall be held in an Eligible Account entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account shall be under the sole dominion and control of Lender, subject to the terms of the Cash Management Agreement. Pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing with the Payment Date in July 2004, an amount equal to 4.0% of the Operating Revenues generated from the Properties for the prior calendar month (such amount, the "MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the Borrowers, subject in all instances to the terms of the Cash Management 73 Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held in the FF&E Reserve shall be used in connection with the Required Capital Improvements. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than Replacements subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d). SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At Closing, the Borrowers shall deposit with Lock Box Account Bank **[$___________]** (said funds, together with any interest thereon, the "CAPITAL IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain Capital Improvements required to be made to the Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5 attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the Borrowers for purposes for which any other Reserve is established or for any other purpose other than completion of the Required Capital Improvements. The Borrowers shall promptly commence and diligently prosecute to completion, subject to Force Majeure, the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds held in the Capital Improvement Reserve shall be disbursed in accordance with Section 6.7. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Capital Improvement Reserve when all Required Capital Improvements are complete, and paid for, in accordance with the terms hereof. SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers shall deposit with Lock Box Account Bank, an amount equal to **[$___________]** (said funds, together with any interest thereon and additions thereto, the "HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials on the Properties as indicated in the Environmental Reports for the Properties prepared and delivered prior to the Closing and as such work is more particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by any applicable Governmental Authority or (y) nine (9) months after the Closing, the Borrowers shall, subject to Force Majeure, complete such Environmental Work and shall provide to Lender such closure reports, no-further-action letters, or other evidence of compliance with law as Lender may reasonably require. The funds contained in the Hazardous Materials Remediation Reserve shall be utilized by the Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrowers for purposes for which any other Reserve is established. Subject to the Borrowers' satisfaction of the applicable conditions of Section 6.7, the Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrowers for such Environmental Work, provided that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, in accordance with the terms hereof. 74 SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK. (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to or for the account of the Borrowers (x) from the Hazardous Materials Remediation Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT EXPENDITURES"; and together with the Approved Environmental Expenditures, collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or Required Capital Improvements to which any such request for disbursement relates shall be referred to as the "WORK"), upon satisfaction of each of the conditions listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's reasonable discretion: (i) Except as provided in this Section 6.7, each request for disbursement from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for completion of the Approved Expenditures for which disbursement is requested. (ii) A request for disbursement from the Work Reserves may be made after completion of a portion of the Work under such contract, or for payment of deposits required in connection with the Work under such Contract, provided (1) all other conditions in this Loan Agreement for disbursement have been satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve are, in Lender's reasonable judgment, sufficient to complete the Environmental Work when required and/or funds remaining in the Capital Improvement Reserve are, in Lender's reasonable judgment, sufficient to complete such item of Required Capital Improvements and any other Required Capital Improvements remaining to be performed, as the case may be, and (3) if reasonably required by Lender, each contractor or subcontractor receiving payments in excess of $100,000 under such contract shall provide a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor. (iii) To the extent the contract with the relevant contractor or supplier provides for a retainage, each disbursement from a Work Reserve, except for a final disbursement, shall be in the amount of actual costs incurred less the percentage of such costs that the contract with the relevant contractor or supplier specifies to be retained and advanced as part of the final disbursement. No funds will be advanced for materials stored at any Property unless such materials are properly stored and secured at the applicable Property in accordance with the Borrowers' customary procedures and sound construction practices as reasonably determined by Lender. No funds will be advanced for materials stored at any location other than at the Properties unless Lender determines in its reasonable discretion that Lender has a perfected first priority security interest in any such materials. 75 (iv) The amount of all invoices in connection with the Work with respect to which a disbursement is requested and which has been approved by Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers (in which event, the Borrowers covenant and agree to promptly pay such invoices) or, if an Event of Default has occurred and is continuing, at Lender's option and in Lender's sole and absolute discretion, directly to the contractor, supplier, materialman, mechanic or subcontractor indicated on said invoices unless already paid by the Borrowers and Lender has received satisfactory evidence of such payment in which case Lender shall reimburse the Borrowers. All invoices in connection with disbursements from the Capital Improvement Reserve shall be classified as requests for payment for items of Capital Improvement (as opposed to items that, in conformity with GAAP, would be included as Operating Expenses). If the Borrowers request that any amounts be disbursed directly to the Borrowers pursuant to the foregoing sentence, the Borrowers shall be required to deliver evidence reasonably acceptable to Lender of payment of all invoices for which disbursements were previously made to the Borrowers as a condition to such requested disbursement. (v) No more than two (2) disbursements will be made by Lender from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve in any calendar month, and, if made in accordance herewith or otherwise approved by Lender, requested disbursements will be made within five (5) Business Days after the request therefor. Lender shall not be required to make any disbursement from a Work Reserve with respect to the Property unless such requested disbursement is in an amount equal to or greater than $25,000 (other than the final disbursement). (vi) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrowers shall assign (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. (vii) The Borrowers shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost and expense. 76 (viii) The Borrowers shall have delivered to Lender a certificate of the Borrowers substantially in the form of Exhibit L attached hereto certifying as to the actual costs which were incurred by the Borrowers to complete such Work, which costs shall not materially exceed the amount budgeted for such Work under the CapEx/FF&E Budget then in effect unless approved by Lender, which shall not be unreasonably withheld, delayed or conditioned (together with supporting documentation reasonably acceptable to Lender). (ix) The Borrowers shall have delivered to Lender all necessary material certificates, authorizations, permits and licenses which are required to permit the construction and completion of the Work, as issued by the appropriate Governmental Authority. The Borrowers, to the full extent permitted by applicable law, hereby assigns to Lender as additional security for the payment of the Obligations and the observance and performance by the Borrowers of the terms, covenants and provisions of the Loan Documents all right, title and interest which the Borrowers may now have or may hereafter acquire in and to such certificates, authorizations, permits and licenses. (x) Lender may require an inspection of the Property prior to making a monthly disbursement from the applicable Work Reserve in order to verify completion of the Work for which disbursement is sought in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may require that such inspection be conducted by Lender's Consultant and/or may require a copy of a certificate of completion by an independent qualified architect or engineer acceptable to Lender prior to the disbursement of any amounts from the applicable Work Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such inspections as reasonably required hereunder, whether such inspections are conducted by Lender, Servicer, Lender's Consultant or by an independent qualified professional. (B) PERFORMANCE OF WORK. (i) The Borrowers shall complete all Work in a good and workmanlike manner as soon as practicable following the commencement thereof substantially in accordance with the applicable budget approved by Lender in accordance with the terms of this Loan Agreement. The insufficiency of the balance in the applicable Work Reserve shall not relieve the Borrowers from their obligations to perform and complete the related Work as herein provided or to fulfill all other preservation and maintenance covenants in the Loan Documents. (ii) If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrowers with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrowers of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrowers shall have commenced to cure such unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such 77 unsatisfactory work, up to a maximum of an additional sixty (60) days, subject to Force Majeure, without the cure thereof), Lender may proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrowers, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. (iii) In order to facilitate Lender's completion or making of any Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right to enter onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrowers and secured by the applicable Mortgage. For this purpose, the Borrowers constitute and appoint Lender their true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrowers empower said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve for the purpose of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the Borrowers which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of such Property; and (vii) to do any and every act which the Borrowers might do in their own behalf to fulfill the terms of this Loan Agreement. (iv) Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrowers additional sums to make or complete any Work. (v) The Borrowers shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.7 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may be kept at any Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The Borrowers shall use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B). 78 (vi) All Work and all materials, equipment, fixtures and any other item comprising a part thereof shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other liens (except for the Permitted Encumbrances). (vii) All Work shall comply with all applicable legal requirements of all Governmental Authorities having jurisdiction over the Properties and applicable insurance requirements, including, without limitation, applicable building codes, special use permits, environmental regulations and requirements of insurance underwriters. (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys' fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrowers shall assign to Lender all rights and claims the Borrowers may have against all Persons supplying labor or materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations in full, a Cash Trap Event shall occur, then for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Lender (or its Servicer or agent) and held in the Lock Box Account in accordance with the terms of the Cash Management Agreement (said funds, together with any interest thereon, the "CASH TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when the Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12) month period ending on such Calculation Date and shall continue to exist until such time as the Minimum Debt Yield test has been satisfied for three (3) consecutive Calculation Dates (on a trailing twelve (12) month basis) following the commencement of the applicable Cash Trap Event. Notwithstanding that the Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no Cash Trap Event shall be deemed to have occurred as a result of such event if the Borrowers make a principal prepayment of the Aggregate Outstanding Principal Balance (which prepayment amount shall be disbursed on the next Payment Date in accordance with the terms of the Cash Management Agreement), within three (3) Business Days after the date of delivery of the financial statements disclosing the existence of such Cash Trap Event (or the date on which such financial statements are required to be delivered pursuant to Section 5.1), in an amount equal to the greater of (x) one percent (1%) of the Aggregate Outstanding Principal Balance, or (y) 120% of the amount, as determined by Lender in its reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the Minimum Debt Yield if such calculation was recalculated as provided above assuming that such amount was applied to reduce the Aggregate Outstanding Principal Balance as of the first day of the relevant measuring period. During the continuance of a Cash Trap Event, provided that no Event of Default shall have occurred and be continuing, any funds on deposit in the Cash Trap Reserve may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be applied to (i) prepayment of the Aggregate Outstanding Principal Balance as provided above, (ii) Capital Expenditures reasonably approved by Lender, or (iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal and interest 79 under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in accordance with the terms of the Cash Management Agreement). Any funds on deposit in the Cash Trap Reserve shall continue to be held as additional Collateral in accordance with this Section 6.8 until the earlier of (a) the date that such funds are applied or disbursed pursuant to the foregoing sentence or (b) the date that the Minimum Debt Yield test has been satisfied for three (3) consecutive months (as determined above), at which time, provided no Event of Default exists, and no Cash Trap Event has commenced, such funds, together with any and all amounts then held in the Minimum Balance Sub-Account (as defined in the Cash Management Agreement), shall be automatically released to the Borrowers without any further certification requirements on the part of the Borrowers. The existence of a Cash Trap Event shall be determined by Lender in its reasonable good faith determination. If Lender determines that a Cash Trap Event has occurred, Lender shall send the Borrowers written notice thereof. Notwithstanding any provision herein to the contrary, if an Event of Default has occurred and is continuing, all funds on deposit in the Cash Trap Reserve and any subsequent Excess Cash Flow, while such Event of Default is continuing, may be applied by Lender to payment of the Loan (including payment of any Prepayment Consideration) or other Obligations (or to the obligations of the Mezzanine Borrowers to Mezzanine Lender) as Lender may elect. ARTICLE VII DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT. (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more deposit accounts shall be established at the Borrowers' sole cost and expense in the name of Lender, as secured party hereunder (said accounts, and any accounts replacing same in accordance with this Loan Agreement and the Deposit Account Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"), pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT AGREEMENT") substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, executed and delivered by the Borrowers and the Deposit Bank. The Deposit Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer). Among other things, the Deposit Account Agreement shall provide that the Borrowers shall have no access to or control over the Deposit Account, that all available funds on deposit in the Deposit Account shall be transferred by wire transfer (or transfer via the ACH System) on each Business Day by the Deposit Bank into the Lock Box Account, for application in accordance with the Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall be directed to deliver to the Borrowers copies of bank statements and other information made available by the Deposit Bank and the Lock Box Account Bank concerning the Deposit Account and the Lock Box Account. (ii) Upon establishing the Deposit Account, (1) the Borrowers shall cause any and all Operating Revenues, including distributions or other payments made directly or indirectly to the Borrowers, Manager, or any of their respective Affiliates, from any Beverage Company, to be deposited promptly into the Deposit Account and in no event later than two (2) Business Days after the same are paid to or for the benefit of the Borrowers, and (2) the Borrowers shall obtain 80 agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each of the Persons paying or disbursing credit card receivables (the "CREDIT CARD COMPANIES"), substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, pursuant to which the Credit Card Companies agree to pay all credit card receivables into the Lock Box Account, and acknowledge and agree that Lender shall have a first priority perfected security interest in such credit card receivables. To the extent that the Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed to hold the same in trust for Lender for the protection of the interests of Lender hereunder and under the Loan Documents. The Borrowers represent and warrant that, as of the date hereof, the only Credit Card Companies paying or disbursing credit card receivables with respect to the Property are Chase Merchant Services, American Express, Discover Financial Service, Diners Club, JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter into an agreement with any other Credit Card Company pursuant to which such Credit Card Company shall pay credit card receivables with respect to the Properties, such Borrower shall promptly obtain a Credit Card Receivables Payment Direction Letter in form and substance reasonably acceptable to Lender from such Credit Card Company. (iii) The Borrowers shall pay all reasonable out-of-pocket costs and expenses incurred by Lender in connection with the transactions and other matters contemplated by this Section 7.1, including but not limited to, Lender's reasonable attorneys' fees and expenses, and all reasonable fees and expenses of the Deposit Bank and the Lock Box Account Bank, including without limitation their reasonable attorneys' fees and expenses. (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms of the Cash Management Agreement, an Eligible Account shall be established in the name of Lender, as secured party hereunder, to serve as the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement, the Borrowers shall not have the right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. Lender may elect to change any financial institution in which the Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrower. The Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement: (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and 81 (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the "Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance Sub-Account"; and (g) "Cash Trap Reserve Sub-Account". SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" means the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrowers; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrowers (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if (i) within forty-five (45) days after the filing thereof, the Borrowers shall either cause the same to be removed of record by payment, bonding or otherwise, or (ii) same is being contested in good faith in accordance with Section 5.3(B) hereof); or 82 (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by any Borrower, Guarantor or Manager in any Loan Document or in any statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan Documents and such default is not fully cured within thirty (30) days after receipt by the Borrowers of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any Borrower Party commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceeding, it shall not 83 constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of their business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrowers 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) and the Borrowers do not take all actions requested by Lender to correct such defect within ten (10) days after the written request by Lender to take such action, or any Person under the control of the Borrowers or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; (ii) or any breach or default shall occur in the material obligations of the Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, that Manager shall have the right to exercise material remedies as a consequence thereof; or (P) GROUND LEASE DEFAULT. Any default by any of the Borrowers beyond any applicable grace period shall occur under any Ground Lease or any actual or attempted surrender, termination, modification or amendment of any Ground Lease without Lender's prior written consent. If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or 84 paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). SECTION 8.2 ACCELERATION AND REMEDIES. (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by the Borrowers. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrowers under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against each Property and the Mortgages have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose the Mortgages in any manner and for any amounts secured by the Mortgages then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrowers default beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose the Mortgage to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose the Mortgage or any of them to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Mortgage as Lender may elect. Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Mortgage to secure payment of sums secured by the Mortgage and not previously recovered. 85 (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. The Borrowers shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their true and lawful attorney, coupled with an interest, in their name and stead to make and execute all documents reasonably necessary to effect the aforesaid severance if the Borrowers fail to do so within ten (10) days of Lender's written request, the Borrowers ratifying all that their said attorney shall do by virtue thereof. (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrowers pursuant to this Loan Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrowers shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrowers or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if any of the Borrowers shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrowers including making protective advances on behalf of any Borrower, or, in its sole discretion, causing the obligations of any of the Borrowers to be satisfied with the proceeds of any Reserve. In such event, the Borrowers shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the 86 Borrowers under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. (B) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrowers. ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower Party hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that such Primary Borrower Party: (A) does not own and will not own any assets other than the Properties (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Borrowers, and other wholly owned subsidiaries of the Primary Borrower Parties established solely for the purpose of holding liquor licenses with respect to one or more of the Properties, and with respect to Member, direct or indirect ownership interests in the Crossed Borrowers as of the date of this Agreement (all of the foregoing ownership interests being referred to herein, collectively, as the "OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties, such incidental assets as are necessary to enable it to discharge its obligations with respect to the Borrowers; (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Properties, the Crossed Properties as of the date of this Agreement, or the Ownership Interests; (C) has not at any time since the SPE Effective Date entered into and will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of any Primary Borrower Party except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate (including the Management Agreements); (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted Indebtedness, and (iii) the Mezzanine Loan; (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), 87 and has not acquired and will not acquire obligations or securities (other than the Ownership Interests) of any of its Affiliates other than the other Borrower Parties; (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due; (G) has at all times since the SPE Effective Date done or caused to be done and will do all things necessary to preserve its existence, and will not, and no partner, member, shareholder, trustee, beneficiary, or principal will, further amend, modify or otherwise change, its partnership certificate, partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement, or other organizational documents, as modified, amended, restated or supplemented as of the date hereof, in any manner with respect to the matters set forth in this Article IX; (H) has at all times since the SPE Effective Date continuously maintained its existence and has at all times since the SPE Effective Date been qualified to do business, and shall continue to maintain its existence and be qualified to do, business in all states necessary to carry on its business, specifically including in the case of each Borrower, the state where its Property is located; (I) has at all times since the SPE Effective Date conducted and operated, and will conduct and operate its business as presently conducted and operated and otherwise contemplated with respect to the ownership of its Property, or the ownership of the Ownership Interests, as applicable; (J) has at all times since the SPE Effective Date maintained, and will maintain books and records and bank accounts (other than bank accounts established hereunder, or established by Manager with respect to the operations of the Properties pursuant to the Management Agreement) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and has at all times since the SPE Effective Date maintained and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) has at all times since the SPE Effective Date been and held itself out to the public as, and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and has at all times since the SPE Effective Date corrected and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) has at all times since the SPE Effective Date paid, and will pay the salaries of its own employees, if any; (M) has at all times since the SPE Effective Date allocated, and will allocate fairly and reasonably any overhead for shared office space; 88 (N) has at all times since the SPE Effective Date used, and will use its own stationery, invoices and checks; (O) has at all times since the SPE Effective Date filed, and will file its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; (P) has at all times since the SPE Effective Date maintained, and reasonably expects to maintain adequate capital (taken as a whole with all of the other Borrowers) for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (Q) will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) will not enter into any transaction of merger or consolidation, and will not acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership (other than the Ownership Interests) of, any Person; (S) has not at any time since the SPE Effective Date commingled or permitted to be commingled, and will not commingle or permit to be commingled, its funds or other assets with those of any other Person (other than, with respect to the Borrowers, each other Borrower, or as may be held by Manager, as agent, for each Borrower pursuant to the terms of the Management Agreement, and except for funds deposited in the Accounts in accordance with the Loan Documents); (T) has at all times since the SPE Effective Date maintained, and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (U) does not and will not hold itself out to be responsible for the debts or obligations (other than the Obligations and the Crossed Indebtedness as of the date of this Agreement) of any other Person; (V) has not guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations and the Crossed Indebtedness as of the date of this Agreement) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to their respective obligations under Section 9.1, each Borrower, General Partner and Member hereby 89 represents, warrants and covenants, as of the Closing Date and until such time as all Obligations are paid and satisfied in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion: (A) each General Partner shall at all times act as the sole general partner of each Borrower that is a limited partnership, with all of the rights, powers, obligations and liabilities thereof under the limited partnership agreement of such Borrower and shall take any and all actions and do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (B) Member shall at all times act as the sole member of each Borrower and Crossed Borrower as of the date of this Agreement that is a limited liability company with all of the rights, powers, obligations and liabilities thereof under the limited liability company operating agreement of such Borrower or Crossed Borrower and shall take any and all actions and will do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (C) each Borrower that is a limited liability company shall not, without the prior written consent of its Member (including the unanimous written consent of its Member's board of directors including the Independent Directors or the unanimous written consent of each of the Borrowers' board of managers including the Independent Directors), and each Borrower that is a limited partnership shall not, without the prior written consent of its General Partner (including the unanimous written consent of General Partner's Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (D) each Borrower that is a corporation shall not, without the prior unanimous written consent of its board of directors, including its Independent Directors, institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against it; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (E) no Member or any General Partner shall, without the unanimous vote of its board of directors or board of managers, as the case may be, including, in each case, its Independent Directors, institute proceedings for itself or any Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or any Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or any Borrower; or a 90 substantial part of its or any Borrower's property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (F) except as otherwise permitted hereunder, no Member or any General Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself or any Borrower, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person; or (iii) amend any provisions of its or any Borrower's organizational documents containing provisions similar to those contained in this Article IX; and (G) each Member, General Partner and Borrower that is a corporation shall each promptly elect and at all times maintain at least two (2) Independent Directors on its board of directors, who shall be selected by such Member, General Partner or Borrower, as applicable, and be reasonably acceptable to Lender. Each Borrower that is a single member limited liability company shall promptly appoint and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by such Borrower, and be reasonably acceptable to Lender. ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel), to cause the Note and any Mortgage to be split into a first and a second mortgage loan, or into one or more loans evidenced by multiple notes and secured by multiple mortgages and/or by ownership interests in any of the Borrowers in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. 91 SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting any such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything to the contrary contained in this Article X, it is acknowledged and agreed that in no event shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's) internal costs and expenses in connection with any Secondary Market Transaction. Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of each Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower Parties shall not be required to pay any third party (other than, which respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the costs and expenses of the Borrowers' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any 92 Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other than with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrowers' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent in substance with the opinions covered by the original opinions, addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrowers understand that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrowers and Guarantor shall provide in connection with each (i) preliminary and final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, prepared in connection with any Secondary Market Transaction (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor certifying that the Borrowers and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrowers, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrowers shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrowers or their Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrowers or their Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. 93 SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, Leases entered into as permitted hereunder, and pledges in connection with the Mezzanine Loan, the Borrowers shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of any Property or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in any Borrower (other than to Mezzanine Lender), irrespective of the number of tiers of ownership, without Lender's consent. SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in any Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower); and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. 94 (D) The pledge of ownership interests granted by the Mezzanine Borrowers pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan Agreement). For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving effect to such Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY. (A) The Borrowers shall have the right to request that Lender consent to (i) a transfer of all of the Properties to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the obligations of the Guarantors arising from and after such date and release of the Borrowers and Guarantor from obligations arising from and after such date and (iii) the replacement of the Mezzanine Borrowers with pledgors of the ownership interests in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the conditions set forth in paragraphs (B) and (C) of this Section. Together with such written application, the Borrowers will pay to Lender a review fee of $10,000. The Borrowers also shall pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of the Rating Agencies, if any, and other outside entities, in connection with considering any proposed Assumption, whether or not the same is permitted or occurs. (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrowers shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrowers shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions; (v) The Borrowers shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the 95 amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; (vi) The Borrowers, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; (vii) (a) The Transferee Borrower shall be a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its reasonable discretion; and (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender. (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or Borrowers, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrowers, the Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, a bankruptcy non-consolidation opinion; (iii) The Borrowers shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrowers and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (iv) The Borrowers shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Transfer and Assumption, including but not limited to Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may obtain the release (each, a "RELEASE") of one or more Properties from the Lien of the applicable Mortgage(s) in connection with a partial or total defeasance of the Loan subject to the conditions of the Note and subject to the satisfaction of the following conditions: 96 (A) Lender shall have received from the Borrowers at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) On the date proposed for such Release, the Borrowers shall defease all or a portion of the Loan by delivering a Defeasance Deposit (as defined in the Note) in an amount necessary to pay all Scheduled Defeasance Payments (as defined in the Note) for the entire principal amount of the Loan in the case of a total defeasance, or in the case of a partial defeasance, relating to the Release Price of each Property being released (together with all accrued and unpaid interest on the principal amount being so defeased), and such defeasance shall be undertaken in accordance with the terms and conditions of the Note, and Mezzanine Lender shall have received all amounts required to be paid to it in connection with such Release under the Mezzanine Loan Documents; (D) If required by any Rating Agency, the Borrowers at their sole cost and expense, in connection with any partial defeasance, shall have delivered to Lender, one or more endorsements to the Title Policies delivered to Lender on the date hereof in connection with the Mortgages insuring that, after giving effect to such Release, (i) the Liens created hereby and thereby and insured under the Title Policies are first priority Liens on the respective remaining Properties subject only to the Permitted Encumbrances applicable to the remaining Properties and (ii) that the Title Policies remain in full force and effect and unaffected by such Release; (E) Immediately following any Release in connection with any partial defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) in effect at Closing, or immediately prior to the Release, whichever is greater; (F) Notwithstanding the foregoing, the Borrowers may not obtain the Release under this Section 11.4 of any Property or Properties which individually, or in the aggregate (with all Releases since the Closing Date), have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the original principal balance of the Loan except pursuant to a total defeasance; (G) The Borrowers shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Release; and (H) Immediately following such Property Release, each released Property will be owned by a Person other than the Borrowers, except as otherwise permitted in connection with any full or partial defeasance of the Loan in accordance with the terms and conditions of the Note. Upon satisfaction of the above conditions, Lender shall effectuate the following (hereinafter referred to as a "PROPERTY RELEASE"): the security interest of Lender under the Mortgage and 97 other Loan Documents relating to each released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrowers to release and terminate or reassign, at the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and financing statements as to each released Property; provided, that such release and termination or reassignment shall be without recourse to Lender and without any representation or warranty except that Lender shall be deemed to have represented that such release and termination or reassignment has been duly authorized and that it has not assigned or encumbered the Mortgage or the other Loan Documents relating to any released Property (except as contemplated hereby) and Lender shall return the originals of any Loan Documents that relate solely to each released Property to the Borrowers; provided, further, that upon the release and termination or reassignment of Lender's security interest in the Mortgage relating to a released Property all references herein to the Mortgage relating to such released Property shall be deemed deleted, except as otherwise provided herein with respect to indemnities. In addition, promptly after consummation of any such Property Release and Lender's receipt of the Defeasance Collateral, any and all Reserves designated as applicable to each released Property held by or on behalf of Lender shall be returned to the Borrowers. SECTION 11.5 RESERVED. SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may Transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Property free from the lien of the Mortgage, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or on the Properties taken as a whole, will not materially impair the utility of any individual Property or the Properties, taken as a whole, 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 building equipment acquired by the Borrowers (and not so disposed of) shall be subject to the lien of the Mortgage. Lender shall, from time to time, upon the reasonable request of any Borrower, execute a written instrument in form reasonably satisfactory to Lender to confirm that such building equipment which is to be, or has been, sold or disposed of is free from the lien of the Mortgage. SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrowers may, without the consent of Lender, (i) make immaterial Transfers of portions of the any Property to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way with respect to any Property in the ordinary course of business 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 such Property or have a Material Adverse Effect on the value of such Property taken as a whole. In connection with any Transfer permitted pursuant to this Section 11.7, Lender 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 such Property affected by such transfer from the lien of the applicable Mortgage or to subordinate the applicable Mortgage to any such easement, restriction, covenant, reservation or right of way within ten (10) days of Lender's receipt of the following: 98 (A) Ten (10) days prior written notice thereof. (B) A copy of the instrument or instruments of transfer. (C) An officer's certificate given by the Borrowers stating that such transfer does not materially impair the utility and operation of the Property, materially reduce the value of the Property or have a Material Adverse Effect. (D) Reimbursement of all of Lender's reasonable, out-of-pocket costs and expenses incurred in connection with such Transfer. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrowers to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrowers' obligations under the Note shall be limited to (i) the Properties, (ii) the rents, profits, issues, products and income of the Properties, and (iii) any other Collateral. Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Obligations secured by the Mortgages or to require that all collateral shall continue to secure all of the Obligations owing to Lender in accordance with the Loan Documents. SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not their members, partners (other than the General Partners), employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrowers or any Borrower Party or Manager and not deposited into the Deposit Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrowers or of any change in the name of any of the Borrowers or if any of the Borrowers takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrowers, or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and 99 representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste with respect to any of the Properties; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully recourse to the Borrowers and Guarantor upon the happening of any of the following: (i) any Borrower Party's defense of any efforts by Lender to collect or enforce the Obligations following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any efforts by Lender to collect or enforce the Obligations without a good faith basis following any other Event of Default, and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents). SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against any Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the 100 obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors of all or any part of the obligations of the other Borrower Parties, and of all other circumstances bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other 101 Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and 102 expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrowers of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrowers shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrowers under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Properties by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers or other Person to any other or further notice or demand in similar or other circumstances. 103 SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrowers to Lender (other than the Note) unless the Borrowers request in writing that same be returned. Upon such request and at the Borrowers' expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). Notices shall be addressed as follows: If to the Borrowers or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Morris, Manning & Martin, LLP 3343 Peachtree Rd., NE 1600 Atlanta Financial Center Atlanta, Georgia 30326 Attention: Thomas Gryboski, Esq. Facsimile: (404) 365-9532 If to Lender: Merrill Lynch Mortgage Lending, Inc. Four World Financial Center New York, New York 10080 Attention: Robert Spinna Facsimile: (212) 449-7684 104 With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn: Robert L. Boyd, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrowers to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its 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 and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, 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. 105 SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrowers may not assign their rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties, represent, warrant and acknowledge that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrowers, on behalf of themselves and all Borrower Parties, also acknowledge and agree that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents 106 and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any other Person. The relationship between Lender and the Borrowers is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and any other Borrower are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. Each of the Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any of the Borrowers or Affiliates thereof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has 107 been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrowers and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE 108 MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrowers have been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrowers shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrowers in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, Lender shall have the right, at the Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [signatures follow on next page] 109 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWERS: [LODGIAN ENTITIES] By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:____________________________________ Name: Title: LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate Re: Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 2.12(G) - Crossed Loans/Crossed Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.30 - Ground Leases Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work/O&M Plans Schedule 6.7 - Reserve Funding Condition EXHIBIT A PROPERTIES EXHIBIT B ENVIRONMENTAL REPORTS EXHIBIT C FRANCHISE AGREEMENTS EXHIBIT D ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS EXHIBIT E MANAGEMENT AGREEMENTS EXHIBIT F [RESERVED] EXHIBIT G PROPERTY IMPROVEMENT PLANS None. EXHIBIT H [RESERVED] EXHIBIT I ACCEPTABLE FRANCHISORS EXHIBIT J PROPERTY CONDITION REPORTS EXHIBIT K ZONING REPORTS EXHIBIT L CERTIFICATE RE: WORK RESERVES SCHEDULE 1 BORROWERS SCHEDULE 2.4 SCHEDULED MORTGAGE PRINCIPAL PAYMENTS SCHEDULE 2.12(G) CROSSED LOANS/CROSSED BORROWERS SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan and Security Agreement 2. Note 3. Mortgages 4. Assignments of Leases 5. Assignments of Agreements, Licenses, Permits and Contracts 6. Assignments of Hotel Management Agreements 7. Guaranty of Recourse Obligations 8. Environmental Indemnity 9. Deposit Account Agreements 10. Financing Statements 11. Cash Management Agreement 12. Borrower's Closing Certificate under Section 3.1(D) 13. Closing Certificate of Lodgian, Inc. 14. Cooperation Agreement 15. Agreement Regarding Right of First Offer 16. Contribution Agreement 17. Cross-Guaranty 18. Post Closing Agreement SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES SCHEDULE 4.2 CONSENTS None SCHEDULE 4.5 CONDEMNATION PROCEEDINGS None. SCHEDULE 4.5(A) RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER SCHEDULE 4.7(B) RENT ROLL SCHEDULE 4.7(E) FRANCHISE DEFAULTS SCHEDULE 4.9 LITIGATION None. SCHEDULE 4.14 ERISA PLANS 1. Lodgian, Inc. 401(k) Plan. 2. Lodgian, Inc. Employee Health & Welfare Plan. 3. Multiemployer Plans covering employees of the following unions: Hotel Employees & Restaurant Employees Local 274 (Philadelphia, PA) (pension, welfare) SCHEDULE 4.20 INSURANCE SCHEDULE 4.28 COLLECTIVE BARGAINING AGREEMENTS
DATE HOTEL BORROWER UNION OF AGREEMENT - ------------------ ---------------------- ---------------------------------------- ------------ ~~Doubletree Hotel - Impac Hotels I, L.L.C. Hotel Employees and Restaurant Employees 10/1/03 Philadelphia, PA Union, Local 274~~
SCHEDULE 4.30 GROUND LEASES SCHEDULE 5.14 MATERIAL AGREEMENTS Agreement between PFG Broadline and Lodgian, Inc. dated July 1, 2003. Agreement between Harbor Linen and Lodgian, Inc. dated March 1, 2002. Various agreements between the Borrowers and On Command Video Corporation. Group booking contract between Albany Hotels, Inc, and Southwest Airlines dated SCHEDULE 6.5 REQUIRED CAPITAL IMPROVEMENTS SCHEDULE 6.6 ENVIRONMENTAL WORK/ O&M PLANS SCHEDULE 6.7 RESERVE FUNDING CONDITIONS 1. The Borrowers shall have submitted to Lender a written request for disbursement at least five (5) days prior to the date on which the Borrowers request such disbursement be made, specifying the specific Work or for which the disbursement is requested and such other information (such as the price of materials and the cost of contracted labor or other services) as Lender may reasonably require, which request must be on a form specified or approved by Lender; 2. On the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured; 3. Lender shall have received a certificate from the Borrowers stating that all Work at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with any plans and specifications approved by Lender and all legal requirements of any Governmental Authority having jurisdiction over the Property, such certificate to be accompanied, in either case, by a copy of any license, permit or other approval by any Governmental Authority required to commence (only for the first advance with respect to each distinct item of work) and/or complete (only for the final advance with respect to each distinct item of work) such Work; 4. Lender shall have received a certificate from the Borrowers stating that each Person that supplied materials or labor in connection with the Work to be funded by the requested disbursement has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by copies of invoices for all items or materials purchased and all contracted labor or services provided, and, with respect to Work relating to mold, a certificate of a Certified Industrial Hygienist that the such Work has been completed in conformity with applicable mold clean-up procedures promulgated by the applicable Governmental Authority within the state in which the applicable Property is located, or, if no such procedures exist, in conformity with the New York City Department of Health or the United States Environmental Protection guidelines for mold related clean-up work; 5. Lender shall have received appropriate lien waivers (including final lien waivers) from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $10,000 for completion of its work or delivery of its materials, which lien waivers shall conform to the requirements of applicable law and shall cover all work performed and materials supplied (including equipment and fixtures) for a Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current disbursement request; and 6. At Lender's option, Lender shall have received a title search for the Property effective to the date of the disbursement, which search shows that no mechanic's or materialmen's liens or other Liens of any nature have been placed against the Property since the date of recordation of the applicable Mortgage and that title to the Property is free and clear of all Liens (other than the Permitted Encumbrances). EX-10.24.2 14 g87458a3exv10w24w2.txt EX-10.24.2 PROMISSORY NOTE EXHIBIT 10.24.2 FORM OF PROMISSORY NOTE $_____________ JUNE ___, 2004 FOR VALUE RECEIVED, the undersigned, each having an address at c/o Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (each, a "Borrower" and, collectively, the "Borrowers"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "Lender"), having an address at Four World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of _______ _________________________________ Dollars ($_____________), with interest on the unpaid principal balance from the date of this Note, until paid, at the Interest Rate (as hereinafter defined) in effect from time to time hereunder. This Promissory Note may be referred to herein as the "Note," and the loan evidenced hereby may be referred to herein as the "Loan." PAYMENTS OF PRINCIPAL AND INTEREST. The Borrowers shall make a payment on the date hereof to Lender of interest only on the outstanding principal balance of this Note at the Interest Rate (hereinafter defined), from the date hereof through and including the last day of the calendar month in which this Note is executed. Commencing on August 1, 2004 (the "First Payment Date") and on the first day of each calendar month (each, a "Payment Date") thereafter to and including the Maturity Date (hereinafter defined), the Borrowers shall make payments to Lender of interest and principal in monthly installments in the amounts set forth on Schedule 1 attached hereto and made a part hereof (the "Monthly Debt Service Payment Amounts"). The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon and all other amounts due hereunder and under the other Loan Documents (collectively the "Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the "Maturity Date"). Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest on this Note shall be payable in arrears. DEFINITIONS. The term "Interest Rate" as used in this Note shall have the meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined). SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered pursuant to that certain Loan and Security Agreement, dated as of the date hereof (the "Loan Agreement"), among the Borrowers and Lender and is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, each dated as of the date hereof (collectively, the "Mortgages"), each executed by the applicable Borrower, encumbering the fee interests or ground lessee's interests of such Borrower, as applicable, in and to certain properties more particularly described therein (collectively, the "Properties"). This Note, the Loan Agreement, the Mortgages, and all other documents or instruments given by the Borrowers or any of them or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Note may be referred to as the "Loan Documents." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement. DEFEASANCE. A. Notwithstanding anything to the contrary contained in this Note, the Mortgages or the other Loan Documents, at any time after the earlier to occur of (x) the second (2nd) anniversary of the date that is the "startup day," within the meaning of Section 860G of the Internal Revenue Code of 1986, as amended from time to time or any successor statute (the "Code"), of a "real estate mortgage investment conduit," within the meaning of Section 860D of the Code, that holds this Note and (y) forty-eight (48) months after the date of this Note, the Borrowers shall have the right to defease all or any portion of the Loan evidenced by this Note with U.S. Government Securities (a "Defeasance"); provided that a partial Defeasance of this Note shall be permitted only in connection with the release of one or more of the Properties from the lien of the Mortgages and the other Loan Documents in accordance with Section 11.4 of the Loan Agreement and upon the satisfaction of the following conditions precedent (all of which conditions shall become covenants upon occurrence of the Defeasance): (i) The Borrowers shall provide to Lender not less than thirty (30) days' prior written notice specifying the date on which the Defeasance Deposit (hereinafter defined) is to be made (the date so specified may be referred to as the "Defeasance Election Date"). (ii) The Borrowers shall pay to Lender on the Defeasance Election Date all interest accrued and unpaid on the outstanding principal amount of this Note due through the Defeasance Election Date, or through the end of the Interest Accrual Period during which the Defeasance Election Date occurs if the Defeasance Election Date is other than a Payment Date, and the scheduled principal amortization payment due on such Defeasance Election Date, or due upon the next succeeding Payment Date if the Defeasance Election Date is other than a Payment Date, together with all other amounts, if any, then due and payable under this Note, the Mortgages and the other Loan Documents. (iii) The Borrowers shall irrevocably deposit with Lender an amount of U.S. Government Securities (hereinafter defined) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due dates of the payments owing hereunder, cash in an amount sufficient, without reinvestment, in the opinion of a firm of independent certified public accountants reasonably acceptable to Lender expressed in a written certification thereof delivered to Lender (the "CPA Certificate"), (1) with respect to a total Defeasance, to pay and discharge the Scheduled Defeasance Payments (hereinafter defined) for the principal balance of this Note or (2) with respect to a partial Defeasance in connection with the release of one or more Properties, to pay and discharge the Scheduled Defeasance Payments relating to the Release Price for such Property or Properties (the U.S. Government Securities so deposited together with any interest or other increase from the issuer of the securities earned thereon, and any replacements thereof, shall be referred to herein as the "Defeasance Deposit"). All such U.S. Government Securities, if in registered form, shall be registered in the name of Lender or its nominee (and, if registered in nominee's name, endorsed to Lender or in blank) and, if issued in book-entry form, the name of Lender or its 2 nominee shall appear as the owner of such securities on the books of the Federal Reserve Bank or other party maintaining such book-entry system. (iv) The Borrowers shall cause the following to be delivered to Lender on or prior to the Defeasance Election Date, all in form and substance reasonably satisfactory to Lender: (a) a security agreement, in form and substance reasonably satisfactory to Lender, creating a first priority lien on the Defeasance Deposit (the "Defeasance Security Agreement"); (b) the CPA Certificate; (c) a certificate of the Borrowers certifying that all requirements for the Defeasance set forth herein have been satisfied; (d) an opinion of counsel for the Borrowers in form and substance reasonably satisfactory to Lender to the effect that (i) Lender has a perfected first priority security interest in the Defeasance Deposit, (ii) the holder of this Note will not recognize additional income, gain or loss for United States federal income tax purposes as a result of the Defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Defeasance had not occurred, (iii) any holder, trustee or custodian of this Note which is a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code will not fail to maintain its status as such as a result of the Defeasance and (iv) the Defeasance Security Agreement is enforceable against the Borrowers in accordance with its terms; (e) evidence in writing from the applicable Rating Agencies for any Securities backed in whole or in part by this Note, to the effect that the Defeasance will not result in a downgrading, withdrawal, or qualification of the ratings in effect immediately prior to such Defeasance for any class of such then outstanding Securities; (f) evidence reasonably satisfactory to Lender that each of the Borrowers remains validly existing and in good standing under the laws of the state where it is organized and, to the extent required by applicable law, qualified to do business in the state where its respective Property is located; and the Borrowers shall maintain such existence during the time thereafter when this Note shall be outstanding (unless a Successor Borrower (hereinafter defined) assumes the obligations of each of the Borrowers or the Defeasing Borrower(s) (as hereinafter defined), as the case may be, under this Note); and (g) a certificate of the Borrowers certifying that all of the representations, and warranties contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects as of the Defeasance Election Date and ratifying all of the covenants and obligations of the Borrowers under the Loan Documents as of such date and such other certificates, documents or instruments as Lender may reasonably request or as may be required by the Rating Agencies referred to above, provided that such certificates, documents or instruments shall not increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents. 3 (v) Either (1) each of the Borrowers in the case of a total Defeasance, or the Defeasing Borrower(s) in the case of a partial Defeasance shall deliver to Lender a certificate stating that at all times following the Defeasance, the Borrowers or the Defeasing Borrower(s), as the case may be, shall have no interest in any assets other than the Defeasance Deposit, or (2) such Borrower(s) shall satisfy all of the requirements of Section C below. (vi) The Borrowers shall pay to Lender all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender in connection with the Defeasance. (vii) In the event only a portion of the Loan evidenced by this Note is the subject of the Defeasance in connection with the release of any Lien of any applicable Mortgage on one or more individual Properties under Section 11.4 of the Loan Agreement, the Borrowers shall execute and deliver all necessary documents to amend and restate this Note and issue two substitute promissory notes therefor: one note having a principal balance equal to the defeased portion of the original Note (the "Defeased Note") and one note having a principal balance equal to the undefeased portion of the original Note (the "Undefeased Note"). The Defeased Note and the Undefeased Note shall have identical terms as the original Note (and the Defeased Note and the Undefeased Note or Notes shall be cross-defaulted with each other), except for the principal balance. A Defeased Note cannot be the subject of any further Defeasance. An Undefeased Note may be the subject of a further Defeasance in accordance with the terms of this Note and the Loan Agreement (the term "Note", as used above in this clause (vii) for these purposes, being deemed to refer to the Undefeased Note that is the subject of further defeasance); provided, however, that no such partial Defeasance shall take place unless the conditions hereof and the conditions of Section 11.4 of the Loan Agreement are satisfied. B. Upon compliance with the requirements of Section A above and compliance with the requirements of Section 11.4 of the Loan Agreement, Lender shall cause each of the Properties, in the case of a total Defeasance, or each Defeased Property (as hereinafter defined), in the case of a partial Defeasance, to be released from the lien of the applicable Mortgages and the other applicable Loan Documents. The obligations under the Loan Documents with respect to the Properties or each Defeased Property, as the case may be, shall no longer be applicable, and the Defeasance Deposit shall be the sole source of collateral securing this Note or the Defeased Note, as the case may be. Lender shall apply the Defeasance Deposit and the payments received therefrom to the payment of all scheduled principal and interest payments due on all successive Payment Dates under this Note or the Defeased Note, as the case may be, after the Defeasance Election Date to and including the Maturity Date and to payment of the entire remaining Debt or the entire remaining principal balance, accrued and unpaid interest and other sums due under the Defeased Note, as the case may be, on the Maturity Date (collectively, the "Scheduled Defeasance Payments"). The Borrowers, pursuant to the Defeasance Security Agreement or other appropriate document, shall direct that the payments received from the Defeasance Deposit shall be made directly to Lender and applied to satisfy the obligations of the Borrowers under this Note or the Defeased Note, as the case may be. C. If, after the Defeasance, the Borrowers, in the case of a total Defeasance, or the Defeasing Borrower(s), in the case of a partial Defeasance, will own any assets other than the Defeasance Deposit, the Borrowers or the Defeasing Borrower(s), as the case may be, shall 4 establish or designate a single-purpose, bankruptcy-remote successor entity acceptable to Lender (the "Successor Borrower"), with respect to which a nonconsolidation opinion reasonably satisfactory in form and substance to Lender and any applicable Rating Agencies shall be delivered to Lender and such Rating Agencies, in which case the Borrowers or the Defeasing Borrower(s), as the case may be, shall transfer and assign to the Successor Borrower all of their respective obligations, rights and duties under this Note or the Defeased Note, as the case may be, and the Defeasance Security Agreement, together with the pledged Defeasance Deposit. The Successor Borrower shall assume the obligations of the Borrowers or the Defeasing Borrower(s), as the case may be, under this Note or the Defeased Note, as the case may be, and the Defeasance Security Agreement, and such Borrower(s) shall be relieved and released of their respective obligations hereunder and thereunder. Each of the Borrowers or the applicable Defeasing Borrower(s), as the case may be, shall pay not less than $1,000 to the Successor Borrower as consideration for assuming such Borrower's obligations. D. As used herein, the following terms shall have the following meanings: (i) "Defeased Property" shall mean any Property being released from the lien of the Mortgage relating to such Property pursuant to a partial Defeasance in accordance with the provisions of this Note and Section 11.4 of the Loan Agreement. (ii) "U.S. Government Securities" shall mean securities that are (i) direct obligations of the United States of America for the full and timely payment of which its full faith and credit is pledged or (ii) obligations of an entity controlled or supervised by and acting as an agency or instrumentality and guaranteed as a full faith and credit obligation which shall be fully and timely paid by the United States of America, which in either case are not callable or redeemable at the option of the issuer thereof (including a depository receipt issued by a bank (as defined in Section 3(a)(2) of the United States Securities Act)) as custodian with respect to any such U.S. Government Securities or a specific payment of principal of or interest on any such U.S. Government Securities held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the securities or the specific payment of principal of or interest on the securities evidenced by such depository receipt. (iii) "Defeasing Borrower" shall mean the Borrower owning or leasing, as the case may be, a Defeased Property. (iv) "Release Price" shall have the meaning set forth in the Loan Agreement. E. If, after payment in full of all obligations evidenced by this Note or any other of the Loan Documents, any of the Defeasance Deposit remains, such remaining balance of the Defeasance Deposit shall be returned to the Borrowers (or to the Successor Borrower, as the case may be) or Lender shall assign to the Borrowers (or the Successor Borrower, as the case may be) all of Lender's right, title, and interest in the Government Securities constituting the Defeasance Deposit. 5 PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrowers may not prepay this Note in whole or in part at any time except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the occurrence of any Event of Default, then at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Note or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Note shall bear interest until paid in full at a rate per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under this Note. The Borrowers agree that such late charges and Default Rate of interest are reasonable and do not constitute a penalty. LAWFUL INTEREST. Notwithstanding any provision to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Note or the Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, 6 the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the applicable Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the applicable Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of the Borrowers or their successors or assigns to pay the outstanding principal balance of this Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Mortgages or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of any Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by the Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note shall be binding upon the Borrowers and their successors and assigns. EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan Agreement, Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Note, the Loan Agreement, the Mortgages and any or all of the other Loan Documents. Lender shall be released of any obligations to the extent that the same are so assigned or transferred, and the rights and obligations of "Lender" hereunder shall become the rights and obligations of the transferee holder. LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of the Borrowers hereunder are limited in accordance with Article XII of the Loan Agreement. This 7 provision shall not limit any rights of Lender under the Guaranty of Recourse Obligations or the Environmental Indemnity, each dated as of the date hereof. ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrowers shall pay to Lender on demand all out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by the Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York and applicable federal law. TIME OF ESSENCE. Time shall be of the essence as to all of the terms, covenants and conditions of this Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, the Borrowers shall be required to make such payment on the next succeeding Business Day. JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of the Borrowers hereunder shall be joint and several. [NO ADDITIONAL TEXT ON THIS PAGE] 8 IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the date first written above. BORROWERS: [LODGIAN ENTITIES] By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above SCHEDULE 1 MONTHLY DEBT SERVICE PAYMENT AMOUNTS EX-10.24.3 15 g87458a3exv10w24w3.txt EX-10.24.3 GUARANTY OF RECOURSE OBLIGATIONS EXHIBIT 10.24.3 FORM OF GUARANTY OF RECOURSE OBLIGATIONS This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of June __, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"), having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "LENDER"). R E C I T A L S: A. Pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as the same may be amended, modified, supplemented or restated from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein (each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has agreed to make a loan to Borrowers in the aggregate original principal amount of up to **[_____________________]** (the "LOAN"), subject to the terms and conditions of the Loan Agreement; B. As a condition to Lender's making the Loan, Lender is requiring that Guarantor execute and deliver to Lender this Guaranty; and C. Guarantor hereby acknowledges that Guarantor holds a direct and/or indirect ownership interest in each Borrower and that Guarantor will materially benefit from Lender's agreeing to make the Loan. NOW, THEREFORE, in consideration of the premises set forth herein and as an inducement for and in consideration of the agreement of Lender to make the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor hereby agrees, covenants, represents and warrants to Lender as follows: SECTION 1. DEFINITIONS. All capitalized terms used and not defined herein shall have the respective meanings given such terms in the Loan Agreement. SECTION 2. GUARANTY. (a) Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) hereby irrevocably, absolutely and unconditionally assumes liability for, guarantees payment to Lender of, and agrees to pay, protect, defend, indemnify and save harmless Lender from and against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter defined). The obligations which are the subject of the guaranty referred to in this Section 2 are hereinafter collectively referred to as the "GUARANTEED OBLIGATIONS". (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used in this Guaranty shall mean all obligations and liabilities of Borrowers for which Borrowers shall be personally liable under the provisions of Section 12.2 of the Loan Agreement. (c) All sums payable to Lender under this Guaranty shall be payable on demand and without reduction for any offset, claim, counterclaim or defense. SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to Lender as follows (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Guaranty): (a) DUE EXECUTION. This Guaranty has been duly executed and delivered by Guarantor. (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, or application of general principles of equity in any legal proceeding. (c) NO VIOLATION. The execution, delivery and performance by Guarantor of its obligations under this Guaranty do not violate any law, regulation, order, writ, injunction or decree of any court or governmental body, agency or other instrumentality applicable to Guarantor, or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the assets of Guarantor pursuant to the terms of any mortgage, indenture, agreement or instrument to which Guarantor is a party or by which it or any of its properties is bound. Guarantor is not in default under any other guaranty which it has provided to Lender. (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan Agreement, there are no actions, suits or proceedings at law or at equity, pending or, to Guarantor's knowledge, threatened against or affecting Guarantor or which involve or could reasonably be expected to involve the validity or enforceability of this Guaranty or which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. Guarantor is not in default beyond any applicable grace or cure period with respect to any order, writ, injunction, decree or demand of any Governmental Authority which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. (e) CONSENTS. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities (collectively, the "CONSENTS") that are required in connection with the valid execution, delivery and performance by Guarantor of this Guaranty have been obtained and Guarantor agrees that all Consents required in connection with the carrying out or performance of any of Guarantor's obligations under this Guaranty will be obtained when required. (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial statements of Guarantor heretofore delivered to Lender fairly present the financial condition of Guarantor as of 2 the respective dates thereof, and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. None of the aforesaid financial statements or any certificate or statement furnished to Lender by or on behalf of Guarantor in connection with the transactions contemplated hereby, and none of the representations and warranties in this Guaranty contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading. Guarantor is not insolvent within the meaning of the Bankruptcy Code or any other applicable law, code or regulation and the execution, delivery and performance of this Guaranty will not render Guarantor insolvent. SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the benefit of Lender that Guarantor will deliver to Lender each of the financial statements required to be delivered pursuant to Section 5.1 of the Loan Agreement. SECTION 5. INTENTIONALLY DELETED. SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR. (a) The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Mortgages or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any Borrower, Guarantor or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrowers under the Note, the Loan Agreement, the Mortgages or any other Loan Documents or Guarantor under this Guaranty, or any setoff, counterclaim, and irrespective of any other circumstances which might otherwise limit recourse against Guarantor by Lender or constitute a legal or equitable discharge or defense of a guarantor or surety. Lender may enforce the obligations of Guarantor under this Guaranty by a proceeding at law, in equity or otherwise, independent of any loan foreclosure or similar proceeding or any deficiency action against Borrowers or any other Person at any time, either before or after an action against the Properties or any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION. Guarantor waives diligence, notice of acceptance of this Guaranty, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Mortgages or any other Loan Documents, against Guarantor, Borrowers or any other Person, any right to require a proceeding first against Borrowers or any other Person, or to exhaust any security (including, without limitation, the Properties or any of them or any part thereof) for the performance of the Guaranteed Obligations or any other obligations of Borrowers or any other Person, or any protest, presentment, notice of default (except as may be expressly required under the Loan Documents) or other notice or demand whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not be discharged of its obligations hereunder. (b) The obligations of Guarantor under this Guaranty, and the rights of Lender to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: 3 (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower, any Property or any part thereof, Guarantor or any other Person; (ii) any failure by Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Loan Agreement, or any other Loan Documents, or any document or instrument relating thereto; (iii) except (A) with respect to activities occurring after the date of a Permitted Assumption or, (B) activities relating to a Released Property after the date of a Release with respect thereto, the sale, transfer or conveyance of any Property or any interest therein to any Person, whether now or hereafter having or acquiring an interest in any Property or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against any Borrower or any Property or any interest therein; (iv) the conveyance to Lender, any Affiliate of Lender or Lender's nominee of any Property or any interest therein by a deed-in-lieu of foreclosure; (v) the release of any Borrower or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise; (vi) the release in whole or in part of any collateral for any or all Guaranteed Obligations or for the Loan or any portion thereof; or (vii) the exercise by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan Documents, including, without limitation, foreclosure or similar remedies under any pledge agreement encumbering Mezzanine Borrower's interest in any General Partner, any Member, and/or any Borrower except with respect to actions taken by the Mezzanine Lender following the Mezzanine Lender succeeding to the interests of the Mezzanine Borrowers in and to the Borrowers. (c) Except as otherwise specifically provided in this Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an action brought by Lender to enforce this Guaranty based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise. (d) Lender may deal with Borrowers and Affiliates of Borrowers in the same manner and as freely as if this Guaranty did not exist and shall be entitled, among other things, to grant Borrowers or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Lender, at any time and from time to time, without terminating, affecting or impairing the validity of this Guaranty or the obligations of Guarantor hereunder. (e) No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with 4 respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Loan Agreement, the Mortgages or the other Loan Documents or any amendment, modification or other change of any legal requirement shall in any way alter, impair or affect any of the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan Documents are modified with Lender's consent, the Guaranteed Obligations shall automatically be deemed modified to include such modifications. (f) Lender may proceed to protect and enforce any or all of its rights under this Guaranty by suit in equity or action at law, whether for the specific performance of any covenants or agreements contained in this Guaranty or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Guarantor. Each and every remedy of Lender shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. (g) No waiver shall be deemed to have been made by Lender of any rights hereunder unless the same shall be in writing and signed by Lender, and any such waiver shall be a waiver only with respect to the specific matter involved and shall in no way impair the rights of Lender or the obligations of Guarantor to Lender in any other respect or at any other time. (h) At the option of Lender, Guarantor may be joined in any action or proceeding commenced by Lender against Borrowers in connection with or based upon the Note, the Loan Agreement, the Mortgages or any other Loan Documents and recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor to the extent of Guarantor's liability hereunder, without any requirement that Lender first assert, prosecute or exhaust any remedy or claim against Borrowers or any other Person, or any security for the obligations of Borrowers or any other Person. (i) Guarantor agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Borrowers or Guarantor to Lender and such payment is rescinded or must otherwise be returned by Lender (as determined by Lender in its sole and absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower or Guarantor, all as though such payment had not been made. (j) In the event that Guarantor shall advance or become obligated to pay any sums under this Guaranty or in connection with the Guaranteed Obligations or in the event that for any reason whatsoever any Borrower or any subsequent owner of any Property or any part thereof is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to the lien, the time of payment and in all other respects to all sums, including principal and interest and other amounts, at any time owed to Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive payment thereof until all principal, interest and other sums due pursuant to the Loan Documents have been paid in full. Nothing herein contained is intended or shall be construed to give Guarantor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Lender 5 in or to any collateral for the Loan, notwithstanding any payments made by Guarantor under this Guaranty, until the actual and irrevocable receipt by Lender of payment in full of all principal, interest and other sums due with respect to the Loan or otherwise payable under the Loan Documents. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when any such sums due and owing to Lender shall not have been fully paid, such amount shall be paid by Guarantor to Lender for credit and application against such sums due and owing to Lender. The foregoing shall not prohibit Borrowers from using the proceeds of the Loan for any permitted use under the Loan Agreement, including, without limitation, the making of distributions to Guarantor. (k) Guarantor's obligations hereunder shall survive a foreclosure, delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or similar proceeding involving any Property or any part thereof and the exercise by Lender of any of all of its remedies pursuant to the Loan Documents. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Guarantor under this Guaranty shall survive for a period of two (2) years following payment in full of the Obligations in accordance with the terms of the Loan Documents, provided, however, in the event that any Guaranteed Obligations or liabilities of the Guarantor under this Guaranty shall have arisen prior to the expiration of such period, then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Guarantor hereunder shall survive. SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED, AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN INSTRUMENT SIGNED BY LENDER AND GUARANTOR. SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor, and its successors and assigns, may not be assigned or delegated by Guarantor and shall inure to the benefit of Lender and its successors and assigns. Lender shall have the right to assign this Guaranty and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. All references to "Lender" hereunder shall be deemed to include the successors and assigns of Lender and the parties hereto acknowledge that actions taken by Lender hereunder may be taken by Lender's agents and by the agents of the successors and assigns of Lender. SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the City and County of New York or in the Courts of the United States of America located in the Southern District of New York, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Guarantor at its address set forth on the first page hereof. Nothing in this Section 9, however, shall affect the right of Lender to serve legal process in any other manner permitted by law or affect the right of 6 Lender to bring any suit, action or proceeding against Guarantor or its property in the courts of any other jurisdictions. SECTION 10. SECTION HEADINGS. The headings of the sections and paragraphs of this Guaranty have been inserted for convenience of reference only and shall in no way define, modify, limit or amplify any of the terms or provisions hereof. SECTION 11. SEVERABILITY. Any provision of this Guaranty which may be determined by any competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Guarantor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH. SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL LIABILITY. (a) The obligations of Guarantor hereunder are separate and distinct from, and in addition to, the obligations of Guarantor now or hereafter arising under the other guaranties pursuant to which Guarantor has guaranteed the payment and performance of certain other obligations of Borrowers described therein. (b) If there is more than one entity comprising Guarantor, all references to Guarantor herein shall be to Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) or any one or more of them. All obligations and liabilities of Guarantor hereunder are in addition to, not in lieu of and are independent of: (i) all obligations of Borrowers under any other Loan Document, including the Note and the Loan Agreement; and (ii) any obligation of Guarantor under any other Loan Document to which Guarantor is a party. (c) If there is more than one entity comprising Guarantor, all obligations of Guarantor hereunder shall be joint and several. SECTION 14. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder to Lender or Guarantor or which are given to Lender or Guarantor with respect to this Guaranty shall be in writing and shall be delivered to Lender at the address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the address set forth on the first page hereof, each in the manner provided in Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less than ten (10) days' prior written notice of any change in the location of Guarantor's principal place of business. SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its execution hereof acknowledges receipt of true copies of all of the Loan Documents, the terms and conditions of which are hereby incorporated herein by reference. 7 SECTION 16. INTEREST; EXPENSES. (a) If Guarantor fails to pay all or any sums due hereunder within ten (10) days of demand by Lender, the amount of such sums payable by Guarantor to Lender shall bear interest from the date of demand until paid at the Default Rate in effect from time to time. (b) Guarantor hereby agrees to pay all reasonable out of pocket costs, charges and expenses, including, without limitation, reasonable attorneys' fees and disbursements, that may be incurred by Lender in enforcing the covenants, agreements, obligations and liabilities of Guarantor under this Guaranty. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written. GUARANTOR: LODGIAN, INC., a Delaware corporation By: _______________________________ Name: Daniel E. Ellis Title: Senior Vice-President EX-10.25.1 16 g87458a3exv10w25w1.txt EX-10.25.1 LOAN & SECURITY AGMT (FIXED RATE #2) EXHIBIT 10.25.1 FORM OF LOAN AND SECURITY AGREEMENT (FIXED RATE #2) DATED AS OF JUNE __, 2004 BETWEEN THE BORROWERS LISTED ON SCHEDULE 1 HERETO AS BORROWERS AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms......................................................................... 1 Section 1.2 Accounting Terms.............................................................................. 23 Section 1.3 Other Definitional Provisions................................................................. 23 ARTICLE II TERMS OF THE LOAN Section 2.1 Loan.......................................................................................... 24 Section 2.2 Interest...................................................................................... 24 Section 2.3 Interest Rate Cap Agreement................................................................... 25 Section 2.4 Payments...................................................................................... 25 Section 2.5 Maturity...................................................................................... 26 Section 2.6 Prepayment.................................................................................... 26 Section 2.7 Outstanding Balance........................................................................... 27 Section 2.8 Taxes......................................................................................... 27 Section 2.9 Reasonableness of Charges..................................................................... 27 Section 2.10 Funding Losses/Change in Law Etc.............................................................. 28 Section 2.11 Servicing/Special Servicing................................................................... 28 ARTICLE III CONDITIONS TO LOAN Section 3.1 Conditions to Funding of the Loan on the Closing Date......................................... 33 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1 Organization, Powers, Capitalization, Good Standing, Business................................. 39 Section 4.2 Authorization of Borrowing, etc............................................................... 39 Section 4.3 Financial Statements.......................................................................... 40 Section 4.4 Indebtedness and Contingent Obligations....................................................... 40 Section 4.5 Title to the Properties....................................................................... 40 Section 4.6 Zoning; Compliance with Laws.................................................................. 41 Section 4.7 Leases; Agreements............................................................................ 41 Section 4.8 Condition of the Properties................................................................... 43 Section 4.9 Litigation; Adverse Facts..................................................................... 43 Section 4.10 Payment of Taxes.............................................................................. 43 Section 4.11 Adverse Contracts............................................................................. 43 Section 4.12 Performance of Agreements..................................................................... 44 Section 4.13 Governmental Regulation....................................................................... 44 Section 4.14 Employee Benefit Plans........................................................................ 44
i Section 4.15 Broker's Fees................................................................................. 44 Section 4.16 Intentionally Deleted......................................................................... 44 Section 4.17 Solvency...................................................................................... 44 Section 4.18 Disclosure.................................................................................... 44 Section 4.19 Use of Proceeds and Margin Security........................................................... 45 Section 4.20 Insurance..................................................................................... 45 Section 4.21 Separate Tax Lots............................................................................. 45 Section 4.22 Investments................................................................................... 45 Section 4.23 Bankruptcy.................................................................................... 45 Section 4.24 Defaults...................................................................................... 45 Section 4.25 No Plan Assets................................................................................ 45 Section 4.26 Governmental Plan............................................................................. 46 Section 4.27 Not Foreign Person............................................................................ 46 Section 4.28 No Collective Bargaining Agreements........................................................... 46 Section 4.29 Reserved...................................................................................... 46 Section 4.30 Ground Leases................................................................................. 46 Section 4.31 No Prohibited Persons......................................................................... 47 ARTICLE V COVENANTS OF BORROWER PARTIES Section 5.1 Financial Statements and Other Reports........................................................ 47 Section 5.2 Existence; Qualification...................................................................... 52 Section 5.3 Payment of Impositions and Claims............................................................. 52 Section 5.4 Maintenance of Insurance...................................................................... 53 Section 5.5 Operation and Maintenance of the Properties; Casualty......................................... 57 Section 5.6 Inspection.................................................................................... 60 Section 5.7 O&M Plan...................................................................................... 60 Section 5.8 Reserved...................................................................................... 60 Section 5.9 Compliance with Laws and Contractual Obligations.............................................. 60 Section 5.10 Further Assurances............................................................................ 61 Section 5.11 Performance of Agreements and Leases.......................................................... 61 Section 5.12 Leases........................................................................................ 61 Section 5.13 Management; Franchise Agreement............................................................... 62 Section 5.14 Material Agreements........................................................................... 65 Section 5.15 Deposits; Application of Receipts............................................................. 65 Section 5.16 Estoppel Certificates......................................................................... 65 Section 5.17 Indebtedness.................................................................................. 65 Section 5.18 No Liens...................................................................................... 66 Section 5.19 Contingent Obligations........................................................................ 66 Section 5.20 Restriction on Fundamental Changes............................................................ 66 Section 5.21 Transactions with Related Persons............................................................. 66 Section 5.22 Bankruptcy, Receivers, Similar Matters........................................................ 67 Section 5.23 ERISA......................................................................................... 67 Section 5.24 Press Release................................................................................. 68 Section 5.25 Ground Leases................................................................................. 68 Section 5.26 Reserved...................................................................................... 72

ii Section 5.27 Lender's Expenses............................................................................. 71 Section 5.28 Distributions................................................................................. 71 Section 5.29 Completion of Required Capital Improvements................................................... 73 Section 5.30 Cancellation of Indebtedness; Settlement of Claims............................................ 71 ARTICLE VI RESERVES Section 6.1 Security Interest in Reserves; Other Matters Pertaining to Reserves........................... 72 Section 6.2 Funds Deposited with Lender................................................................... 72 Section 6.3 Impositions and Insurance Reserve............................................................. 73 Section 6.4 FF&E Reserve.................................................................................. 73 Section 6.5 Capital Improvement Reserve; Required Capital Improvements.................................... 74 Section 6.6 Hazardous Materials Remediation Reserve....................................................... 74 Section 6.7 Conditions to Disbursements from Hazardous Materials Remediation Reserve and Capital Improvement Reserve; Performance of Work...................................................... 75 Section 6.8 Cash Trap Reserve............................................................................. 79 ARTICLE VII LOCK BOX; CLEARING ACCOUNT; CENTRAL ACCOUNT; CASH MANAGEMENT Section 7.1 Establishment of Deposit Account and Lock Box Account......................................... 80 Section 7.2 Application of Funds in Lock Box Account...................................................... 82 Section 7.3 Application of Funds After Event of Default................................................... 82 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES Section 8.1 Event of Default.............................................................................. 82 Section 8.2 Acceleration and Remedies..................................................................... 85 Section 8.3 Performance by Lender......................................................................... 86 Section 8.4 Evidence of Compliance........................................................................ 87 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS Section 9.1 Applicable to all Primary Borrower Parties.................................................... 87 Section 9.2 Applicable to Borrowers, General Partner and Member........................................... 89 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS Section 10.1 Secondary Market Transactions Generally....................................................... 91 Section 10.2 Cooperation; Limitations...................................................................... 91 Section 10.3 Information................................................................................... 92 Section 10.4 Additional Provisions......................................................................... 91

iii ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES Section 11.1 Restrictions on Transfer and Encumbrance...................................................... 94 Section 11.2 Transfers of Beneficial Interests in Borrowers................................................ 94 Section 11.3 Assumability.................................................................................. 95 Section 11.4 Release of Properties......................................................................... 96 Section 11.5 Reserved...................................................................................... 98 Section 11.6 Sale of Building Equipment.................................................................... 98 Section 11.7 Immaterial Transfers and Easements, etc....................................................... 98 ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE Section 12.1 Limitations on Recourse....................................................................... 99 Section 12.2 Partial Recourse.............................................................................. 99 Section 12.3 Miscellaneous................................................................................. 100 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES Section 13.1 Waivers....................................................................................... 100 ARTICLE XIV MISCELLANEOUS Section 14.1 Expenses and Attorneys' Fees.................................................................. 102 Section 14.2 Indemnity..................................................................................... 102 Section 14.3 Amendments and Waivers........................................................................ 103 Section 14.4 Retention of the Borrowers' Documents......................................................... 103 Section 14.5 Notices....................................................................................... 104 Section 14.6 Survival of Warranties and Certain Agreements................................................. 105 Section 14.7 Failure or Indulgence Not Waiver; Remedies Cumulative......................................... 105 Section 14.8 Marshaling; Payments Set Aside................................................................ 105 Section 14.9 Severability.................................................................................. 106 Section 14.10 Headings...................................................................................... 106 Section 14.11 APPLICABLE LAW................................................................................ 106 Section 14.12 Successors and Assigns........................................................................ 106 Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship............................ 106 Section 14.14 Reasonableness of Determinations.............................................................. 107 Section 14.15 Limitation of Liability....................................................................... 107 Section 14.16 No Duty....................................................................................... 107 Section 14.17 Entire Agreement.............................................................................. 107 Section 14.18 Construction; Supremacy of Loan Agreement..................................................... 107 Section 14.19 Consent to Jurisdiction....................................................................... 108 Section 14.20 Waiver of Jury Trial.......................................................................... 108 Section 14.21 Counterparts; Effectiveness................................................................... 109

iv Section 14.22 Servicer...................................................................................... 109 Section 14.23 Obligations of Borrower Parties............................................................... 109 Section 14.24 Additional Inspections; Reports............................................................... 109

v LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate re: Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 2.12(G) - Crossed Loans/Crossed Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.30 - Ground Leases Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work/O&M Plans Schedule 6.7 - Reserve Funding Conditions i LOAN AND SECURITY AGREEMENT This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as of June __, 2004 and entered into by and between the parties listed as Borrowers on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrowers and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT I. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any other accounts pledged to Lender pursuant to this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, directors, managing members, or general partners of the entity. "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT D. "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Mezzanine Loan and the Loan. ["ALLOCABLE PORTION" means __% [DEFINE PERCENTAGE OF MEZZANINE LOAN ALLOCABLE TO EACH FIXED RATE LOAN].] "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each Property as set forth on EXHIBIT D. "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7. "ARCHITECT" has the meaning set forth in Section 5.5. "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and Rents of even date herewith from each of the Borrowers to Lender, constituting assignments of each Borrower's right, title and interest in the Leases and proceeds therefrom for each of their respective Properties as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain Conditional Assignments of Hotel Management Agreements of even date herewith executed by each of the Borrowers and the applicable Manager, constituting an assignment of each Management Agreement as Collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "BEVERAGE COMPANY" means any Person (other than any of the Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property. 2 "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Condominium Property Documents. "BORROWER" and "BORROWERS" have the meanings set forth in the preamble; provided that, following a Release, "BORROWERS" means each of the Borrowers remaining as a party to the Loan Documents, and whose Properties remain encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any of such remaining parties. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrowers, General Partner, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing offices of the Servicer, and, if the Loan becomes a "specially serviced mortgage loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1(D) hereof. "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations (including any improvements, repairs or alterations required pursuant to a Property Improvement Plan), FF&E and other capital items (whether paid in cash or property or accrued as liabilities) made by the Borrowers that, in conformity with GAAP, would not be included in the Borrowers' annual financial statements as an Operating Expense of the Properties. "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5. "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank. "CASH TRAP EVENT" has the meaning set forth in Section 6.8. 3 "CASH TRAP RESERVE" has the meaning set forth in Section 6.8. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan. "CLOSING DATE" means the date on which the Closing occurs. "COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan Documents, including without limitation the Properties and the Account Collateral. "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. 4 "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1. "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set forth in Section 7.1. "CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan, each dated as of the date hereof, executed by each of the Crossed Borrowers, and (ii) those certain Guaranties of each of the Crossed Loans, each dated as of the date hereof, executed by each of the Borrowers. "CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G). "CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other "Indebtedness" as defined in each Crossed Loan Agreement. "CROSSED LOANS" shall mean each of the mortgage loans (other than the Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with respect to each Crossed Borrower, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each dated as of the date hereof, between Lender and the Crossed Borrowers for the respective Crossed Loans, each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in each Crossed Loan Agreement for each Crossed Loan, including without limitation the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing and/or securing each Crossed Loan, and each of the Crossed Guaranties relating to the respective Crossed Loans, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and deeds to secure debt, each dated as of the date hereof, from each Crossed Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed Property as security for the respective Crossed Loans, each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan, as described in the respective Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G) hereof. "D&O INSURANCE" has the meaning set forth in Section 5.4. 5 "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the amount of interest that will be required to be paid over the succeeding twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan, plus principal amortization of the Loan and the Allocable Portion of the Mezzanine Loan that would be required in respect of the then outstanding principal amount of the Loan and the Allocable Portion of the Mezzanine Loan over the succeeding twelve (12) months based on a twenty-five (25) year amortization schedule, calculated using the Interest Rate for the Loan and the actual interest rate on the Mezzanine Loan. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. "DEBT YIELD" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the then outstanding principal balance of the Loan and the Mezzanine Loan. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1. "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1. "DEPOSIT BANK" has the meaning set forth in Section 7.1. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "ELIGIBLE ACCOUNT" means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding 6 fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of any of the Borrowers or any current or former ERISA Affiliate or (iii) for which any of the Borrowers or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrowers and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAWS" means all present and future local, state, federal or other governmental authority, statutes, ordinances, codes, orders, decrees, laws, rules or regulations pertaining to or imposing liability or standards of conduct concerning environmental regulation (including, without limitation, regulations concerning health and safety), contamination or clean-up or the handling, generation, release or storage of Hazardous Material affecting the Properties including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, as amended, the Hazardous Substances Transportation Act, as amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as amended, the Safe Drinking Water Act, as amended, the Occupational Safety and Health Act, as amended, any state superlien and environmental clean-up statutes and all regulations adopted in respect of the foregoing laws whether now or hereafter in effect. "ENVIRONMENTAL REPORTS" means those certain environmental reports and audits for the Properties as described on EXHIBIT B. "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6. "EO13224" has the meaning set forth in Section 4.31. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions and which is also a Business Day. 7 "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning set forth in the Cash Management Agreement. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash Management Agreement. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. 8 "FF&E RESERVE" means the reserve established pursuant to Section 6.4. "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the applicable Borrower Parties as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FITCH" means Fitch, Inc. "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrowers or their Affiliates, or other causes beyond the reasonable control of the Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrowers. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT C and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Borrowers, as franchisee, pursuant to which the Borrowers have the right to operate the Properties under names and hotel systems controlled by the Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to each Property or any other successor franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" means, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "FUNDING LOSSES" has the meaning set forth in Section 2.10. "FUNDING PARTY" means any bank or other entity, if any, which is indirectly or directly funding Lender with respect to the Loan, in whole or in part, including, without limitation, any direct or indirect assignee of, or participant in, the Loan. "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. "GENERAL PARTNER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which is now or hereafter becomes a general partner of any of the Borrowers under such Borrower's limited partnership agreement. 9 "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30. "GROUND LEASED PROPERTIES" means the Properties subject to the Ground Leases described on SCHEDULE 4.30 attached hereto. "GROUND LEASES" means the ground leases described on SCHEDULE 4.30 attached hereto. "GROUND LESSORS" means the lessors under the Ground Leases described on SCHEDULE 4.30 attached hereto. "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity. "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse Obligations of even date herewith from Guarantor to Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIAL" means all or any of the following: (A) substances, materials, compounds, wastes, products, emissions and vapors that are defined or listed in, regulated by, or otherwise classified pursuant to, any applicable Environmental Laws, including any so defined, listed, regulated or classified as "hazardous substances", "hazardous materials", "hazardous wastes", "toxic substances", "pollutants", "contaminants", or any other formulation intended to regulate, define, list or classify substances by reason of deleterious, harmful or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (C) any flammable substances or explosives or any radioactive materials; (D) asbestos in any form; (E) electrical or hydraulic equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G) mold; or (H) urea formaldehyde, provided, however, such definition shall not include cleaning materials and other substances commonly used in the ordinary course of the Borrowers' business, which materials exist only in reasonable quantities and are stored, contained, transported, used, released, and disposed of in accordance with all applicable Environmental Laws. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.6. 10 "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Borrowers under each of the Ground Leases and under the Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties. "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, and (v) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of General Partner, Member, any of the Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (except that such individual may be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with General 11 Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to the Borrowers, Member, General Partner or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INITIAL TERM" means the period from the Closing Date to the Scheduled Maturity Date. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Borrowers with respect to the Properties under Section 5.4. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. "INTEREST RATE" has the meaning set forth in Section 2.2. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. "IRS" means the Internal Revenue Service or any successor thereto. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrowers or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation or inquiry unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of each Borrower and Member, with respect to operational issues of any Property or any of the Borrowers; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) the person signing such document or certificate. "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. 12 "LENDER" is defined in the preamble. "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7 "LETTER OF CREDIT" means an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrowers shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrowers that the institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LOAN" has the meaning set forth in Section 2.1. "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the Assignments of Leases, the Assignments of Management Agreements, the Guaranty, the Financing Statements, the Cash Management Agreement and any and all other documents and agreements from any of the Borrowers, General Partner, Member, Guarantor or Manager and accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mezzanine Loan Documents. "LOAN YEAR" means the twelve (12) month period commencing on July 1st of any calendar year during the term of the Loan and ending on June 30th of the following calendar year - provided that the first Loan Year shall commence on the Closing Date and end on June 30, 2005. "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT E, between each Borrower and the applicable Manager described therein, and any management agreement which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. 13 "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT E or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties approved by Lender in accordance with the terms and conditions hereof. "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations, properties, assets or condition (financial or otherwise) of any of the Borrowers or Guarantor, or (B) the impairment of the ability of any of the Borrowers or Guarantor to perform its obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers receives in compensation, more than $500,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers (or all the Borrowers in the aggregate) receives in compensation, not more than $1,000,000 per annum and (y) which is terminable by the Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. "MATERIAL ALTERATION" means any improvement or alteration to a Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget then in effect, or as approved Work under Section 6.7 hereof. "MATERIAL LEASE" means any Lease of space in a Property which (i) is with an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other payments in an amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, or (iv) obligates the Borrowers to make any improvements to the Properties either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. 14 "MATURITY DATE" means July 1, 2009, or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. "MEMBER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the Borrowers which are limited liability companies) and any other entity which is now or hereafter becomes the managing or sole member of any of the Borrowers under such Borrower's limited liability company operating agreement. "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE BORROWER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Mezzanine Borrower". "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its successors and assigns. "MEZZANINE LOAN" means that certain loan being made on the date hereof from Mezzanine Lender to Mezzanine Borrower. "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the Mezzanine Loan, as same may be amended, modified or restated from time to time. "MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii) during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year, 11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th) Loan Year, 13%. "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4. "MOODY'S" means Moody's Investors Service. "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments of Leases and Security Agreements, (ii) those certain Deeds of Trust, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security Agreements, each of even date herewith, from each Borrower to Lender (or deed trustee on behalf of Lender, as applicable), constituting a Lien on such Borrower's respective Property as Collateral for the Loan as same may be modified or amended from time to time. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which any of the Borrowers or any Affiliate has any liability, including contingent liability. 15 "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which Operating Revenues exceed Operating Expenses (excluding Management Fees, interest, income taxes, depreciation, amortization, FF&E reserves, and fees due to all Franchisors for such period). "NOTE" has the meaning set forth in Section 2.1. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrowers under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against any of the Borrowers, and the performance of all other terms, conditions and covenants under the Loan Documents. "OFAC" has the meaning set forth in Section 4.31. "O&M PLANS" has the meaning set forth in Section 5.7. "OPERATING BUDGET" means, collectively, for any period, the Borrowers' budgets setting forth the Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties for such period, which budgets have been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" means, for any period, without duplication, all costs and expenses of operating, maintaining and managing the Properties determined in accordance with GAAP, including, without limitation, Impositions (due and payable during the applicable period of determination), Insurance Premiums, repair and maintenance costs, Management Fees and costs, fees payable to all Franchisors, utilities, accounting, legal and other professional fees, fees relating to environmental and financial audits, wages, salaries, payroll taxes and benefits, business franchise taxes, tips and gratuities paid to employees and staff and other personnel expenses, costs and expenses related to operating and maintaining all guest rooms, restaurants (including inventory and supplies), retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, and all other "costs and expenses" as defined in the Uniform System; but excluding principal and interest payments on the Loan, fees and expenses of a non-operating nature and fees and expenses due and payable to or for the benefit of Lender under this Loan Agreement or any of the other Loan Documents (including, without limitation, all loan servicing fees and expenses, and expenses related to a Cap), expenses which, in accordance with GAAP, should be capitalized, any expense paid by a tenant that would otherwise be an Operating Expense, capital expenditures, tenant improvement allowances and leasing commissions, if any, asset management fees, any payment or expense for which each Borrower was or is to be reimbursed from proceeds of the Loan or insurance or by any third 16 party, any fees or expenses paid to any partner or member of the Borrowers for services provided to any of the Borrowers and any non-cash charges such as depreciation and amortization. Operating Expenses shall not include federal, state or local income taxes or legal and other professional fees unrelated to the operation of the Properties. "OPERATING REVENUES" means, without duplication, all revenues and receipts of the Borrowers from operation of the Properties or otherwise arising in respect of the Properties which are properly allocable to the Properties for the applicable period in accordance with GAAP, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants and bars (including without limitation, service charges for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, health club membership fees, food and beverage wholesale and retail sales, service charges, convention services, special events, audio-visual services, boat cruises, travel agency fees, internet booking fees, telephone charges, laundry services, vending machines and otherwise, all rents, revenues and receipts now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the possession, use or occupancy of all or any portion of the Properties or personalty located thereon, or rendering of service by any of the Borrowers or any operator or manager of the hotel or commercial space (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores and deposits securing reservations of such space (only to the extent such deposits are not required to be returned or refunded to the depositor)), proceeds from rental or business interruption insurance relating to business interruption or loss of income for the period in question and any other items of revenue which would be included in operating revenues under the Uniform System; but excluding proceeds from the sale of FF&E, abatements, reductions or refunds of real estate or personal property taxes relating to the Properties, dividends on insurance policies relating to the Properties, condemnation proceeds arising from a temporary taking of all or a part of any Properties, security and other deposits until they are forfeited by the depositor, advance rentals until they are earned, proceeds from a sale, financing or other disposition of the Properties or any part thereof or interest therein and other non-recurring revenues as determined by Lender, insurance proceeds (other than proceeds from rental or business interruption insurance), other condemnation proceeds, capital contributions or loans to any of the Borrowers, disbursements to any of the Borrowers from the Reserves, sales, use and occupancy taxes collected from customers or patrons of the Properties to be remitted to the applicable taxing authorities, and gratuities or service charges collected on behalf of and remitted to employees or contractors of the Properties. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. "PAYMENT DATE" means the first day of each calendar month occurring during the term of the Loan (or if such day is not a Business Day, the immediately succeeding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the other Liens of the Loan Documents in favor of Lender, (ii) the items shown in Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not yet due and payable or Liens arising after the date hereof which are being contested in good faith by appropriate proceedings promptly 17 instituted and diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case of Liens arising after the date hereof, statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business and discharged by the Borrowers by payment, bonding or otherwise within forty-five (45) days after the filing thereof or which are being contested in good faith in accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and customary purchase money financing of personal property and equipment leasing to the extent the same are created in the ordinary course of business in accordance with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against real property which do not materially adversely affect (A) the ability of the Borrowers to pay any of their obligations to any Person as and when due, (B) the marketability of title to the Properties, (C) the fair market value of the Properties, or (D) the use or operation of the Properties as of the Closing Date and thereafter; (vii) rights of existing and future tenants, as tenants only, pursuant to the Leases; (viii) any other Lien to which Lender may expressly consent in writing; and (ix) Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or 18 (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5. "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6. "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General Partner and Member. "PROHIBITED PERSON" has the meaning set forth in Section 4.31. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT A, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the Borrowers and which shall be encumbered by and are more particularly described in the respective Mortgages: provided that, following a Release, "PROPERTIES" means each of the Properties that remain encumbered by the Mortgages as Collateral for the Loan. "PROPERTY CONDITION REPORT" means those certain property condition reports for the Properties as described on EXHIBIT J. "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties described on EXHIBIT G and any future Property Improvement Plans required to be implemented by the applicable Franchisor. "PROPERTY RELEASE" has the meaning set forth in Section 11.4. "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization; 19 and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. "RATING CRITERIA" with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" means all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties received by the Borrowers or any Related Person of the Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which any of the Borrowers or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE" has the meaning set forth in Section 11.4. "RELEASE DATE" has the meaning set forth in Section 11.4. "RELEASE PRICE" means an amount equal to one hundred twenty-five percent (125%) of the Allocated Loan Amount of the applicable Property. "RENT ROLL" has the meaning set forth in Section 3.1. "RENTS" has the meaning set forth in the Mortgages. "REPLACEMENTS" has the meaning set forth in Section 6.4. "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5. "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "RESERVES" means the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Document, including without limitation, the reserves established pursuant to Article VI. "RESTORATION" has the meaning set forth in Section 5.5. 20 "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five percent (5%) of the Aggregate Allocated Loan amount of the applicable Property, not to exceed $500,000, per Property per occurrence. "REVPAR" means average room revenues per available room per day. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto; which payment amounts were calculated based upon a twenty-five (25) year amortization schedule at the Interest Rate. In the event that the amount of principal prepayments on the Loan from application of casualty insurance proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in the aggregate, from the Closing Date or from the date of the last re-amortization of the Loan under this sentence, Lender shall recalculate the Scheduled Mortgage Principal Payments based upon the then remaining principal amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE 2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto in its entirety. "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" means a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEE" has the meaning set forth in Section 2.11. "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the date of formation of the applicable Person in its respective jurisdiction of formation. "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period, (iii) a calculation of the Debt Service Coverage Ratio and the Debt Yield for the applicable period (which shall not be 21 binding on Lender), and (iv) such other financial reports as the subject entity shall routinely and regularly prepare. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TIER 1 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT I. "TIER 2 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT I. "TIER 3 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT I. "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart Title Insurance Company, as co-insurers, and/or such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title insurance pertaining to the Mortgages issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, (y) the failure to pay to any Franchisor any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT") and the continuance thereof beyond any applicable notice and grace period under such Franchise Agreement or the occurrence of one or more breaches or defaults (other than Franchise Payment Defaults) and the continuance thereof beyond all applicable notice and grace periods, if any, under such Franchise Agreements (or such other cure periods as may be provided by the applicable Franchisors in writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or more of the outstanding principal balance of the Loan; provided, however, no Uncured Franchise Default shall be deemed to have occurred under clause (x) above with respect to any Property following the voluntary or involuntary termination of the applicable Franchise Agreement if (a) within ten (10) Business Days of the termination of such Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)), the applicable Borrower delivers to Lender evidence reasonably satisfactory to Lender that such Borrower is diligently pursuing efforts to enter into a new Franchise Agreement with an Acceptable Franchisor for the applicable Property and such Borrower shall thereafter diligently and continuously pursue such efforts to enter into a new Franchise Agreement, (b) at the time of such termination no other Property shall be in 22 operation without being subject to a Franchise Agreement, (c) the Allocated Loan Amount of the Property covered by such Franchise Agreement is not more than five percent (5%) of the outstanding principal balance of the Loan or such Property shall not be in operation for more than five (5) consecutive days without being subject to a Franchise Agreement, and (d) no Property shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. "WORK" has the meaning set forth in Section 6.7. "WORK RESERVES" has the meaning set forth in Section 6.7. "ZONING REPORTS" means those certain zoning and site requirements summaries for the Properties as described on EXHIBIT K. SECTION 1.2 ACCOUNTING TERMS. For purposes of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any reference to any Person may include such Person's respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. 23 ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrowers contained herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to borrow from Lender, a loan in the original principal amount of ____________ (the "LOAN"). (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to Lender a Promissory Note, dated of even date herewith (as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the order of Lender, in the original principal amount of ____________. (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be used to (i) refinance existing indebtedness; (ii) pay all recording fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable legal fees and expenses of counsel to Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) establish the Reserves required hereunder; and (iv) provide for general corporate purposes, including, without limitation, payment of transaction costs and expenses incurred by the Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrowers. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall bear interest at a rate per annum equal to _____ percent (__%) (the "INTEREST RATE"). (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is four percent (4%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT RATE"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in arrears. (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this 24 subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 RESERVED. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments of interest and principal on the Note as follows: (i) The Borrowers shall make a payment to Lender of interest only on the Closing Date for the period from and including the Closing Date through and including the last day of the calendar month in which the Closing occurs; and (ii) Commencing on August 1, 2004 and on each Payment Date thereafter through but not including the Maturity Date, the Borrowers shall make a payment of interest on the Loan for the prior calendar month, and in addition shall make a payment of principal on the Loan in an amount equal to the Scheduled Mortgage Principal Payment for such Payment Date. (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such day, 25 or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrowers on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to have satisfied their obligations to make such payments. Upon the occurrence and during the continuance of an Event of Default, payments shall be applied to the Obligations in such order as Lender shall determine in its sole and absolute discretion. SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance with the Loan Documents, the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon, and all other sums then owing to Lender hereunder and under the Note, the Mortgages and the other Loan Documents, shall be due and payable on the Maturity Date. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or in part at any time, except as expressly set forth in this provision. On and after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part, without payment of Prepayment Consideration, provided that (i) the Borrowers shall provide to Lender not less than fifteen (15) days prior written notice of such prepayment, (ii) together with such prepayment the Borrowers also shall pay all accrued and unpaid interest and all other Obligations then due and owing, (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith the Borrowers also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to the end of such calendar month. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur prior to May 1 2009, on account of acceleration of the Loan (whether or not due to an Event of Default), or otherwise, then except only as expressly provided in this Loan Agreement or the other Loan Documents to the contrary, the Borrowers shall pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due as to a prepayment of the Loan in connection with (i) application of insurance or condemnation proceeds required by Lender pursuant to this Loan Agreement or the Mortgages in the absence of 26 an Event of Default, (ii) Scheduled Mortgage Principal Payments. The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. (C) DEFINITIONS. The following terms shall have the meanings indicated: "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii) the Yield Maintenance Amount. "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if any, between (i) the present value on the date of prepayment (by acceleration or otherwise) of all future installments of principal and interest which the Borrowers would otherwise be required to pay under the Note from the date of such prepayment until the Maturity Date absent such prepayment, including the unpaid principal amount which might otherwise be due upon the Maturity Date absent such prepayment, with such present value being determined by the use of a discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent Basis" pursuant to the standards and practices of the Securities Industry Association), on the date of such prepayment of the United States Treasury Security having the term to maturity closest to what otherwise would have been the remaining term hereof absent such prepayment and (ii) the principal balance of the Loan on the date of such prepayment. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrowers; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrowers' obligation to pay the Obligations. SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrowers shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under 27 the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 RESERVED. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths of one percent (.05%) per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrowers and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrowers be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF CROSS-COLLATERALIZATION. (A) Until repayment of the Indebtedness and the Crossed Indebtedness and satisfaction of all obligations under this Agreement and the Crossed Loan Agreement, each Borrower acknowledges and agrees (subject to Lender's election(s) at Lender's sole discretion from time to time pursuant to Section 2.12(G) below): (i) that the Properties shall secure not only the Loan but also the Crossed Loans, and that the Liens of the Loan Documents shall constitute Liens securing not only the Loan but also the Crossed Loans; (ii) that the Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured by such Crossed Properties; and (iii) that Lender would not make the Loan to the Borrowers or the loans constituting the Crossed Loans unless the Borrowers and the Crossed Borrowers granted liens on the Properties and, in addition, the Crossed Properties of the Crossed Borrowers to secure the payment of the Loan and the Crossed Loans. (B) Until the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, the Borrowers (i) shall have no right of subrogation with respect to the Crossed Loans and (ii) waive any right to enforce any remedy which Lender now has or may hereafter have against the Crossed Borrowers, any endorser or any guarantor of all or any part of the Crossed Loans or any other individual or entity, and the Borrowers waive any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of the Crossed Loans or any other liability of any of the Crossed Borrowers to Lender. Should any Borrower have the right, notwithstanding the foregoing, to exercise its subrogation rights, each Borrower hereby expressly and irrevocably (1) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that such Borrower may have to the payment in full in cash of the Loan 28 and the Crossed Loans and (2) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Loan and the Crossed Loans are paid in full in cash. Each Borrower acknowledges and agrees that this subordination is intended to benefit Lender and shall not limit or otherwise affect any Borrower's liability hereunder or the enforceability of this Loan Agreement or the Crossed Loan Documents. (C) Each Borrower agrees that any and all claims of such Borrower against any of the Crossed Borrowers or any endorser or any guarantor of all or any part of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with respect to any obligations, liabilities or indebtedness now or hereafter owing by the Crossed Obligors, or any of them, to such Borrower, or otherwise existing or claimed to be owed or to exist on the part of any of the Crossed Obligors, or against any of their respective properties (collectively, the "CROSSED PARTY OBLIGATIONS") shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any right of any Borrower to ask, demand, sue for, take or receive any payment from any of the Crossed Obligors, all rights, liens and security interests of each Borrower, whether now or hereafter arising and howsoever existing, in and to any assets of any of the Crossed Obligors shall be and are subordinated to the rights of Lender in those assets under the Loan Documents, the Crossed Loan Documents or otherwise, and no Borrower shall, until the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, (i) assert, collect, sue upon, or enforce all or any part of the Crossed Party Obligations; (ii) commence or join with any other creditors of any of the Crossed Obligors in commencing any bankruptcy, reorganization, receivership or insolvency proceeding against any of the Crossed Obligors; (iii) take, accept, ask for, sue for, receive, set off or demand any payments upon the Crossed Party Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to be created liens, security interests, mortgages, deeds of trust or pledges of or with respect to any of the assets of any of the Crossed Obligors in favor of or for the benefit of such Borrower. (D) If all or any part of the assets of any of the Crossed Obligors, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Crossed Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Crossed Obligor is dissolved or if substantially all of the assets of any such Crossed Obligor are sold, then, and in any such event (such events being herein referred to as an "CROSSED OBLIGOR INSOLVENCY EVENT"), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable to any Borrower upon or with respect to any Crossed Party Obligations shall be paid or delivered directly to the Lender for application on the Loan and the Crossed Loans, due or to become due, until such Loan and Crossed Loans shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by any Borrower upon or with respect to the Crossed Party Obligations after any Crossed Obligor Insolvency Event and prior to the payment in full and satisfaction of all of the Loan and Crossed Loans, such Borrower shall receive and hold the same in trust, as trustee, for the benefit of Lender and shall forthwith deliver the same to Lender in precisely the form received (except for the endorsement or assignment of such Borrower where necessary), for application to any of the Loan or Crossed Loans, due or not due, and, until so delivered, the same shall be held in trust by such Borrower as the property of Lender. If such Borrower fails to make 29 any such endorsement or assignment to Lender, Lender or any of its officers or employees is irrevocably authorized to make the same. Each Borrower agrees that until the Loan and Crossed Loans have been paid in full (in cash) and satisfied, no Borrower will assign or transfer to any individual or entity (other than Lender) any claim such Borrower has or may have against any Crossed Obligor. (E) Subject to the provisions of Section 2.12(G), to the extent that any collection upon any of the Loan or the Crossed Loans is made by Lender from one of the Crossed Borrowers or the Crossed Properties or other assets of the Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all other Crossed Loans Collections then previously or concurrently made by such Crossed Borrower, exceeds the amount which otherwise would have been collected from such Crossed Borrower if each Borrower and each Crossed Borrower had paid the portion of the Loan and Crossed Loans satisfied by such Crossed Loans Collection in the same proportion as such Crossed Borrower's Allocable Amount (as defined below) (as determined immediately prior to such Crossed Loans Collection) bore to the aggregate Allocable Amounts of each Borrower and each Crossed Borrower as determined immediately prior to the making of such Crossed Loans Collection, then, following payment in full in cash of the entire Loan and Crossed Loans, such Crossed Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each Borrower and each of the other Crossed Borrowers for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Crossed Loans Collection. As of any date of determination, the "ALLOCABLE AMOUNT" of any Borrower or any Crossed Borrower shall be equal to the maximum amount of the claim which could then be recovered from such Borrower or Crossed Borrower under the Loan Documents and Crossed Loan Documents without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. The foregoing provision shall be for the benefit of each of the Crossed Borrowers and Lender, but shall be subject to modification as provided in Section 2.12(G) below and to amendment by agreement of the Borrowers and Lender, in each case without necessity of any agreement, acknowledgment or approval of any Crossed Borrower or any notice to any Crossed Borrower. Section 2.12(E) of each of the Crossed Loan Agreements contains provisions similar to this Section 2.12(E) for the benefit of Lender and (subject to the terms thereof) the Crossed Borrowers. This Section 2.12(E) and Section 2.12(E) of each of the Crossed Loan Agreements are intended only to define the relative rights of the Borrowers and Crossed Borrowers, and nothing set forth in this Section 2.12(E) or in Section 2.12(E) of each of the Crossed Loan Agreements is intended to or shall impair the liens and security interests of the Loan Documents and the Crossed Loan Documents or the obligations of the Borrowers and the Crossed Borrowers thereunder. Each Borrower acknowledges that the rights of contribution and indemnification under this Section 2.12(E) and under Section 2.12(E) of the Crossed Loan Agreements constitute assets of the Borrowers or Crossed Borrowers to which such contribution and indemnification is owing, and any such right of contribution and indemnification owing to any Borrower under Section 2.12(E) of any of the Crossed Loan Agreements shall constitute additional Crossed Party Obligations for all purposes under this Section 2.12. (F) Each Borrower hereby consents and agrees to each of the following, and agrees that such Borrower's obligations under this Loan Agreement and the other Loan Documents and the 30 Liens created under this Loan Agreement and the other Loan Documents securing the Loan and the Crossed Loans shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) that such Borrower might otherwise have as a result of or in connection with any of the following: (i) Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Crossed Loans, the Crossed Loan Documents, or other document, instrument, contract or understanding between the Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed Loans or any failure of Lender to notify such Borrower of any such action. (ii) Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to the Crossed Borrowers. (iii) The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of any of the Crossed Borrowers or any other party at any time liable for the payment of all or part of the Crossed Loans; or any dissolution of any of the Crossed Borrowers, or any sale, lease or transfer of any or all of the assets of any of the Crossed Borrowers, or any changes in the shareholders, partners or members of any of the Crossed Borrowers; or any reorganization of any of the Crossed Borrowers. (iv) The invalidity, illegality or unenforceability of all or any part of the Crossed Loans, or any document or agreement executed in connection therewith, for any reason whatsoever, including without limitation the fact that (A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law, (B) the act of creating the Crossed Loans or any part thereof is ultra vires, (C) the officers or representatives executing the Crossed Loan Documents or otherwise creating the Crossed Loans acted in excess of their authority, (D) the Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Crossed Loans wholly or partially uncollectible from the Crossed Borrowers, (F) the creation, performance or repayment of the Crossed Loans (or the execution, delivery and performance of any document or instrument representing part of the Crossed Loans or executed in connection with the Crossed Loans, or given to secure the repayment of the Crossed Loans) is illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that each Borrower shall remain liable hereon regardless of whether the Crossed Borrowers or any other person be found not liable on the Crossed Loans or any part thereof for any reason. (v) Any full or partial release of the liability of the Crossed Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Crossed Loans, or any part thereof, it being recognized, acknowledged and agreed by each Borrower that such Borrower has not been induced to enter into this Loan Agreement or the other Loan Documents on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or 31 perform the Loan or such Borrower's obligations under the Loan Agreement or the other Loan Documents, or that Lender will look to other parties to pay or perform the Crossed Loans. (vi) The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Crossed Loans. (vii) Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Crossed Loans. (viii) The failure of or refusal of Lender or any other party acting on behalf of Lender to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (A) to take or prosecute any action for the collection of any of the Crossed Loans, (B) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (C) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Crossed Loans. (ix) The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Crossed Loans, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by each Borrower that it is not entering into this Loan Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Crossed Loans. (x) Any payment by any of the Crossed Borrowers to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to any of the Crossed Borrowers or someone else. (xi) Any other action taken or omitted to be taken with respect to the Crossed Loan Documents, the Crossed Loans, or the security and collateral therefor. (G) Notwithstanding anything to the contrary set forth in this Loan Agreement, Lender may, at its sole option and in its sole discretion, from time to time (one or more times) deliver written notice to the Borrowers stating that this Loan Agreement, the Mortgages and the other Loan Documents shall no longer secure one or more (at Lender's sole election) of the Crossed Loans (each a "CROSS RELEASE NOTICe"), whereupon (i) this Loan Agreement and the other Loan Documents shall no longer secure any of the Crossed Loans for which a Cross Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and, collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side Agreement and other Crossed Loan Documents executed and delivered by the Excluded Borrowers with respect to any Excluded Loan are herein referred to as the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT" and "EXCLUDED 32 LOAN DOCUMENTS", respectively, and each Crossed Property encumbered by the Excluded Loan Documents is herein referred to as an "EXCLUDED PROPERTY"), (ii) each Cross Guaranty of the Loan executed by each Excluded Borrower, together with each Cross Guaranty of an Excluded Loan executed by the Borrowers (herein collectively referred to as the "EXCLUDED GUARANTIES") shall be deemed automatically terminated and of no further force or effect, (iii) each reference herein and in the other Loan Documents to the "Crossed Loans" shall be deemed to exclude the Excluded Loans, (iv) each reference herein and in the other Loan Documents to the "Crossed Loan Agreements", "Crossed Mortgages", "Crossed Loan Documents", "Crossed Properties", "Cross Side Agreements" and "Cross Guaranties" shall be deemed to exclude the Excluded Loan Agreement, the Excluded Mortgages, the Excluded Loan Documents, the Excluded Property, the Excluded Side Agreements and the Excluded Guaranties, respectively, (v) each reference herein and in the other Loan Documents to the "Crossed Borrowers" and the "Crossed Obligors" shall be deemed to exclude each Excluded Borrower, (vi) the provisions of Section 2.12(E) of this Loan Agreement shall not apply to any Crossed Loans Collection from any Excluded Borrower or its Excluded Property and the Borrowers shall have no obligation or liability on account thereof; and (vii) Borrowers shall no longer be beneficiaries of the covenants and agreements set forth in Section 2.12(E) of any Excluded Loan Agreement, and the Borrowers shall have no rights or claims on account of any contribution or indemnification obligations of any Excluded Borrower under Section 2.12(E) of any Excluded Loan Agreement. In addition to and without limiting the foregoing, the Borrowers hereby agree to fully cooperate with Lender, if Lender is considering the termination of the cross collateralization and cross default of the Loan and Loan Documents with any of the Crossed Loans, including, but not limited to (x) amending this Loan Agreement and the other Loan Documents as may be required by Lender to effectuate such termination of the cross collateralization and cross default provisions thereof, and (y) updating and/or endorsing the title insurance policies (at Lender's cost as to additional premium charges, if any) to reflect the continuation of the first priority lien of this Loan Agreement. (H) In the event the Loan is repaid or defeased in full in accordance with the provisions of this Loan Agreement and the other Loan Documents, then provided no Event of Default then exists hereunder, and no "Event of Default" (as defined in any of the Other Crossed Loan Agreements) exists under any of the Other Crossed Loan Documents, the cross collateralization and cross default of the Loan and Loan Documents with the Other Crossed Loans shall terminate and all the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan and the provisions of Section 2.12(G) above shall become automatically applicable with respect thereto. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to fund the Loan are subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrowers and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not 33 be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender a certificate duly executed by the Borrowers stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. (B) DEPOSITS. The deposits required herein, including without limitation, the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrowers' option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower Party and all other Persons executing any agreement on behalf of any Borrower Party shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of each Borrower by the chief financial officer (or similar officer of the Borrowers) stating that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrowers or the projected cash flow of the Borrowers or the Properties, in each case taken as a whole, has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, specifying such change in detail), and that, to the Borrowers' Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operations of the Borrowers and the Properties, in each case taken as a whole, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrowers' Knowledge, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Morris, Manning & Martin, LLP or other legal counsel for the Borrowers satisfactory to Lender, written legal opinions, each in form and substance acceptable to Lender, as to such matters as Lender shall request, including opinions to the effect that (i) each of the Borrower 34 Parties is duly formed, validly existing, and in good standing in its state of organization and, in the case of each Borrower, in each state where its Property is located, (ii) this Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Deposit Account Agreement and Cash Management Agreement have been duly authorized, executed and delivered by Borrower and Manager and are enforceable in accordance with their terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) no Borrower, Member or General Partner would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrowers' local counsel in each state where the Properties are located as to the enforceability of, and the creation and perfection of Liens under, the Mortgages and the Assignments of Leases and such other matters as Lender may reasonably request; (b) [intentionally omitted]; (c) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for each Borrower that is a single member limited liability company formed under the laws of the State of Delaware that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous written consent of the board of directors of Member including the Independent Directors, or the unanimous prior written consent of the board of managers' of each Borrower, including the Independent Directors') would be required for a voluntary bankruptcy filing by each such Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors) would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law the bankruptcy or dissolution of Member would not cause the dissolution of any of the Borrowers and the bankruptcy or dissolution of the sole shareholder or member would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of any of the Borrowers and creditors of Guarantor shall have no legal or equitable remedies with respect to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of each Borrower and Member; and (d) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received and approved pro forma Title Policies for the Mortgages, and as of the Closing, each Title Company shall be irrevocably committed and prepared immediately to issue the Title Policies or binding commitments. The Title Policies shall be in form and substance satisfactory to Lender. Without limitation, each Title Policy shall be issued on an ALTA form acceptable to Lender by each Title Company or if an ALTA form is not available in the applicable jurisdiction, another form acceptable to Lender, together with such reinsurance and direct access agreements as Lender may require, insuring that the Mortgages are valid first and prior enforceable liens on each Borrower's fee simple interest or ground leasehold interest, as the case may be, in the applicable Property (including any easements appurtenant thereto) subject only to such exceptions to coverage as are acceptable to Lender, including the Permitted Exceptions. Each Title Policy shall contain such endorsements as Lender may require (to the extent available in the state where 35 the Properties is located) in form acceptable to Lender, including deletion of the creditors' rights exception and affirmative endorsement coverage for creditors' rights risks. (G) SURVEY. Lender shall have received a survey of each of the Properties, certified to Lender and its successors, assigns and designees and to each Title Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or Lender shall have received both (x) a "no change" affidavit from each Borrower with respect to such Borrower's most recent Survey sufficient to cause the Title Company to provide current survey coverage to Lender in the applicable Title Policy without exception for matters that would be revealed by a current and accurate survey of the applicable Property, except for matters specifically shown on such most recent Survey, and (y) a reliance letter (to the extent any such surveys are not currently addressed to Lender) in form and substance satisfactory to Lender, permitting Lender to rely on the Survey (and any certification thereof) as if originally addressed and certified to Lender. Each Survey shall contain the minimum detail for land surveys as most recently adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall contain Lender's standard form certification, and shall show no state of facts or conditions reasonably objectionable to Lender. (H) ZONING. On or before the Closing Date, Lender shall have received evidence reasonably satisfactory to Lender as to the zoning and subdivision compliance of each of the Properties. (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business (including without limitation, each state in which the Properties are located for the applicable Borrower(s) and, to the extent required by law, Member and General Partner). Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to Lender for each Borrower Party (including for Guarantor) and for the Properties. If any such statements are 36 not available for the Properties, then the Borrowers shall provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year. (M) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the applicable Borrower. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements (including any Property Improvement Plan) and Franchisor Letters for each of the Properties duly executed by the applicable Franchisors. (O) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL") in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases, and the amount of security deposit being held by the Borrowers under each Material Lease, if any. (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases, as amended. (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender shall have received copies of the final, unconditional certificates of occupancy issued with respect to each of the Properties, together with all other applicable licenses (including, without limitation, each liquor license and beer permit), permits and approvals required for each Borrower to own, use, occupy, operate and maintain each of the Properties as a hotel. (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date, Lender shall have received copies of certificates of insurance (dated not more than twenty (20) days prior to the Closing Date) regarding insurance required to be maintained under this Loan Agreement and the other Loan Documents, together with endorsements satisfactory to Lender naming Lender as an additional insured and loss payee, as required by this Loan Agreement, under such policies. In addition, as to any insurance matters arising under Environmental Laws or pertaining to any environmental insurance that any of the Borrowers has with respect to any Property, the same shall be endorsed to Lender as required by this Loan Agreement and shall name Lender as an insured, additional insured and/or loss payee, as applicable. 37 (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to each of the Properties, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender shall have received a property condition report for each of the Properties, which shall be prepared by an engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion. Each such report shall set forth any items of deferred maintenance at the applicable Property. (U) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of each of the Properties from a state certified appraiser engaged by Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search reports with respect to the Borrowers, Guarantor, Managers, General Partner and Member, all dated not more than thirty (30) days prior to the Closing Date. (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days prior to the Closing Date, Lender shall have received payoff demand letters and wiring instructions from each lender or other obligee of any existing indebtedness which is required to be repaid pursuant to this Loan Agreement. (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (Z) OTHER REVIEW. Lender shall have completed all other review of the Borrower Parties, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrower Parties shall have satisfied such other reasonable criteria as Lender may reasonably specify. (AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date, Lender shall have received (i) true and complete copies of each of the Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements acceptable to Lender, duly executed by each Ground Lessor. 38 ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, each Borrower represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrowers, General Partners and Members. SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower Party of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower Party; (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower Party; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower Party or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower Party or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or imposition of any material Lien (other than the Lien of the Loan Documents) upon the Properties or assets of any Borrower Party; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower Party, which approvals or consents as set forth on SCHEDULE 4.2 have been obtained on or before the 39 dates required under such material Contractual Obligation, but in no event later than the Closing Date. (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower Party that is a party thereto, enforceable against each of the Borrower Parties, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No Borrower Party has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower Party has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the Borrowers, their Affiliates and the Properties which have been furnished by or on behalf of the Borrowers to Lender pursuant to this Loan Agreement present fairly the financial condition of the Persons covered thereby as of the dates thereof and the results of their operations for the periods then ended, and, to the Borrowers' Knowledge after due inquiry, have been prepared in accordance with GAAP consistently applied (except as disclosed therein). Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements. SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the Borrowers shall have no outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to the Properties, free and clear of all Liens except for the Permitted Encumbrances. The Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Borrowers as permitted hereunder), subject only to the Permitted Encumbrances. The Mortgages, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) a valid, perfected first lien on each of the Properties, subject only to the Permitted Encumbrances, and (ii) perfected first priority security interests in and to, and perfected collateral assignments of, all personalty (including the Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. Lender will have a perfected first priority security interest in and to the FF&E owned by the Borrowers, if any, not located at the Properties. To the Borrowers' Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual Knowledge of the Borrowers, none is threatened. Except as set forth on SCHEDULE 4.5(A), no Person has any option or other right to 40 purchase all or any portion of any of the Properties or any interest therein. To the Borrowers' Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties which are or will be liens prior to, or equal or coordinate with, the lien of any of the Mortgages. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgages and this Loan Agreement, materially and adversely affect the value of any of the Properties, impair the use or operations of the Properties or impair the Borrowers' ability to pay its obligations in a timely manner. SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrowers' Knowledge, there are no illegal activities relating to controlled substances on any of the Properties. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, all material permits, licenses and certificates for the lawful use, occupancy and operation of each component of each of the Properties in the manner in which it is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, in the event that all or any part of the Improvements located on any Property is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrowers' Knowledge, no legal proceedings are pending or threatened with respect to the zoning of any Property. To the Borrowers' Knowledge, except as set forth in the Title Policies and/or the Surveys, neither the zoning nor any other right to construct, use or operate any Property is in any way dependent upon or related to any real estate other than such Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Borrowers with respect to any Property without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and complete copies (in all material respects) of all (i) Leases for more than five hundred (500) square feet of space at any Property and (ii) Material Agreements affecting the operation and management of the Properties, and such Leases and Material Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Except for the rights of each of the current Managers pursuant to the existing Management Agreements, no Person has any right or obligation to manage any of the Properties or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the 41 Properties, or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, none of the Properties are subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrowers' Knowledge, (i) the Material Leases are in full force and effect; (ii) the Borrowers have not given any notice of default to any tenant under any Material Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Material Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrowers, threatened) against the Borrowers by any tenant or former tenant. No rental in excess of one month's rent has been prepaid under any of the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. (C) NO RESIDENTIAL UNITS. There are no residential units in any of the Properties and, to each Borrower's Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Properties for dwelling purposes other than on a transient basis. (D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true and complete copy of each of the Management Agreements to which they are a party that will be in effect on the Closing Date, and such Management Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. The Management Agreements are in full force and effect and no default by any of the Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have delivered to Lender a true and complete copy of each of the Franchise Agreements to which they are a party, and such Franchise Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material default by the Borrowers, Manager or the applicable Franchisor exists thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the aggregate, do not and will not have a Material Adverse Effect. Except for the Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no other property improvement plans or similar capital improvement plans or obligations required by any Franchisor pursuant to any Franchise Agreement, in effect for any of the Properties. 42 SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as set forth in the Property Condition Reports for the Properties delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in good condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrowers are not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of each of the Properties (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of each of the Properties as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of each of the Properties as now used or presently contemplated. Except as may be shown on the applicable Survey, to the Borrowers' Knowledge no part of any of the Properties is within a flood plain and none of the Improvements create encroachments over, across or upon the Properties' boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each of the Properties for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrowers' Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at any of the Properties is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, there are no judgments outstanding against any Borrower Party, or affecting any of the Properties or any property of any Borrower, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the Borrowers' Knowledge, threatened against any Borrower Party that could reasonably be expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each Primary Borrower Party required to be filed have been timely filed (or each Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon such Person and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrowers' Knowledge, there is not presently pending any special assessment against any of the Properties or any part thereof. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Primary Borrower Parties is a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. 43 SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no Primary Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of any Primary Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from any Borrower Parties' actions. SECTION 4.16 INTENTIONALLY DELETED. SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the aggregate fair saleable value of the Borrowers' assets exceed and will, immediately following the making of the Loan, exceed the Borrowers' total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The aggregate fair saleable value of the Borrowers' assets is and will, immediately following the making of the Loan, be greater than the Borrowers' probable total liabilities, including the maximum amount of their Contingent Obligations on their debts as such debts become absolute and matured. Each Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond their ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrowers and the amounts to be payable on or in respect of obligations of the Borrowers). SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided 44 by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrowers that has had or could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrowers. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrowers or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate description of all policies of insurance for each Borrower that are in effect as of the Closing Date. No notice of cancellation has been received with respect to such policies, and, to each Borrower's Knowledge, the Borrowers are in compliance with all conditions contained in such policies. SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1) or more parcels which constitute separate tax lots. No part of any of the Properties is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lots or parcels comprising any of the Properties. SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person (other than the Beverage Companies), or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including any Property) is property of the estate, in any voluntary or involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law now or hereafter in effect. No Borrower Party and no property of any of them is under the possession or control of a receiver, trustee or other custodian. No Borrower Party has made any assignment for the benefit of creditors. No such assignment or bankruptcy or similar case or proceeding is now contemplated. SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to Lender in writing herein or in any of the Loan Documents, no Default exists. SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrowers have assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is 45 covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers are not and will not be subject to state statutes applicable to the Borrowers' regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining agreement. SECTION 4.29 RESERVED. SECTION 4.30 GROUND LEASES. (A) Each Ground Lease contains the entire agreement of the Ground Lessor and the applicable Borrower pertaining to each Ground Leased Property covered thereby. The Borrowers have no estate, right, title or interest in or to the Ground Leased Properties except under and pursuant to the Ground Leases. The Borrowers have delivered true and correct copies of each of the Ground Leases to Lender and the Ground Leases have not been modified, amended or assigned except as set forth on SCHEDULE 4.30. (B) To the Knowledge of the Borrowers, each Ground Lessor is the exclusive fee simple owner of its Ground Leased Property, subject only to the Ground Lease and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the lessor's interest in the applicable Ground Lease. (C) There are no rights to terminate any Ground Lease other than any Ground Lessor's right to terminate by reason of default, casualty, condemnation or other reasons, in each case as expressly set forth in the applicable Ground Lease. (D) Each Ground Lease is in full force and effect and to the Borrowers' Knowledge, no breach or default or event that with the giving of notice or passage of time would constitute a breach or default under any Ground Lease (a "GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or on the part of any Ground Lessor under any Ground Lease. All base rent and additional rent due and payable under the Ground Leases has been paid through the date hereof and the Borrowers are not required to pay any deferred or accrued rent after the date hereof under any of the Ground Leases except for certain deferred rental obligations payable under the Ground Lease for the Crowne Plaza, Albany, New York as set forth in the estoppel executed by the Ground Lessor under such Ground Lease and delivered to Lender prior to Closing. The Borrowers have not received any written notice that a Ground Lease Default has 46 occurred or exists, or that any Ground Lessor or any third party alleges the same to have occurred or exist. (E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive owner of the lessee's interest under and pursuant to the applicable Ground Lease and has not assigned, transferred, or encumbered its interest in, to, or under any Ground Lease (other than assignments that will terminate on or prior to Closing), except in favor of Lender pursuant to this Loan Agreement and the other Loan Documents. SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective officers, directors, partners, members, Affiliates or, to the knowledge of the Borrowers, shareholders is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED PERSON"). ARTICLE V COVENANTS OF BORROWER PARTIES The Borrowers covenant and agree that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrowers shall perform and comply with all covenants in this Article V applicable to such Person. SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrowers (on a consolidated basis), and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of their Financial Statements for such year to Lender. All such Financial Statements shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information for such calendar year. The annual Financial Statements for the Borrowers (on a consolidated basis) and Guarantor shall also be accompanied by a certification executed by the entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days after the end of each calendar quarter, the Borrowers on a consolidated basis (other than with respect to 47 income statements, which shall be on an individual property basis) shall provide copies of their Financial Statements for such quarter to Lender, together with a certification executed on behalf of each of the Borrowers by their respective chief executive officers or chief financial officers (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after the end of each calendar year, each Borrower shall provide to Lender a certified Rent Roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after the end of each calendar year, each Borrower shall also provide to Lender (a) a schedule of any retail Material Leases that expired during such calendar year and a schedule of retail Material Leases scheduled to expire within the next calendar year and (b) to the extent the Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar year. Within ninety (90) days after the end of each calendar year, each Borrower shall provide to Lender a statement of income and expenses for all retail space at each of the Properties owned and operated by the Borrowers and, to the extent provided to the Borrowers and not subject to confidentiality restrictions, sales reports for retail tenants for such year. (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, each Borrower shall provide, or cause Manager to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for each of the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly, and year to date operating statements prepared for such calendar month and for the trailing twelve (12) month period then ended, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of each of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a detailed explanation for any material deviations from budget) and setting forth that all disbursements and/or withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E Reserve have been made with respect to items of Capital Improvement only (as opposed to items that, in accordance with GAAP, would be included as an Operating Expense); (e) monthly and year to date detailed reports of Operating Expenses for each of the Properties, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement) for which Lender has approved a disbursement from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently available "OSI", or similar quality index, scores (including detailed 48 information regarding criteria and thresholds); (g) prior to Securitization of the Loan, market segmentation reports for the trailing twelve (12) month period for each of the Properties; and (h) a report setting forth (i) the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has continued beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the original Aggregate Allocated Loan Amount represented by such Properties), (iii) a summary report establishing that the Borrowers are diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. All of the above statements, reports and information shall be provided to Lender by email in Microsoft Excel format or other spreadsheet format reasonably acceptable to Lender (in the case of any statements, reports or information provided by third parties that are not Affiliates of the Borrowers, to the extent same are available in such format). Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of such Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to Lender such further documents and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice to the Borrowers. (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender by or on behalf of the Borrowers or Guarantor under this Section, the Borrowers or Guarantor also shall deliver to Lender a certification to Lender, executed on behalf of the Borrowers or Guarantor by their respective chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of the Borrowers, Guarantor and/or the Properties for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents 49 submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating (a) that, to their Knowledge after due inquiry, there does not exist any Default or Event of Default under the Loan Documents (or if any exists, specifying the same in detail), and (b) the Borrowers and Guarantor have complied with the applicable reporting requirements of this Section 5.1. (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and that of the Guarantor ends on December 31, and agrees that no change shall be made to each such fiscal year, without Lender's prior written consent. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business operations of such Borrower made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, each Borrower shall deliver to Lender a copy of its Federal income tax returns (or the return of the applicable Person into which such Borrower's Federal income tax return is consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of each calendar year, each Borrower shall deliver to Lender for its review for its Property a proposed Operating Budget and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap Event or Event of Default exists, the Borrowers may make changes to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Borrower, provided no such modification (together with all prior modifications taken as a whole) shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without Lender's prior written approval, which approval shall not be unreasonably withheld; provided, however, notwithstanding the foregoing during a Cash Trap Event, increases to the Operating Budget for any Property (not to exceed ten percent (10%) of the Operating Budget for such Property as a whole) will be permitted without Lender's consent for actual verifiable increases in utilities, water and sewer assessments and charges and real property taxes for the applicable Property over the amounts therefor set forth in the Operating Budget for such Property for the prior period. Notice of any modifications to the Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating Budget shall identify and set forth each Borrower's reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's 50 approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and the Borrowers shall promptly amend and resubmit for approval revised budgets or plans, as applicable, making such changes as are necessary to comply with the reasonable requirements of Lender. Until any such budget or plan for any year requiring Lender's approval has been approved or deemed approved, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is approved or deemed approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. (E) MATERIAL NOTICES. (i) The Borrowers shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of any Borrower, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrowers shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plan received from a Franchisor related to such Borrower's Property. (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining knowledge of any of the following events or conditions, such Borrower shall deliver a certificate executed on its behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action such Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. 51 (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrowers or any of the Properties not previously disclosed in writing by the Borrowers to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrowers or the Properties which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect, the Borrowers will give notice thereof to Lender and, upon request from Lender, provide such other information as may be reasonably available to them to enable Lender and its counsel to evaluate such matter. (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Borrowers, the Borrowers will deliver certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Borrowers and all material insurance coverage planned to be maintained by the Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver such other information and data with respect to such Person and its Affiliates or the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full force and effect their existence as a limited partnership, limited liability company, or corporation, as the case may be, and all rights and franchises material to its business, including their qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, each Borrower and, to the extent required by applicable law, General Partner and Member, shall at all times be qualified to do business in each of the states where the Properties are located. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) Except for those matters being contested pursuant to clause (B) below, the Borrowers will pay (i) all Impositions; (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrowers on their business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrowers shall not be required to pay, discharge or remove any Imposition or Claim relating to a Property so long as the Borrowers contest in good faith such Imposition, Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Property or any portion thereof, and so long as: (i) no Event of Default shall have occurred and be continuing, (ii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have given Lender prior written notice of their intent to contest 52 said Imposition or Claim; (iii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have deposited with Lender (or with a court of competent jurisdiction or other appropriate body reasonably approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss of any interest in the applicable Property or any part thereof arises, in Lender's reasonable judgment, during the pendency of such contest; (v) such contest does not, in Lender's reasonable determination, have a Material Adverse Effect; and (vi) such contest is based on bona fide, material, and reasonable claims or defenses. Any such contest shall be prosecuted with due diligence, and the Borrowers shall promptly pay the amount of such Imposition or Claim as finally determined, together with all interest and penalties payable in connection therewith. Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture of the applicable Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Claim for which a deposit was made shall be promptly repaid to the Borrowers unless an Event of Default shall have occurred, in which case said surplus may be retained by Lender to be applied to the Obligations. Notwithstanding any provision of this Section to the contrary, the Borrowers shall pay any Imposition or Claim which they might otherwise be entitled to contest if an Event of Default shall occur and be continuing, or if, in the reasonable determination of Lender, the applicable Property is in danger of being forfeited or foreclosed. If the Borrowers refuse to pay any such Imposition or Claim, Lender may (but shall not be obligated to) make such payment and the Borrowers shall reimburse Lender on demand for all such advances. SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrowers will continuously maintain the following described policies of insurance on each of the respective Properties without cost to Lender (the "INSURANCE POLICIES"): (i) Property insurance against loss and damage by all risks of physical loss or damage, including fire, sprinkler leakage, windstorm, hurricane, terrorism, and other risks covered by the so-called extended coverage endorsement covering the Improvements and personal property in amounts not less than the full insurable replacement value of all Improvements (less building foundations and footings) and personal property from time to time on the Properties and without sublimits, and bearing a replacement cost agreed-amount endorsement; (ii) Commercial general liability insurance, including death, bodily injury, innkeeper legal liability and broad form property damage coverage with a combined single limit in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate for any policy year; (iii) If any of the Properties are in an area prone to geological phenomena, including, but not limited to, sinkholes, mine subsidence or earthquakes, insurance covering such 53 risks in an amount equal to 100% of the full replacement cost of all improvements (without any deductions for depreciation) and with a maximum permissible deductible equal to the lesser of $25,000 or 10% of the face value of the policy; (iv) For each Property located in whole or in part in a federally designated "special flood hazard area", flood insurance in the maximum available amount; (v) An umbrella excess liability policy with a limit of not less than Twenty Million Dollars ($20,000,000) over primary insurance, which policy shall include coverage for so-called assumed and contractual liability coverage and automobile liability coverage, and coverage for safeguarding of personalty and shall also include such additional coverages and insured risks which are acceptable to Lender; (vi) Business interruption and/or rent loss insurance with an aggregate limit equal to at least the gross income from the Properties for an indemnity period commencing on the date of such casualty and ending at least six (6) months after completion of the Restoration (such amount being adjusted annually); (vii) Crime protection insurance covering all employees with access to funds and located in Guarantor's corporate offices with a limit of not less than One Million Dollars ($1,000,000) and with the same coverages and deductibles as currently in place at the Properties; (viii) Steam boiler, machinery and pressurized vessel insurance insuring against breakdown or explosion of such equipment on a replacement cost value basis, which shall not contain any exclusions for testing procedures; (ix) Worker's Compensation Insurance in statutory amounts, if any, at all times; (x) Insurance against loss or damage from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), in an amount at least equal to the Aggregate Allocated Loan Amount; (xi) During any period of construction, repair or restoration, builder's "all risk" insurance in an amount equal to not less than the full insurable value of the Properties (excluding building foundations and footings) against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may reasonably request; (xii) If the Properties are or become a "non-conforming use" under applicable zoning and building ordinances, or other requirements of the applicable Governmental Authority, law or ordinance coverage to compensate for the cost of demolition and the increased cost of construction, if available; (xiii) If the Borrowers, Manager or any of their respective Affiliates holds a liquor license for the Properties, liquor liability insurance (including "dram shop" liability) in an 54 amount not less than $1,000,000 for each common cause and $3,000,000 in the aggregate; provided that if such liquor license is held by any tenant under a Lease, the Borrowers shall cause such tenant to cause liquor liability insurance in an amount not less than the limits set forth above to be carried in such tenant's name, and shall include the Borrowers and Lender as additional insureds thereunder; (xiv) If reasonably required by Lender as a result of the release, disposal or existence of any Hazardous Materials on or about any Property after the date hereof (or as to which Lender obtains knowledge after the date hereof) or if such insurance is then customarily required by institutional lenders for securitized loans, environmental insurance, including mold coverage, in form and with coverages (including business interruption coverage) reasonably satisfactory to Lender; provided, however, without limiting or affecting Lender's right to require such environmental insurance with respect to any other Properties after the date hereof, Lender acknowledges that, as of the date hereof, environmental insurance shall only be required with respect to the Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford, Connecticut; (xv) Fiduciary liability insurance and directors and officers liability insurance ("D&O INSURANCE") with coverages at levels in effect as of the Closing Date; (xvi) Insurance against acts of terrorism, or insurance policies without an exclusion for damages resulting from acts of terrorism on terms consistent with the commercial property insurance policies required under subsection (i), (ii), (v) and (vi) above; (xvii) Such other insurance as may from time to time be reasonably required by Lender and which is then customarily required by institutional lenders for securitized loans secured by similar properties similarly situated, against other insurable hazards, including, but not limited to, malicious mischief, vandalism, windstorm and or earthquake, due regard to be given to the size and type of the Properties, Improvements, fixtures and equipment and their location, construction and use. Additionally, the Borrowers shall carry such insurance coverage as Lender may from time to time require if the failure to carry such insurance would result in a downgrade, qualification or withdrawal of any class of securities issued in connection with a Securitization. All Insurance Policies shall be in content (including, without limitation, endorsements or exclusions, if any), form, and amounts, and issued by companies, satisfactory to Lender from time to time and shall name Lender and its successors and assignees as their interests may appear as (x) an "additional insured" for each of the liability policies under this Section 5.4 hereof, and (y) a "mortgagee" for each of the property and casualty policies under this Section hereof, and shall (except for Worker's Compensation Insurance) contain a waiver of subrogation clause reasonably acceptable to Lender. Other than with respect to D&O Insurance, an insurance company shall not be satisfactory unless such insurance company (a) is licensed or authorized to issue insurance in the State where the applicable Property is located and (b) has a claims paying ability rating by the Rating Agencies of AA- (or its equivalent). Notwithstanding the foregoing, a carrier which does not meet the foregoing ratings requirement shall nevertheless be deemed acceptable hereunder provided that such carrier is reasonably acceptable to Lender and the Borrowers shall obtain and deliver to Lender a Rating Confirmation with respect to such carrier 55 from each of the Rating Agencies, provided, however, that: (a) if any insurance coverage required under this Section 5.4 is maintained by a syndicate of insurers, the preceding ratings requirements shall be deemed satisfied (without any required Rating Confirmation) as long as at least seventy five percent (75%) of the coverage (if there are four or fewer members of the syndicate) or at least sixty percent (60%) of the coverage (if there are five or more members of the syndicate) is maintained with carriers meeting the claims-paying ability ratings requirements by S&P and Moody's (if applicable) set forth above and all carriers in such syndicate have a claims-paying ability rating by S&P of not less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier providing the insurance described in clause (ii) above, so long as such carrier maintains a claims paying ability of not less than A- by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby) and (c) until the expiration of the current term of the applicable policies, Lender hereby approves Landmark American as the carrier providing the insurance described in clauses (i), (iv) and (vi) above (covering losses over the first $25,000,000 of coverage), so long as thereafter such carrier or any other carrier providing the above coverages maintains a claims paying ability of not less than A by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby). All Insurance Policies under Sections 5.4 (i), (iv), (vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438 BFU NS), or their equivalents (such endorsements shall entitle Lender to collect any and all proceeds payable under all such insurance, with the insurance company waiving any claim or defense against Lender for premium payment, deductible, self-insured retention or claims reporting provisions). All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Lender without ten (10) days' advance written notice to Lender. The Borrowers may obtain any insurance required by this Section through blanket policies; provided, however, that such blanket policies shall separately set forth the amount of insurance in force with respect to the Properties (which shall not be reduced by reason of events occurring on property other than the Properties) and shall afford all the protections to Lender as are required under this Section. Except as may be expressly provided above, all policies of insurance required hereunder shall contain no annual aggregate limit of liability, other than with respect to liability insurance. If a blanket policy is issued, a certified copy of said policy shall be furnished, together with a certificate indicating that Lender is an additional insured (and, if applicable, loss payee) under such policy in the designated amount. The Borrowers will deliver duplicate originals of all Insurance Policies, premium prepaid through the current expiration dates of such Insurance Policies, to Lender and, in case of Insurance Policies about to expire, the Borrowers will deliver duplicate originals of replacement policies satisfying the requirements hereof to Lender not less than ten (10) days prior to the date of expiration; provided, however, if such replacement policy is not yet available, the Borrowers shall provide Lender with an insurance certificate executed by the insurer or its authorized agent evidencing that the insurance required hereunder is being maintained under such policy, which certificate shall be acceptable to Lender on an interim basis until the duplicate original of the policy is available. The Borrowers shall furnish Lender receipts for the payment of premiums on such insurance policies or other evidence of such payment reasonably satisfactory to Lender in the event that such premiums have not been paid by Lender pursuant to the Loan Agreement. The requirements of this Section 5.4 shall apply to any separate policies of insurance taken out by the Borrowers 56 concurrent in form or contributing in the event of loss with the Insurance Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure to act or negligence of the Borrowers or their agents or employees, Lender or any other insured party which might, absent such agreement, result in a forfeiture or all or part of such insurance payment, other than the willful misconduct of Lender knowingly in violation of the conditions of such policy, (2) the occupation or use of the Properties or any part thereof for purposes more hazardous than permitted by the terms of such policy, (3) any foreclosure or other action or proceeding taken pursuant to this Loan Agreement or (4) any change in title to or ownership of the Properties or any part thereof. The property insurance and the boiler and machinery insurance described in Sections 5.4(i) and (x) hereof shall include "underground hazards" coverage; "time element" coverage by which Lender shall be assured payment of all amounts due under the Note, this Loan Agreement and the other Loan Documents; "extra expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage; and "expediting expense" coverage to facilitate rapid repair or restoration of the Properties. The Insurance Policies shall not contain any deductible in excess of $250,000. SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrowers will operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Borrowers, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each Borrower, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, each Borrower will operate and maintain its Property substantially in accordance with the applicable Operating Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrowers may, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Borrowers shall not perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the Properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Borrowers may perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrowers deliver notice to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Borrowers have cash available for 57 payment of the cost of such Material Alteration or, if the Borrowers fail to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an amount equal to 125% of the cost of such Material Alteration as reasonably estimated by Lender. Cash deposited by the Borrowers with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the conditions for disbursement of amounts from the Capital Improvement Reserve under Section 6.5 (including the requirements set forth under Section 6.7). Upon completion of the Material Alteration, the Borrowers shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. The Borrowers shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrowers shall give immediate written notice of the same to the insurance carrier and to Lender and shall promptly commence and diligently prosecute to completion, in accordance with the terms hereof, the repair and restoration of the Property as nearly as possible to the Pre-Existing Condition (a "RESTORATION"). The Borrowers hereby authorize and empower Lender as attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event of Default has occurred and is continuing), or any of them, to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this Section shall require Lender to incur any expense or take any action hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to hold the balance of such proceeds to be used to reimburse the Borrowers for the cost of Restoration of any of the Properties or (ii) subject to Subsection 5.5(C), to apply such proceeds to payment of the Obligations whether or not then due, in any order. Notwithstanding the foregoing, in the event of a casualty where the loss does not exceed the Restoration Threshold, the Borrowers may settle and adjust such claim; provided that (a) no Event of Default has occurred and is continuing and (b) such adjustment is carried out in a commercially reasonable and timely manner. (C) Lender shall not exercise Lender's option to apply insurance proceeds to payment of the Obligations if all of the following conditions are met: (i) no Event of Default then exists; (ii) Lender reasonably determines that there will be sufficient funds to complete the Restoration of the Property to at least substantially the Pre-Existing Condition and to timely make all payments due under the Loan Documents during the Restoration of the affected Property; (iii) Lender reasonably determines that the Net Operating Income of the Properties (including rental income or business interruption insurance) will be sufficient to pay principal and interest 58 on the Loan and the Mezzanine Loan and Operating Revenues of the Properties, after the Restoration thereof to the Pre-Existing Condition, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Note and the Mezzanine Loan; (iv) Lender determines that the Restoration of the affected Property to the Pre-Existing Condition will be completed not later than five (5) months prior to the expiration of any business interruption insurance, but in no event later than six (6) months prior to the Maturity Date; (v) less than fifty percent (50%) of the total floor area of the Improvements has been damaged, destroyed or rendered unusable as a result of such fire or other casualty; and (vi) such Property can be restored and repaired substantially to the condition it was in immediately prior to such casualty and in compliance with all applicable zoning, building and other laws and codes (the "PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to payment of the Obligations, such application shall be made on the Payment Date immediately following such election in accordance with the terms of the Cash Management Agreement. (D) If Lender elects or is obligated to make the insurance proceeds available for the Restoration of any Property and Lender is holding such proceeds, the Borrowers agree that, if at any time during the Restoration, the cost of completing such Restoration, as reasonably determined by Lender, exceeds the undisbursed insurance proceeds, the Borrowers shall, within ten (10) Business Days following the written demand by Lender, deposit the amount of such excess with Lender, and Lender shall first disburse such deposit to pay for the costs of such Restoration on the same terms and conditions as the insurance proceeds are disbursed. If the Borrowers deposit such excess with Lender and if, after completion of the Restoration, any funds remain from the combination of insurance proceeds and the funds so deposited with Lender by the Borrowers, and if no Event of Default shall have occurred and be continuing, then Lender shall promptly disburse to the Borrowers such remaining funds. (E) Lender may, at Lender's option, condition disbursement of any insurance proceeds on Lender's approval (which approval shall not be unreasonably withheld) of plans and specifications of an independent architect licensed in the state where the Property is located and reasonably satisfactory to Lender (the "ARCHITECT"), any and all contractors, subcontractors and materialmen engaged in the Restoration and the contracts under which they have been engaged, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. Lender shall not be obligated to disburse insurance proceeds more frequently than once every calendar month. If insurance proceeds are applied to the payment of the Obligations and provided no Event of Default exists, any such application of proceeds to principal shall be without any Prepayment Consideration and shall not extend or postpone the due dates of the monthly payments due under the Note or otherwise under the Loan Documents, or change the amounts of such payments. If Lender elects to apply all of such insurance proceeds toward the repayment of the Obligations, the Borrowers shall (subject to compliance with clauses (A), (B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property Release (without representation or warranty) of the applicable Property from the Lien of the Mortgage relating to such Property (in which event the Borrowers shall not be obligated to restore the applicable Property pursuant to Section 5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by which the Release Price for such Property exceeds the insurance proceeds received by Lender and applied to repayment of the Obligations. If any proceeds are applied to 59 reduce the Obligations under this Section 5.5, provided that no Event of Default has occurred and is continuing, no Prepayment Consideration shall be due and payable in connection with such application. Any amount of insurance proceeds remaining in Lender's possession after full and final payment and discharge of all Obligations shall be refunded to, or as directed by, the Borrowers or otherwise paid in accordance with applicable law. If the Property is sold at foreclosure or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of the applicable Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to such Property prior to such sale or acquisition. (F) In no event shall Lender be obligated to make disbursements of insurance proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Architect, less a retainage equal to the lesser of (x) the actual retainage required pursuant to the permitted contract, or (y) ten percent (10%) of such costs incurred until the Restoration has been completed. The retainage shall in no event be less than the amount actually held back by the Borrowers from contractors, subcontractors and materialmen engaged in the Restoration. The retainage shall not be released until the Architect certifies to Lender, or, if no Architect has been retained by Lender, Lender is reasonably satisfied, that the Restoration has been completed in accordance with the provisions of this Section 5.5 and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental authorities, and Lender receives final lien waivers and such other evidence reasonably satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the retainage. SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized representatives designated by Lender to visit and inspect during normal business hours its Property and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with such Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice of at least three (3) Business Days prior to visiting or inspecting any Property or such Borrower's offices. SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and delivered to Lender operations and maintenance programs (the "O&M PLANS") with respect to suspected asbestos, asbestos-containing materials, and/or mold located in certain Properties as set forth on Schedule 6.6 attached hereto, which conditions were disclosed in the applicable Environmental Reports for such Properties. Each applicable Borrower shall at all times implement and carry out the O&M Plan in accordance with its terms. Lender's requirement that the applicable Borrowers develop and comply with the O&M Plan shall not be deemed to constitute a waiver or modification of any covenants or agreements of the Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws as set forth in the Environmental Indemnity. SECTION 5.8 INTENTIONALLY DELETED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will (A) comply with the requirements of all present and future applicable laws, rules, regulations and 60 orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the operation or value of any Property, (B) maintain all licenses and permits now held or hereafter acquired by any Borrower, the loss, suspension, or revocation of which, or failure to renew, could have a material adverse effect on the operation or value of any Property and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party shall duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a material adverse effect on the operation or value of any Property. SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrowers shall not, nor shall the Borrowers authorize Manager or any other Person to, (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrowers shall furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification 61 of any Material Lease, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Borrowers shall not under any circumstances collect any such rent more than one month in advance. The Borrowers, at Lender's request, shall furnish Lender with executed copies of all Material Leases hereafter made. Each new Material Lease or a separate agreement with the tenant of such Material Lease shall be in recordable form and shall specifically provide that such Material Lease (i) is subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; (iii) that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; (iv) that the attornment of the tenant shall not be terminated by foreclosure; (v) that in no event shall Lender, as holder of the Mortgages or as successor landlord, be liable to the tenant for any act or omission of any prior landlord or for any liability or obligation of any prior landlord occurring prior to the date that Lender or any subsequent owner acquire title to the Property; and (vi) that Lender may, at Lender's option, accept or reject such attornment. SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS. (A) The Borrowers shall cause each Manager to manage the Properties in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and types customary for hotels comparable to each Property. The Borrowers shall (i) perform and observe all of the material terms, covenants and conditions of the Management Agreement on the part of each Borrower to be performed and observed, and (ii) promptly notify Lender of any notice to any of the Borrowers of any material default under the Management Agreement of which it is aware. If any of the Borrowers shall default in the performance or observance of any material term, covenant or condition of the applicable Management Agreement on the part of the Borrowers to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrowers from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrower, but shall be under no obligation, to pay any sums and to perform any act as may be reasonably appropriate to 62 cause such material conditions of the applicable Management Agreement on the part of the Borrowers to be performed or observed. (B) The Borrowers shall not surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager, or consent to the assignment by the Manager of its interest under the Management Agreement, in each case without (i) prior to a Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies. The Borrowers shall cause any new Manager with respect to any Property to execute and deliver a subordination of management agreement in substantially the form delivered in connection with the closing of the Loan. (C) Lender shall have the right to require any of the Borrowers to replace any Manager with a Person chosen by the Borrowers and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrowers if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrowers shall not terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. Notwithstanding the foregoing, the following changes to Franchise Agreements shall be permitted without Lender's prior written consent: (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with another Franchisor within the same Category, provided that the Borrowers shall not replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(ii) with respect to more than the lesser of (x) two (2) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided that the Borrowers shall not replace Franchise Agreements for more than one (1) Property, or for any Property with an Allocated Loan Amount of more than five percent 63 (5%) of the outstanding principal balance of the Loan pursuant to this Section 5.13(D)(iii); and (iv) Entering into new Franchise Agreements (or amendments or addenda to existing Franchise Agreements) with the existing Franchisors for the applicable Properties for the same franchise brand, each in form substantially similar to the forms previously approved for the respective Properties by Lender, as required by the existing Franchisors under the respective Franchise Agreements in connection with the transfers of the applicable Properties and the direct and indirect ownership interests in the Borrowers made by the Borrower Parties and their Affiliates in connection with the Closing of the Loan. In connection with the replacement of any Franchisors permitted hereunder, the applicable Borrower shall, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender a Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, each Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants required to be performed and observed by the Franchisor under the Franchise Agreement. In addition, the Borrowers shall not, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. 64 SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become obligated under any Material Agreement pertaining to any Property without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) any Lease that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13 hereof (provided, however, that the foregoing shall not affect Borrowers' obligation to deliver Rating Confirmations with respect to any such Management Agreement if required under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all Receipts from the Properties into, and otherwise comply with, the Accounts established from time to time hereunder. Subject to Article VII hereof and the Cash Management Agreement, each Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrowers shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Mortgages and the other Loan Documents are legal, valid and binding obligations of the Borrowers and have not been modified or amended, or if modified or amended, describing such modification or amendments. (B) Within ten (10) Business Days following a written request by the Borrowers, Lender shall provide to the Borrowers a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrowers with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): (A) the Obligations and Crossed Indebtedness; 65 (B) (i) unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the financing of equipment or other personal property used at any Property in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days, and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal property or otherwise referred to in clauses (i) and (ii) above (excluding therefrom utility expenses of the Properties and fees payable to the Franchisors pursuant to the terms of the Franchise Agreements) outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan; and (C) the Mezzanine Loan. In no event shall any Indebtedness other than the Loan be secured, in whole or in part, by the Properties or any portion thereof or interest therein. SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not create, incur, assume or permit to exist any Lien on or with respect to the Properties, any other Collateral or any direct or indirect ownership interest in the Borrowers, except the Permitted Encumbrances and Liens on the ownership interests in the Borrowers securing the Mezzanine Loan. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Primary Borrower Party shall directly or indirectly create or become or be liable with respect to any Contingent Obligation. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted in this Loan Agreement, no Primary Borrower Party shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of such Borrower Party's partnership agreement, certificate of limited partnership, articles of incorporation, by-laws, articles of organization, operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such Primary Borrower Party. SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to the Manager under the Management Agreement, the Borrowers shall not pay any management, consulting, director or similar fees to any Related Person of the Borrowers or to any director, officer or employee of the Borrowers. The Borrowers shall not directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of any of the Borrowers or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrowers and upon fair and reasonable terms and which are no less favorable to any of the Borrowers than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of any Borrower. The Borrowers shall not make any payment or permit any payment to be made to any 66 Related Person of any of the Borrowers when or as to any time when any Event of Default shall exist. SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of any Borrower. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which any of the Borrowers is a debtor or any portion of the Properties is property of the estate therein. The Borrowers shall not file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or support any motion (irrespective of the subject of the motion), and the Borrowers shall not file or support any plan of reorganization. The Borrowers having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrowers or any ERISA Affiliate or increase the obligation of the Borrowers, provided that the Borrower shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC. 67 (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrowers regulating investments of governmental plans. SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 GROUND LEASES. (A) NO MODIFICATION. The Borrowers shall not modify or amend, or terminate or surrender any Ground Lease, in each case without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any attempted or purported modification, amendment, or any surrender or termination of any Ground Lease without Lender's prior written consent shall be null and void and of no force or effect. (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and when due each and all of its obligations under each Ground Lease in accordance with the terms of such Ground Lease, and shall not cause or suffer to occur any material breach or default in any of such obligations. The Borrowers shall keep and maintain each Ground Lease in full force and effect. The Borrowers shall exercise any option to renew or extend any Ground Lease and give written confirmation thereof to Lender within thirty (30) days after such option is exercised. Notwithstanding that certain of the obligations of the Borrowers under this Loan Agreement may be similar or identical to certain of the obligations of the Borrowers under the Ground Leases, all of the obligations of the Borrowers under this Loan Agreement are and shall be separate from and in addition to its obligations under the Ground Leases. (C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any written notice that any Ground Lease Default has occurred, then the Borrowers immediately shall notify Lender in writing of the same and immediately deliver to Lender a true and complete copy of each such notice. Further, the Borrowers shall provide such documents and information as Lender shall reasonably request concerning the Ground Lease Default. (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be continuing, or if any Ground Lessor asserts that a Ground Lease Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Ground Lease, Lender, upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary, including, without limitation, 68 (i) performance or attempted performance of the applicable Borrower's obligations under the applicable Ground Lease, (ii) curing or attempting to cure any actual or purported Ground Lease Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the applicable Ground Leased Property for any or all of such purposes. Upon Lender's request, each Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each Ground Lease. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender, together with interest thereon from the date of expenditure at the Default Rate. (E) LEGAL ACTION. The Borrowers shall not commence any action or proceeding against any Ground Lessor or affecting or potentially affecting any Ground Lease or the Borrowers' or Lender's interest therein, the effect of which could cause an event of default or termination of any such Ground Lease, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrowers shall notify Lender immediately if any action or proceeding shall be commenced between any Ground Lessor and either Borrower, or affecting or potentially affecting any Ground Lease or either Borrower's or Lender's interest therein (including, without limitation, any case commenced by or against any Ground Lessor under the Bankruptcy Code). Lender shall have the option, exercisable upon notice from Lender to the Borrowers, to participate in any such action or proceeding with counsel of Lender's choice. The Borrowers shall cooperate with Lender, comply with the reasonable instructions of Lender, execute any and all powers, authorizations, consents or other documents reasonably required by Lender in connection therewith, and shall not settle any such action or proceeding without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the applicable Ground Lease, from time to time, at Lender's request, the Borrowers shall use commercially reasonable efforts to obtain and deliver to Lender within the time period required under the applicable Ground Lease, an estoppel certificate from each Ground Lessor setting forth (A) (i) the identities of the original lessor and lessee under the applicable Ground Lease and each of their respective successors, (ii) that the Ground Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modification), (iii) the rent payable under the Ground Lease, (iv) the dates to which all rent and other charges have been paid, (v) whether there are any alleged Ground Lease Defaults and, if so, setting forth the nature thereof in reasonable detail, and (vi) such other matters as Lender may reasonably request or (B) the matters required to be certified by the Ground Lessor under the applicable Ground Lease. The Borrowers shall not be required to request an estoppel from any Ground Lessor more than two (2) times in any calendar year. (G) BANKRUPTCY. (i) If any Ground Lessor shall reject any Ground Lease under or pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall not elect to treat the Ground Lease as terminated but shall elect to remain in possession of the applicable Ground Leased Property and the leasehold estate under such Ground Lease. The lien of the Mortgage covering 69 such Property does and shall encumber and attach to all of the Borrowers' rights and remedies at any time arising under or pursuant to Section 365 of the Bankruptcy Code, including without limitation, all of such Borrower's rights to remain in possession of such Property and the leasehold estate. (ii) The Borrowers acknowledge and agree that in any case commenced by or against the Borrowers under the Bankruptcy Code, Lender by reason of the liens and rights granted under the Mortgage covering such Property and the Loan Documents shall have a substantial and material interest in the treatment and preservation of such Borrower's rights and obligations under such Ground Lease, and that such Borrower shall, in any such bankruptcy case, provide to Lender immediate and continuous reasonably adequate protection of such interests. Each Borrower and Lender agree that such adequate protection shall include but shall not necessarily be limited to the following: (a) Lender shall be deemed a party to the Ground Lease (but shall not have any obligations thereunder) for purposes of Section 365 of the Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such action by Lender would adversely and materially affect the Borrowers' ability to prosecute, or defend, any such claims asserted therein, have standing to appear and act as a party in interest in relation to any matter arising out of or related to the Ground Lease or such Property. (b) The Borrowers shall serve Lender with copies of all notices, pleadings and other documents relating to or affecting the Ground Lease or the applicable Property. Any notice, pleading or document served by the Borrowers on any other party in the bankruptcy case shall be contemporaneously served by such Borrower on Lender, and any notice, pleading or document served upon or received by such Borrower from any other party in the bankruptcy case shall be served by such Borrower on Lender promptly upon receipt by such Borrower. (c) Upon written request of Lender, the Borrowers shall assume the Ground Lease, and shall take such steps as are necessary to preserve such Borrower's right to assume the Ground Lease, including without limitation using commercially reasonable efforts to obtain extensions of time to assume or reject the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it is applicable. (H) ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground Lessor seeks to reject any Ground Lease or have the Ground Lease deemed rejected, then prior to the hearing on such rejection Lender shall, subject to applicable law, be given no less than twenty (20) days' notice and opportunity to elect in lieu of rejection to have the Ground Lease assumed and assigned to a nominee of Lender. If Lender shall so elect to assume and assign the Ground Lease, then the Borrowers shall, subject to applicable law, continue any request to reject the Ground Lease until after the motion to assume and assign has been heard. If Lender shall not elect to assume and assign the Ground Lease, then Lender may, subject to applicable law, obtain in connection with the rejection of the Ground Lease a determination that the applicable Ground Lessor, at Lender's option, shall (1) agree to terminate the Ground Lease and enter into a new lease with Lender on the same terms and conditions as the Ground Lease, for the remaining term of the Ground Lease, or (2) treat the Ground Lease as breached and provide Lender with the 70 rights to cure defaults under the Ground Lease and to assume the rights and benefits of the Ground Lease. Each Borrower shall join with and support any request by Lender to grant and approve the foregoing as necessary for adequate protection of Lender's interests. Notwithstanding the foregoing, Lender may seek additional terms and conditions, including such economic and monetary protections as it deems reasonably appropriate to adequately protect its interests, and any request for such additional terms or conditions shall not delay or limit Lender's right to receive the specific elements of adequate protection set forth herein. Each Borrower hereby appoints Lender as its attorney in fact to act on behalf of Lender in connection with all matters relating to or arising out of the assumption or rejection of any Ground Lease, in which the other party to the lease is a debtor in a case under the Bankruptcy Code. This grant of power of attorney is present, unconditional, irrevocable, durable and coupled with an interest. SECTION 5.26 RESERVED. SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrowers shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrowers. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrowers shall not cancel any indebtedness from any Person owing to any Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no Borrower Party, nor any of their respective Affiliates, officers, directors, partners or members will knowingly: (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrowers further covenants and agrees to deliver (from time to time) to Lender any such certification or other evidence as may be 71 requested by Lender in its sole and absolute discretion, confirming that: (i) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, has to its Knowledge engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person. ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrowers hereby pledge, assign and grant to Lender a security interest in and to all of the Borrowers' right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any Default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. SECTION 6.2 FUNDS DEPOSITED WITH LENDER. (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein, all funds of the Borrowers which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrowers and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After 72 repayment of all of the Obligations, all funds held as Reserves will be promptly returned to, or as directed by, the Borrowers. (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the amounts necessary to fund each of the Reserves as set forth below. Deposits into the Reserves at Closing may occur by deduction from the amount of the Loan that otherwise would be disbursed to the Borrowers, followed by deposit of the same into the applicable Sub-Account or Account of the Lock Box Account in accordance with the Cash Management Agreement on the Closing Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes to be fully disbursed at Closing. SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit with Lock Box Account Bank **[$_________]** and, pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the Payment date in July 2004, 1/12th of the annual charges (as reasonably estimated by Lender) for all Impositions and all Insurance Premiums (other than for D&O Insurance) payable with respect to the Properties hereunder (said funds, together with any interest thereon and additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made to the Impositions and Insurance Reserve from and after the date hereof is **[$__________]**. The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days of the written demand by Lender, to be added to and included within such reserve, a sum of money which Lender reasonably estimates, together with such monthly deposits, will be sufficient to make the payment of each such charge at least ten (10) Business Days prior to the date initially due. The Borrowers shall provide Lender with bills and all other documents necessary for the payment of the foregoing charges at least thirty (30) days prior to the date on which each payment shall first become subject to penalty or interest if not paid. So long as (i) no Event of Default has occurred and is continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other documents in a timely manner, and (iii) sufficient funds are held by Lender for the payment of the Impositions and Insurance Premiums relating to each of the Properties, Lender shall pay said items or disburse to the Borrowers from such Reserve an amount sufficient to pay said items. Interest shall accrue in favor of the Borrowers on funds in the Impositions and Insurance Reserve and be added to the balance thereof and disbursed in accordance with the terms hereof. SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender shall establish and maintain with Lock Box Bank an account for the purpose of creating a reserve for replacements of FF&E at or in, or used in connection with, the Properties (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget approved by Lender (said funds, together with any interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve shall be held in an Eligible Account entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account shall be under the sole dominion and control of Lender, subject to the terms of the Cash Management Agreement. Pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing with the Payment Date in July 2004, an amount equal to 4.0% of the Operating Revenues generated from the Properties for the prior calendar month (such amount, the "MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the Borrowers, subject in all instances to the terms of the Cash Management 73 Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held in the FF&E Reserve shall be used in connection with the Required Capital Improvements. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than Replacements subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d). SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At Closing, the Borrowers shall deposit with Lock Box Account Bank **[$___________]** (said funds, together with any interest thereon, the "CAPITAL IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain Capital Improvements required to be made to the Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5 attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the Borrowers for purposes for which any other Reserve is established or for any other purpose other than completion of the Required Capital Improvements. The Borrowers shall promptly commence and diligently prosecute to completion, subject to Force Majeure, the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds held in the Capital Improvement Reserve shall be disbursed in accordance with Section 6.7. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Capital Improvement Reserve when all Required Capital Improvements are complete, and paid for, in accordance with the terms hereof. SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers shall deposit with Lock Box Account Bank, an amount equal to **[$___________]** (said funds, together with any interest thereon and additions thereto, the "HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials on the Properties as indicated in the Environmental Reports for the Properties prepared and delivered prior to the Closing and as such work is more particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by any applicable Governmental Authority or (y) nine (9) months after the Closing, the Borrowers shall, subject to Force Majeure, complete such Environmental Work and shall provide to Lender such closure reports, no-further-action letters, or other evidence of compliance with law as Lender may reasonably require. The funds contained in the Hazardous Materials Remediation Reserve shall be utilized by the Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrowers for purposes for which any other Reserve is established. Subject to the Borrowers' satisfaction of the applicable conditions of Section 6.7, the Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrowers for such Environmental Work, provided that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, in accordance with the terms hereof. 74 SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK. (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to or for the account of the Borrowers (x) from the Hazardous Materials Remediation Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT EXPENDITURES"; and together with the Approved Environmental Expenditures, collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or Required Capital Improvements to which any such request for disbursement relates shall be referred to as the "WORK"), upon satisfaction of each of the conditions listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's reasonable discretion: (i) Except as provided in this Section 6.7, each request for disbursement from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for completion of the Approved Expenditures for which disbursement is requested. (ii) A request for disbursement from the Work Reserves may be made after completion of a portion of the Work under such contract, or for payment of deposits required in connection with the Work under such Contract, provided (1) all other conditions in this Loan Agreement for disbursement have been satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve are, in Lender's reasonable judgment, sufficient to complete the Environmental Work when required and/or funds remaining in the Capital Improvement Reserve are, in Lender's reasonable judgment, sufficient to complete such item of Required Capital Improvements and any other Required Capital Improvements remaining to be performed, as the case may be, and (3) if reasonably required by Lender, each contractor or subcontractor receiving payments in excess of $100,000 under such contract shall provide a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor. (iii) To the extent the contract with the relevant contractor or supplier provides for a retainage, each disbursement from a Work Reserve, except for a final disbursement, shall be in the amount of actual costs incurred less the percentage of such costs that the contract with the relevant contractor or supplier specifies to be retained and advanced as part of the final disbursement. No funds will be advanced for materials stored at any Property unless such materials are properly stored and secured at the applicable Property in accordance with the Borrowers' customary procedures and sound construction practices as reasonably determined by Lender. No funds will be advanced for materials stored at any location other than at the Properties unless Lender determines in its reasonable discretion that Lender has a perfected first priority security interest in any such materials. 75 (iv) The amount of all invoices in connection with the Work with respect to which a disbursement is requested and which has been approved by Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers (in which event, the Borrowers covenant and agree to promptly pay such invoices) or, if an Event of Default has occurred and is continuing, at Lender's option and in Lender's sole and absolute discretion, directly to the contractor, supplier, materialman, mechanic or subcontractor indicated on said invoices unless already paid by the Borrowers and Lender has received satisfactory evidence of such payment in which case Lender shall reimburse the Borrowers. All invoices in connection with disbursements from the Capital Improvement Reserve shall be classified as requests for payment for items of Capital Improvement (as opposed to items that, in conformity with GAAP, would be included as Operating Expenses). If the Borrowers request that any amounts be disbursed directly to the Borrowers pursuant to the foregoing sentence, the Borrowers shall be required to deliver evidence reasonably acceptable to Lender of payment of all invoices for which disbursements were previously made to the Borrowers as a condition to such requested disbursement. (v) No more than two (2) disbursements will be made by Lender from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve in any calendar month, and, if made in accordance herewith or otherwise approved by Lender, requested disbursements will be made within five (5) Business Days after the request therefor. Lender shall not be required to make any disbursement from a Work Reserve with respect to the Property unless such requested disbursement is in an amount equal to or greater than $25,000 (other than the final disbursement). (vi) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrowers shall assign (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. (vii) The Borrowers shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost and expense. 76 (viii) The Borrowers shall have delivered to Lender a certificate of the Borrowers substantially in the form of Exhibit L attached hereto certifying as to the actual costs which were incurred by the Borrowers to complete such Work, which costs shall not materially exceed the amount budgeted for such Work under the CapEx/FF&E Budget then in effect unless approved by Lender, which shall not be unreasonably withheld, delayed or conditioned (together with supporting documentation reasonably acceptable to Lender). (ix) The Borrowers shall have delivered to Lender all necessary material certificates, authorizations, permits and licenses which are required to permit the construction and completion of the Work, as issued by the appropriate Governmental Authority. The Borrowers, to the full extent permitted by applicable law, hereby assigns to Lender as additional security for the payment of the Obligations and the observance and performance by the Borrowers of the terms, covenants and provisions of the Loan Documents all right, title and interest which the Borrowers may now have or may hereafter acquire in and to such certificates, authorizations, permits and licenses. (x) Lender may require an inspection of the Property prior to making a monthly disbursement from the applicable Work Reserve in order to verify completion of the Work for which disbursement is sought in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may require that such inspection be conducted by Lender's Consultant and/or may require a copy of a certificate of completion by an independent qualified architect or engineer acceptable to Lender prior to the disbursement of any amounts from the applicable Work Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such inspections as reasonably required hereunder, whether such inspections are conducted by Lender, Servicer, Lender's Consultant or by an independent qualified professional. (B) PERFORMANCE OF WORK. (i) The Borrowers shall complete all Work in a good and workmanlike manner as soon as practicable following the commencement thereof substantially in accordance with the applicable budget approved by Lender in accordance with the terms of this Loan Agreement. The insufficiency of the balance in the applicable Work Reserve shall not relieve the Borrowers from their obligations to perform and complete the related Work as herein provided or to fulfill all other preservation and maintenance covenants in the Loan Documents. (ii) If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrowers with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrowers of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrowers shall have commenced to cure such unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such 77 unsatisfactory work, up to a maximum of an additional sixty (60) days, subject to Force Majeure, without the cure thereof), Lender may proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrowers, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. (iii) In order to facilitate Lender's completion or making of any Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right to enter onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrowers and secured by the applicable Mortgage. For this purpose, the Borrowers constitute and appoint Lender their true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrowers empower said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve for the purpose of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the Borrowers which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of such Property; and (vii) to do any and every act which the Borrowers might do in their own behalf to fulfill the terms of this Loan Agreement. (iv) Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrowers additional sums to make or complete any Work. (v) The Borrowers shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.7 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may be kept at any Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The Borrowers shall use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B). 78 (vi) All Work and all materials, equipment, fixtures and any other item comprising a part thereof shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other liens (except for the Permitted Encumbrances). (vii) All Work shall comply with all applicable legal requirements of all Governmental Authorities having jurisdiction over the Properties and applicable insurance requirements, including, without limitation, applicable building codes, special use permits, environmental regulations and requirements of insurance underwriters. (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys' fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrowers shall assign to Lender all rights and claims the Borrowers may have against all Persons supplying labor or materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations in full, a Cash Trap Event shall occur, then for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Lender (or its Servicer or agent) and held in the Lock Box Account in accordance with the terms of the Cash Management Agreement (said funds, together with any interest thereon, the "CASH TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when the Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12) month period ending on such Calculation Date and shall continue to exist until such time as the Minimum Debt Yield test has been satisfied for three (3) consecutive Calculation Dates (on a trailing twelve (12) month basis) following the commencement of the applicable Cash Trap Event. Notwithstanding that the Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no Cash Trap Event shall be deemed to have occurred as a result of such event if the Borrowers make a principal prepayment of the Aggregate Outstanding Principal Balance (which prepayment amount shall be disbursed on the next Payment Date in accordance with the terms of the Cash Management Agreement), within three (3) Business Days after the date of delivery of the financial statements disclosing the existence of such Cash Trap Event (or the date on which such financial statements are required to be delivered pursuant to Section 5.1), in an amount equal to the greater of (x) one percent (1%) of the Aggregate Outstanding Principal Balance, or (y) 120% of the amount, as determined by Lender in its reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the Minimum Debt Yield if such calculation was recalculated as provided above assuming that such amount was applied to reduce the Aggregate Outstanding Principal Balance as of the first day of the relevant measuring period. During the continuance of a Cash Trap Event, provided that no Event of Default shall have occurred and be continuing, any funds on deposit in the Cash Trap Reserve may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be applied to (i) prepayment of the Aggregate Outstanding Principal Balance as provided above, (ii) Capital Expenditures reasonably approved by Lender, or (iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal and interest 79 under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in accordance with the terms of the Cash Management Agreement). Any funds on deposit in the Cash Trap Reserve shall continue to be held as additional Collateral in accordance with this Section 6.8 until the earlier of (a) the date that such funds are applied or disbursed pursuant to the foregoing sentence or (b) the date that the Minimum Debt Yield test has been satisfied for three (3) consecutive months (as determined above), at which time, provided no Event of Default exists, and no Cash Trap Event has commenced, such funds, together with any and all amounts then held in the Minimum Balance Sub-Account (as defined in the Cash Management Agreement), shall be automatically released to the Borrowers without any further certification requirements on the part of the Borrowers. The existence of a Cash Trap Event shall be determined by Lender in its reasonable good faith determination. If Lender determines that a Cash Trap Event has occurred, Lender shall send the Borrowers written notice thereof. Notwithstanding any provision herein to the contrary, if an Event of Default has occurred and is continuing, all funds on deposit in the Cash Trap Reserve and any subsequent Excess Cash Flow, while such Event of Default is continuing, may be applied by Lender to payment of the Loan (including payment of any Prepayment Consideration) or other Obligations (or to the obligations of the Mezzanine Borrowers to Mezzanine Lender) as Lender may elect. ARTICLE VII DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT. (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more deposit accounts shall be established at the Borrowers' sole cost and expense in the name of Lender, as secured party hereunder (said accounts, and any accounts replacing same in accordance with this Loan Agreement and the Deposit Account Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"), pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT AGREEMENT") substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, executed and delivered by the Borrowers and the Deposit Bank. The Deposit Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer). Among other things, the Deposit Account Agreement shall provide that the Borrowers shall have no access to or control over the Deposit Account, that all available funds on deposit in the Deposit Account shall be transferred by wire transfer (or transfer via the ACH System) on each Business Day by the Deposit Bank into the Lock Box Account, for application in accordance with the Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall be directed to deliver to the Borrowers copies of bank statements and other information made available by the Deposit Bank and the Lock Box Account Bank concerning the Deposit Account and the Lock Box Account. (ii) Upon establishing the Deposit Account, (1) the Borrowers shall cause any and all Operating Revenues, including distributions or other payments made directly or indirectly to the Borrowers, Manager, or any of their respective Affiliates, from any Beverage Company, to be deposited promptly into the Deposit Account and in no event later than two (2) Business Days after the same are paid to or for the benefit of the Borrowers, and (2) the Borrowers shall obtain 80 agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each of the Persons paying or disbursing credit card receivables (the "CREDIT CARD COMPANIES"), substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, pursuant to which the Credit Card Companies agree to pay all credit card receivables into the Lock Box Account, and acknowledge and agree that Lender shall have a first priority perfected security interest in such credit card receivables. To the extent that the Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed to hold the same in trust for Lender for the protection of the interests of Lender hereunder and under the Loan Documents. The Borrowers represent and warrant that, as of the date hereof, the only Credit Card Companies paying or disbursing credit card receivables with respect to the Property are Chase Merchant Services, American Express, Discover Financial Service, Diners Club, JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter into an agreement with any other Credit Card Company pursuant to which such Credit Card Company shall pay credit card receivables with respect to the Properties, such Borrower shall promptly obtain a Credit Card Receivables Payment Direction Letter in form and substance reasonably acceptable to Lender from such Credit Card Company. (iii) The Borrowers shall pay all reasonable out-of-pocket costs and expenses incurred by Lender in connection with the transactions and other matters contemplated by this Section 7.1, including but not limited to, Lender's reasonable attorneys' fees and expenses, and all reasonable fees and expenses of the Deposit Bank and the Lock Box Account Bank, including without limitation their reasonable attorneys' fees and expenses. (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms of the Cash Management Agreement, an Eligible Account shall be established in the name of Lender, as secured party hereunder, to serve as the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement, the Borrowers shall not have the right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. Lender may elect to change any financial institution in which the Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrower. The Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement: (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and 81 (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the "Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance Sub-Account"; and (g) "Cash Trap Reserve Sub-Account". SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" means the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrowers; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrowers (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if (i) within forty-five (45) days after the filing thereof, the Borrowers shall either cause the same to be removed of record by payment, bonding or otherwise, or (ii) same is being contested in good faith in accordance with Section 5.3(B) hereof); or 82 (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by any Borrower, Guarantor or Manager in any Loan Document or in any statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan Documents and such default is not fully cured within thirty (30) days after receipt by the Borrowers of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any Borrower Party commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceeding, it shall not 83 constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of their business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrowers 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) and the Borrowers do not take all actions requested by Lender to correct such defect within ten (10) days after the written request by Lender to take such action, or any Person under the control of the Borrowers or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; (ii) or any breach or default shall occur in the material obligations of the Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, that Manager shall have the right to exercise material remedies as a consequence thereof; or (P) GROUND LEASE DEFAULT. Any default by any of the Borrowers beyond any applicable grace period shall occur under any Ground Lease or any actual or attempted surrender, termination, modification or amendment of any Ground Lease without Lender's prior written consent. If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or 84 paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). SECTION 8.2 ACCELERATION AND REMEDIES. (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by the Borrowers. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrowers under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against each Property and the Mortgages have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose the Mortgages in any manner and for any amounts secured by the Mortgages then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrowers default beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose the Mortgage to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose the Mortgage or any of them to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Mortgage as Lender may elect. Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Mortgage to secure payment of sums secured by the Mortgage and not previously recovered. (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, 85 mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. The Borrowers shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their true and lawful attorney, coupled with an interest, in their name and stead to make and execute all documents reasonably necessary to effect the aforesaid severance if the Borrowers fail to do so within ten (10) days of Lender's written request, the Borrowers ratifying all that their said attorney shall do by virtue thereof. (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrowers pursuant to this Loan Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrowers shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrowers or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if any of the Borrowers shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrowers including making protective advances on behalf of any Borrower, or, in its sole discretion, causing the obligations of any of the Borrowers to be satisfied with the proceeds of any Reserve. In such event, the Borrowers shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the Borrowers under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. 86 (B) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrowers. ARTICLE IX . SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower Party hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that such Primary Borrower Party: (A) does not own and will not own any assets other than the Properties (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Borrowers, and other wholly owned subsidiaries of the Primary Borrower Parties established solely for the purpose of holding liquor licenses with respect to one or more of the Properties, and with respect to Member, direct or indirect ownership interests in the Crossed Borrowers as of the date of this Agreement (all of the foregoing ownership interests being referred to herein, collectively, as the "OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties, such incidental assets as are necessary to enable it to discharge its obligations with respect to the Borrowers; (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Properties, the Crossed Properties as of the date of this Agreement, or the Ownership Interests; (C) has not at any time since the SPE Effective Date entered into and will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of any Primary Borrower Party except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate (including the Management Agreements); (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted Indebtedness, and (iii) the Mezzanine Loan; (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), and has not acquired and will not acquire obligations or securities (other than the Ownership Interests) of any of its Affiliates other than the other Borrower Parties; 87 (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due; (G) has at all times since the SPE Effective Date done or caused to be done and will do all things necessary to preserve its existence, and will not, and no partner, member, shareholder, trustee, beneficiary, or principal will, further amend, modify or otherwise change, its partnership certificate, partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement, or other organizational documents, as modified, amended, restated or supplemented as of the date hereof, in any manner with respect to the matters set forth in this Article IX; (H) has at all times since the SPE Effective Date continuously maintained its existence and has at all times since the SPE Effective Date been qualified to do business, and shall continue to maintain its existence and be qualified to do, business in all states necessary to carry on its business, specifically including in the case of each Borrower, the state where its Property is located; (I) has at all times since the SPE Effective Date conducted and operated, and will conduct and operate its business as presently conducted and operated and otherwise contemplated with respect to the ownership of its Property, or the ownership of the Ownership Interests, as applicable; (J) has at all times since the SPE Effective Date maintained, and will maintain books and records and bank accounts (other than bank accounts established hereunder, or established by Manager with respect to the operations of the Properties pursuant to the Management Agreement) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and has at all times since the SPE Effective Date maintained and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) has at all times since the SPE Effective Date been and held itself out to the public as, and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and has at all times since the SPE Effective Date corrected and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) has at all times since the SPE Effective Date paid, and will pay the salaries of its own employees, if any; (M) has at all times since the SPE Effective Date allocated, and will allocate fairly and reasonably any overhead for shared office space; (N) has at all times since the SPE Effective Date used, and will use its own stationery, invoices and checks; 88 (O) has at all times since the SPE Effective Date filed, and will file its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; (P) has at all times since the SPE Effective Date maintained, and reasonably expects to maintain adequate capital (taken as a whole with all of the other Borrowers) for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (Q) will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) will not enter into any transaction of merger or consolidation, and will not acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership (other than the Ownership Interests) of, any Person; (S) has not at any time since the SPE Effective Date commingled or permitted to be commingled, and will not commingle or permit to be commingled, its funds or other assets with those of any other Person (other than, with respect to the Borrowers, each other Borrower, or as may be held by Manager, as agent, for each Borrower pursuant to the terms of the Management Agreement, and except for funds deposited in the Accounts in accordance with the Loan Documents); (T) has at all times since the SPE Effective Date maintained, and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (U) does not and will not hold itself out to be responsible for the debts or obligations (other than the Obligations and the Crossed Indebtedness as of the date of this Agreement) of any other Person; (V) has not guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations and the Crossed Indebtedness as of the date of this Agreement) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to their respective obligations under Section 9.1, each Borrower, General Partner and Member hereby represents, warrants and covenants, as of the Closing Date and until such time as all Obligations are paid and satisfied in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion: 89 (A) each General Partner shall at all times act as the sole general partner of each Borrower that is a limited partnership, with all of the rights, powers, obligations and liabilities thereof under the limited partnership agreement of such Borrower and shall take any and all actions and do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (B) Member shall at all times act as the sole member of each Borrower and Crossed Borrower as of the date of this Agreement that is a limited liability company with all of the rights, powers, obligations and liabilities thereof under the limited liability company operating agreement of such Borrower or Crossed Borrower and shall take any and all actions and will do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (C) each Borrower that is a limited liability company shall not, without the prior written consent of its Member (including the unanimous written consent of its Member's board of directors including the Independent Directors or the unanimous written consent of each of the Borrowers' board of managers including the Independent Directors), and each Borrower that is a limited partnership shall not, without the prior written consent of its General Partner (including the unanimous written consent of General Partner's Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (D) each Borrower that is a corporation shall not, without the prior unanimous written consent of its board of directors, including its Independent Directors, institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against it; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (E) no Member or any General Partner shall, without the unanimous vote of its board of directors or board of managers, as the case may be, including, in each case, its Independent Directors, institute proceedings for itself or any Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or any Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or any Borrower; or a substantial part of its or any Borrower's property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (F) except as otherwise permitted hereunder, no Member or any General Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve, in whole or in part; (ii) consolidate, 90 merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself or any Borrower, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person; or (iii) amend any provisions of its or any Borrower's organizational documents containing provisions similar to those contained in this Article IX; and (G) each Member, General Partner and Borrower that is a corporation shall each promptly elect and at all times maintain at least two (2) Independent Directors on its board of directors, who shall be selected by such Member, General Partner or Borrower, as applicable, and be reasonably acceptable to Lender. Each Borrower that is a single member limited liability company shall promptly appoint and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by such Borrower, and be reasonably acceptable to Lender. ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel), to cause the Note and any Mortgage to be split into a first and a second mortgage loan, or into one or more loans evidenced by multiple notes and secured by multiple mortgages and/or by ownership interests in any of the Borrowers in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting any such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs 91 and expenses and the costs and expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything to the contrary contained in this Article X, it is acknowledged and agreed that in no event shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's) internal costs and expenses in connection with any Secondary Market Transaction. Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of each Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower Parties shall not be required to pay any third party (other than, which respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the costs and expenses of the Borrowers' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other than with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrowers' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or 92 "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent in substance with the opinions covered by the original opinions, addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrowers understand that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrowers and Guarantor shall provide in connection with each (i) preliminary and final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, prepared in connection with any Secondary Market Transaction (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor certifying that the Borrowers and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrowers, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrowers shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrowers or their Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrowers or their Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. 93 ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, Leases entered into as permitted hereunder, and pledges in connection with the Mezzanine Loan, the Borrowers shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of any Property or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in any Borrower (other than to Mezzanine Lender), irrespective of the number of tiers of ownership, without Lender's consent. SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in any Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower); and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. (D) The pledge of ownership interests granted by the Mezzanine Borrowers pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan Agreement). For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving effect to such 94 Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY. (A) The Borrowers shall have the right to request that Lender consent to (i) a transfer of all of the Properties to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the obligations of the Guarantors arising from and after such date and release of the Borrowers and Guarantor from obligations arising from and after such date and (iii) the replacement of the Mezzanine Borrowers with pledgors of the ownership interests in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the conditions set forth in paragraphs (B) and (C) of this Section. Together with such written application, the Borrowers will pay to Lender a review fee of $10,000. The Borrowers also shall pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of the Rating Agencies, if any, and other outside entities, in connection with considering any proposed Assumption, whether or not the same is permitted or occurs. (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrowers shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrowers shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions; (v) The Borrowers shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; (vi) The Borrowers, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; 95 (vii) (a) The Transferee Borrower shall be a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its reasonable discretion; and (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender. (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or Borrowers, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrowers, the Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, a bankruptcy non-consolidation opinion; (iii) The Borrowers shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrowers and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (iv) The Borrowers shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Transfer and Assumption, including but not limited to Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may obtain the release (each, a "RELEASE") of one or more Properties from the Lien of the applicable Mortgage(s) in connection with a partial or total defeasance of the Loan subject to the conditions of the Note and subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrowers at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) On the date proposed for such Release, the Borrowers shall defease all or a portion of the Loan by delivering a Defeasance Deposit (as defined in the Note) in an amount necessary to pay all Scheduled Defeasance Payments (as defined in the Note) for the entire principal amount 96 of the Loan in the case of a total defeasance, or in the case of a partial defeasance, relating to the Release Price of each Property being released (together with all accrued and unpaid interest on the principal amount being so defeased), and such defeasance shall be undertaken in accordance with the terms and conditions of the Note, and Mezzanine Lender shall have received all amounts required to be paid to it in connection with such Release under the Mezzanine Loan Documents; (D) If required by any Rating Agency, the Borrowers at their sole cost and expense, in connection with any partial defeasance, shall have delivered to Lender, one or more endorsements to the Title Policies delivered to Lender on the date hereof in connection with the Mortgages insuring that, after giving effect to such Release, (i) the Liens created hereby and thereby and insured under the Title Policies are first priority Liens on the respective remaining Properties subject only to the Permitted Encumbrances applicable to the remaining Properties and (ii) that the Title Policies remain in full force and effect and unaffected by such Release; (E) Immediately following any Release in connection with any partial defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) in effect at Closing, or immediately prior to the Release, whichever is greater; (F) Notwithstanding the foregoing, the Borrowers may not obtain the Release under this Section 11.4 of any Property or Properties which individually, or in the aggregate (with all Releases since the Closing Date), have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the original principal balance of the Loan except pursuant to a total defeasance; (G) The Borrowers shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Release; and (H) Immediately following such Property Release, each released Property will be owned by a Person other than the Borrowers, except as otherwise permitted in connection with any full or partial defeasance of the Loan in accordance with the terms and conditions of the Note. Upon satisfaction of the above conditions, Lender shall effectuate the following (hereinafter referred to as a "PROPERTY RELEASE"): the security interest of Lender under the Mortgage and other Loan Documents relating to each released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrowers to release and terminate or reassign, at the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and financing statements as to each released Property; provided, that such release and termination or reassignment shall be without recourse to Lender and without any representation or warranty except that Lender shall be deemed to have represented that such release and termination or reassignment has been duly authorized and that it has not assigned or encumbered the Mortgage or the other Loan Documents relating to any released Property (except as contemplated hereby) and Lender shall return the originals of any Loan Documents that relate solely to each released Property to the Borrowers; provided, further, that upon the release and 97 termination or reassignment of Lender's security interest in the Mortgage relating to a released Property all references herein to the Mortgage relating to such released Property shall be deemed deleted, except as otherwise provided herein with respect to indemnities. In addition, promptly after consummation of any such Property Release and Lender's receipt of the Defeasance Collateral, any and all Reserves designated as applicable to each released Property held by or on behalf of Lender shall be returned to the Borrowers. SECTION 11.5 RESERVED. SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may Transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Property free from the lien of the Mortgage, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or on the Properties taken as a whole, will not materially impair the utility of any individual Property or the Properties, taken as a whole, 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 building equipment acquired by the Borrowers (and not so disposed of) shall be subject to the lien of the Mortgage. Lender shall, from time to time, upon the reasonable request of any Borrower, execute a written instrument in form reasonably satisfactory to Lender to confirm that such building equipment which is to be, or has been, sold or disposed of is free from the lien of the Mortgage. SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrowers may, without the consent of Lender, (i) make immaterial Transfers of portions of the any Property to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way with respect to any Property in the ordinary course of business 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 such Property or have a Material Adverse Effect on the value of such Property taken as a whole. In connection with any Transfer permitted pursuant to this Section 11.7, Lender 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 such Property affected by such transfer from the lien of the applicable Mortgage or to subordinate the applicable Mortgage to any such easement, restriction, covenant, reservation or right of way within ten (10) days of Lender's receipt of the following: (A) ten (10) days prior written notice thereof. (B) a copy of the instrument or instruments of transfer. (C) an officer's certificate given by the Borrowers stating that such transfer does not materially impair the utility and operation of the Property, materially reduce the value of the Property or have a Material Adverse Effect. 98 (D) reimbursement of all of Lender's reasonable, out-of-pocket costs and expenses incurred in connection with such Transfer. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrowers to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrowers' obligations under the Note shall be limited to (i) the Properties, (ii) the rents, profits, issues, products and income of the Properties, and (iii) any other Collateral. Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Obligations secured by the Mortgages or to require that all collateral shall continue to secure all of the Obligations owing to Lender in accordance with the Loan Documents. SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not their members, partners (other than the General Partners), employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrowers or any Borrower Party or Manager and not deposited into the Deposit Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrowers or of any change in the name of any of the Borrowers or if any of the Borrowers takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrowers, or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste with respect to any of the Properties; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully recourse to the Borrowers and Guarantor upon the happening of any of the following: (i) 99 any Borrower Party's defense of any efforts by Lender to collect or enforce the Obligations following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any efforts by Lender to collect or enforce the Obligations without a good faith basis following any other Event of Default, and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents). SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against any Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of 100 exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors of all or any part of the obligations of the other Borrower Parties, and of all other circumstances bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may 101 hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person 102 which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrowers of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrowers shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrowers under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Properties by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers or other Person to any other or further notice or demand in similar or other circumstances. SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrowers to Lender (other than the Note) unless the Borrowers request in writing that same be returned. Upon such request and at the Borrowers' expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. 103 SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). Notices shall be addressed as follows: If to the Borrowers or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Morris, Manning & Martin, LLP 3343 Peachtree Rd., NE 1600 Atlanta Financial Center Atlanta, Georgia 30326 Attention: Thomas Gryboski, Esq. Facsimile: (404) 365-9532 If to Lender: Merrill Lynch Mortgage Lending, Inc. Four World Financial Center New York, New York 10080 Attention: Robert Spinna Facsimile: (212) 449-7684 104 With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn: Robert L. Boyd, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrowers to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its 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 and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, 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. 105 SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrowers may not assign their rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties, represent, warrant and acknowledge that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrowers, on behalf of themselves and all Borrower Parties, also acknowledge and agree that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents 106 and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any other Person. The relationship between Lender and the Borrowers is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and any other Borrower are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. Each of the Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any of the Borrowers or Affiliates thereof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has 107 been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrowers and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE 108 MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrowers have been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrowers shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrowers in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, Lender shall have the right, at the Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [signatures follow on next page] 109 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWERS: AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition General Partner SPE Corp., its general partner By:____________________________ Name: Daniel E. Ellis Title: Vice President and Secretary ALBANY HOTELS, INC. APICO INNS OF GREEN TREE, INC. LODGIAN TULSA LLC LODGIAN AUGUSTA LLC LODGIAN LAFAYETTE LLC LODGIAN HOTELS FIXED II, INC. By:____________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Dedham Lodging SPE, Inc., its general partner By:____________________________ Name: Daniel E. Ellis Title: Vice President and Secretary LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:____________________________ Name: Title: LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate Re: Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 2.12(G) - Crossed Loans/Crossed Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.30 - Ground Leases Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work/O&M Plans Schedule 6.7 - Reserve Funding Condition List of Exhibits and Schedules EXHIBIT A PROPERTIES 1. Holiday Inn, 363 Roberts Street, East Hartford, CT 2. Fairfield Inn, 201 Boy Scout Road, Augusta, GA 3. Courtyard by Marriott, 214 E. Kaliste Saloon Road, Lafayette, LA 4. Holiday Inn, 890 Elkridge Landing Road, Baltimore (Linthicum), MD 5. Residence Inn, 259 Elm Street, Dedham , MA 6. Crowne Plaza , 30 Lodge Street, Albany , NY 7. Courtyard by Marriott, 3340 South 79th East Avenue, Tulsa, OK 8. Holiday Inn- Greentree, 401 Holiday Drive, Pittsburgh, PA 9. Holiday Inn, 334 Arsenal Road, York, PA EXHIBIT B ENVIRONMENTAL REPORTS EXHIBIT C FRANCHISE AGREEMENTS EXHIBIT D ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS EXHIBIT E MANAGEMENT AGREEMENTS EXHIBIT F [RESERVED] EXHIBIT G PROPERTY IMPROVEMENT PLANS None EXHIBIT H [RESERVED] EXHIBIT I ACCEPTABLE FRANCHISORS EXHIBIT J PROPERTY CONDITION REPORTS EXHIBIT K ZONING REPORTS EXHIBIT L CERTIFICATE RE: WORK RESERVES SCHEDULE 1 BORROWERS SCHEDULE 2.4 SCHEDULED MORTGAGE PRINCIPAL PAYMENTS SCHEDULE 2.12(G) CROSSED LOANS/CROSSED BORROWERS SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan and Security Agreement 2. Note 3. Mortgages 4. Note and Mortgage Consolidation, Spreader, Severance and Modification Agreement 5. Assignments of Leases 6. Assignments of Agreements, Licenses, Permits and Contracts 7. Assignments of Hotel Management Agreements 8. Guaranty of Recourse Obligations 9. Environmental Indemnity 10. Deposit Account Agreements 11. Financing Statements 12. Cash Management Agreement 13. Borrower's Closing Certificate under Section 3.1(D) 14. Closing Certificate of Lodgian, Inc. 15. Cooperation Agreement 16. Agreement Regarding Right of First Offer 17. Contribution Agreement 18. Cross-Guaranty 19. Post Closing Agreement SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES SCHEDULE 4.2 CONSENTS None SCHEDULE 4.5 CONDEMNATION PROCEEDINGS None SCHEDULE 4.5(A) RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER SCHEDULE 4.7(B) RENT ROLL SCHEDULE 4.7(E) FRANCHISE DEFAULTS SCHEDULE 4.9 LITIGATION None SCHEDULE 4.14 ERISA PLANS 1. Lodgian, Inc. 401(k) Plan. 2. Lodgian, Inc. Employee Health & Welfare Plan. 3. Multiemployer Plans covering employees of the following unions: Hotel, Motel & Restaurant Employees & Bartenders - Local 471 (Albany, NY) (pension, welfare) SCHEDULE 4.20 INSURANCE SCHEDULE 4.28 COLLECTIVE BARGAINING AGREEMENTS
HOTEL BORROWER UNION DATE OF AGREEMENT ----- -------- ----- ----------------- Crowne Plaza - Albany, NY Albany Hotel, Inc. Hotel, Motel & Restaurant Employees & 2/1/04 Bartenders Union, Local 471
SCHEDULE 4.30 GROUND LEASES SCHEDULE 5.14 MATERIAL AGREEMENTS Agreement between PFG Broadline and Lodgian, Inc. dated July 1, 2003. Agreement between Harbor Linen and Lodgian, Inc. dated March 1, 2002. Various agreements between the Borrowers and On Command Video Corporation. Group booking contract between Albany Hotels, Inc, and Southwest Airlines dated SCHEDULE 6.5 REQUIRED CAPITAL IMPROVEMENTS SCHEDULE 6.6 ENVIRONMENTAL WORK/O&M PLANS SCHEDULE 6.7 RESERVE FUNDING CONDITIONS 1. The Borrowers shall have submitted to Lender a written request for disbursement at least five (5) days prior to the date on which the Borrowers request such disbursement be made, specifying the specific Work or for which the disbursement is requested and such other information (such as the price of materials and the cost of contracted labor or other services) as Lender may reasonably require, which request must be on a form specified or approved by Lender; 2. On the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured; 3. Lender shall have received a certificate from the Borrowers stating that all Work at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with any plans and specifications approved by Lender and all legal requirements of any Governmental Authority having jurisdiction over the Property, such certificate to be accompanied, in either case, by a copy of any license, permit or other approval by any Governmental Authority required to commence (only for the first advance with respect to each distinct item of work) and/or complete (only for the final advance with respect to each distinct item of work) such Work; 4. Lender shall have received a certificate from the Borrowers stating that each Person that supplied materials or labor in connection with the Work to be funded by the requested disbursement has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by copies of invoices for all items or materials purchased and all contracted labor or services provided, and, with respect to Work relating to mold, a certificate of a Certified Industrial Hygienist that the such Work has been completed in conformity with applicable mold clean-up procedures promulgated by the applicable Governmental Authority within the state in which the applicable Property is located, or, if no such procedures exist, in conformity with the New York City Department of Health or the United States Environmental Protection guidelines for mold related clean-up work; 5. Lender shall have received appropriate lien waivers (including final lien waivers) from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $10,000 for completion of its work or delivery of its materials, which lien waivers shall conform to the requirements of applicable law and shall cover all work performed and materials supplied (including equipment and fixtures) for a Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current disbursement request; and 6. At Lender's option, Lender shall have received a title search for the Property effective to the date of the disbursement, which search shows that no mechanic's or materialmen's liens or other Liens of any nature have been placed against the Property since the date of recordation of the applicable Mortgage and that title to the Property is free and clear of all Liens (other than the Permitted Encumbrances). EX-10.25.2 17 g87458a3exv10w25w2.txt EX-10.25.2 PROMISSORY NOTE EXHIBIT 10.25.2 FORM OF PROMISSORY NOTE $_____________ JUNE ___, 2004 FOR VALUE RECEIVED, the undersigned, each having an address at c/o Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (each, a "Borrower" and, collectively, the "Borrowers"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "Lender"), having an address at Four World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of _______ _________________________________Dollars ($_____________), with interest on the unpaid principal balance from the date of this Note, until paid, at the Interest Rate (as hereinafter defined) in effect from time to time hereunder. This Promissory Note may be referred to herein as the "Note," and the loan evidenced hereby may be referred to herein as the "Loan." PAYMENTS OF PRINCIPAL AND INTEREST. The Borrowers shall make a payment on the date hereof to Lender of interest only on the outstanding principal balance of this Note at the Interest Rate (hereinafter defined), from the date hereof through and including the last day of the calendar month in which this Note is executed. Commencing on August 1, 2004 (the "First Payment Date") and on the first day of each calendar month (each, a "Payment Date") thereafter to and including the Maturity Date (hereinafter defined), the Borrowers shall make payments to Lender of interest and principal in monthly installments in the amounts set forth on Schedule 1 attached hereto and made a part hereof (the "Monthly Debt Service Payment Amounts"). The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon and all other amounts due hereunder and under the other Loan Documents (collectively the "Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the "Maturity Date"). Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest on this Note shall be payable in arrears. DEFINITIONS. The term "Interest Rate" as used in this Note shall have the meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined). SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered pursuant to that certain Loan and Security Agreement, dated as of the date hereof (the "Loan Agreement"), among the Borrowers and Lender and is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, each dated as of the date hereof (collectively, the "Mortgages"), each executed by the applicable Borrower, encumbering the fee interests or ground lessee's interests of such Borrower, as applicable, in and to certain properties more particularly described therein (collectively, the "Properties"). This Note, the Loan Agreement, the Mortgages, and all other documents or instruments given by the Borrowers or any of them or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Note may be referred to as the "Loan Documents." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement. DEFEASANCE. A. Notwithstanding anything to the contrary contained in this Note, the Mortgages or the other Loan Documents, at any time after the earlier to occur of (x) the second (2nd) anniversary of the date that is the "startup day," within the meaning of Section 860G of the Internal Revenue Code of 1986, as amended from time to time or any successor statute (the "Code"), of a "real estate mortgage investment conduit," within the meaning of Section 860D of the Code, that holds this Note and (y) forty-eight (48) months after the date of this Note, the Borrowers shall have the right to defease all or any portion of the Loan evidenced by this Note with U.S. Government Securities (a "Defeasance"); provided that a partial Defeasance of this Note shall be permitted only in connection with the release of one or more of the Properties from the lien of the Mortgages and the other Loan Documents in accordance with Section 11.4 of the Loan Agreement and upon the satisfaction of the following conditions precedent (all of which conditions shall become covenants upon occurrence of the Defeasance): (i) The Borrowers shall provide to Lender not less than thirty (30) days' prior written notice specifying the date on which the Defeasance Deposit (hereinafter defined) is to be made (the date so specified may be referred to as the "Defeasance Election Date"). (ii) The Borrowers shall pay to Lender on the Defeasance Election Date all interest accrued and unpaid on the outstanding principal amount of this Note due through the Defeasance Election Date, or through the end of the Interest Accrual Period during which the Defeasance Election Date occurs if the Defeasance Election Date is other than a Payment Date, and the scheduled principal amortization payment due on such Defeasance Election Date, or due upon the next succeeding Payment Date if the Defeasance Election Date is other than a Payment Date, together with all other amounts, if any, then due and payable under this Note, the Mortgages and the other Loan Documents. (iii) The Borrowers shall irrevocably deposit with Lender an amount of U.S. Government Securities (hereinafter defined) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due dates of the payments owing hereunder, cash in an amount sufficient, without reinvestment, in the opinion of a firm of independent certified public accountants reasonably acceptable to Lender expressed in a written certification thereof delivered to Lender (the "CPA Certificate"), (1) with respect to a total Defeasance, to pay and discharge the Scheduled Defeasance Payments (hereinafter defined) for the principal balance of this Note or (2) with respect to a partial Defeasance in connection with the release of one or more Properties, to pay and discharge the Scheduled Defeasance Payments relating to the Release Price for such Property or Properties (the U.S. Government Securities so deposited together with any interest or other increase from the issuer of the securities earned thereon, and any replacements thereof, shall be referred to herein as the "Defeasance Deposit"). All such U.S. Government Securities, if in registered form, shall be registered in the name of Lender or its nominee (and, if registered in nominee's name, endorsed to Lender or in blank) and, if issued in book-entry form, the name of Lender or its 2 nominee shall appear as the owner of such securities on the books of the Federal Reserve Bank or other party maintaining such book-entry system. (iv) The Borrowers shall cause the following to be delivered to Lender on or prior to the Defeasance Election Date, all in form and substance reasonably satisfactory to Lender: (a) a security agreement, in form and substance reasonably satisfactory to Lender, creating a first priority lien on the Defeasance Deposit (the "Defeasance Security Agreement"); (b) the CPA Certificate; (c) a certificate of the Borrowers certifying that all requirements for the Defeasance set forth herein have been satisfied; (d) an opinion of counsel for the Borrowers in form and substance reasonably satisfactory to Lender to the effect that (i) Lender has a perfected first priority security interest in the Defeasance Deposit, (ii) the holder of this Note will not recognize additional income, gain or loss for United States federal income tax purposes as a result of the Defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Defeasance had not occurred, (iii) any holder, trustee or custodian of this Note which is a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code will not fail to maintain its status as such as a result of the Defeasance and (iv) the Defeasance Security Agreement is enforceable against the Borrowers in accordance with its terms; (e) evidence in writing from the applicable Rating Agencies for any Securities backed in whole or in part by this Note, to the effect that the Defeasance will not result in a downgrading, withdrawal, or qualification of the ratings in effect immediately prior to such Defeasance for any class of such then outstanding Securities; (f) evidence reasonably satisfactory to Lender that each of the Borrowers remains validly existing and in good standing under the laws of the state where it is organized and, to the extent required by applicable law, qualified to do business in the state where its respective Property is located; and the Borrowers shall maintain such existence during the time thereafter when this Note shall be outstanding (unless a Successor Borrower (hereinafter defined) assumes the obligations of each of the Borrowers or the Defeasing Borrower(s) (as hereinafter defined), as the case may be, under this Note); and (g) a certificate of the Borrowers certifying that all of the representations, and warranties contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects as of the Defeasance Election Date and ratifying all of the covenants and obligations of the Borrowers under the Loan Documents as of such date and such other certificates, documents or instruments as Lender may reasonably request or as may be required by the Rating Agencies referred to above, provided that such certificates, documents or instruments shall not increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents. 3 (v) Either (1) each of the Borrowers in the case of a total Defeasance, or the Defeasing Borrower(s) in the case of a partial Defeasance shall deliver to Lender a certificate stating that at all times following the Defeasance, the Borrowers or the Defeasing Borrower(s), as the case may be, shall have no interest in any assets other than the Defeasance Deposit, or (2) such Borrower(s) shall satisfy all of the requirements of Section C below. (vi) The Borrowers shall pay to Lender all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender in connection with the Defeasance. (vii) In the event only a portion of the Loan evidenced by this Note is the subject of the Defeasance in connection with the release of any Lien of any applicable Mortgage on one or more individual Properties under Section 11.4 of the Loan Agreement, the Borrowers shall execute and deliver all necessary documents to amend and restate this Note and issue two substitute promissory notes therefor: one note having a principal balance equal to the defeased portion of the original Note (the "Defeased Note") and one note having a principal balance equal to the undefeased portion of the original Note (the "Undefeased Note"). The Defeased Note and the Undefeased Note shall have identical terms as the original Note (and the Defeased Note and the Undefeased Note or Notes shall be cross-defaulted with each other), except for the principal balance. A Defeased Note cannot be the subject of any further Defeasance. An Undefeased Note may be the subject of a further Defeasance in accordance with the terms of this Note and the Loan Agreement (the term "Note", as used above in this clause (vii) for these purposes, being deemed to refer to the Undefeased Note that is the subject of further defeasance); provided, however, that no such partial Defeasance shall take place unless the conditions hereof and the conditions of Section 11.4 of the Loan Agreement are satisfied. B. Upon compliance with the requirements of Section A above and compliance with the requirements of Section 11.4 of the Loan Agreement, Lender shall cause each of the Properties, in the case of a total Defeasance, or each Defeased Property (as hereinafter defined), in the case of a partial Defeasance, to be released from the lien of the applicable Mortgages and the other applicable Loan Documents. The obligations under the Loan Documents with respect to the Properties or each Defeased Property, as the case may be, shall no longer be applicable, and the Defeasance Deposit shall be the sole source of collateral securing this Note or the Defeased Note, as the case may be. Lender shall apply the Defeasance Deposit and the payments received therefrom to the payment of all scheduled principal and interest payments due on all successive Payment Dates under this Note or the Defeased Note, as the case may be, after the Defeasance Election Date to and including the Maturity Date and to payment of the entire remaining Debt or the entire remaining principal balance, accrued and unpaid interest and other sums due under the Defeased Note, as the case may be, on the Maturity Date (collectively, the "Scheduled Defeasance Payments"). The Borrowers, pursuant to the Defeasance Security Agreement or other appropriate document, shall direct that the payments received from the Defeasance Deposit shall be made directly to Lender and applied to satisfy the obligations of the Borrowers under this Note or the Defeased Note, as the case may be. C. If, after the Defeasance, the Borrowers, in the case of a total Defeasance, or the Defeasing Borrower(s), in the case of a partial Defeasance, will own any assets other than the Defeasance Deposit, the Borrowers or the Defeasing Borrower(s), as the case may be, shall 4 establish or designate a single-purpose, bankruptcy-remote successor entity acceptable to Lender (the "Successor Borrower"), with respect to which a nonconsolidation opinion reasonably satisfactory in form and substance to Lender and any applicable Rating Agencies shall be delivered to Lender and such Rating Agencies, in which case the Borrowers or the Defeasing Borrower(s), as the case may be, shall transfer and assign to the Successor Borrower all of their respective obligations, rights and duties under this Note or the Defeased Note, as the case may be, and the Defeasance Security Agreement, together with the pledged Defeasance Deposit. The Successor Borrower shall assume the obligations of the Borrowers or the Defeasing Borrower(s), as the case may be, under this Note or the Defeased Note, as the case may be, and the Defeasance Security Agreement, and such Borrower(s) shall be relieved and released of their respective obligations hereunder and thereunder. Each of the Borrowers or the applicable Defeasing Borrower(s), as the case may be, shall pay not less than $1,000 to the Successor Borrower as consideration for assuming such Borrower's obligations. D. As used herein, the following terms shall have the following meanings: (i) "Defeased Property" shall mean any Property being released from the lien of the Mortgage relating to such Property pursuant to a partial Defeasance in accordance with the provisions of this Note and Section 11.4 of the Loan Agreement. (ii) "U.S. Government Securities" shall mean securities that are (i) direct obligations of the United States of America for the full and timely payment of which its full faith and credit is pledged or (ii) obligations of an entity controlled or supervised by and acting as an agency or instrumentality and guaranteed as a full faith and credit obligation which shall be fully and timely paid by the United States of America, which in either case are not callable or redeemable at the option of the issuer thereof (including a depository receipt issued by a bank (as defined in Section 3(a)(2) of the United States Securities Act)) as custodian with respect to any such U.S. Government Securities or a specific payment of principal of or interest on any such U.S. Government Securities held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the securities or the specific payment of principal of or interest on the securities evidenced by such depository receipt. (iii) "Defeasing Borrower" shall mean the Borrower owning or leasing, as the case may be, a Defeased Property. (iv) "Release Price" shall have the meaning set forth in the Loan Agreement. E. If, after payment in full of all obligations evidenced by this Note or any other of the Loan Documents, any of the Defeasance Deposit remains, such remaining balance of the Defeasance Deposit shall be returned to the Borrowers (or to the Successor Borrower, as the case may be) or Lender shall assign to the Borrowers (or the Successor Borrower, as the case may be) all of Lender's right, title, and interest in the Government Securities constituting the Defeasance Deposit. 5 PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrowers may not prepay this Note in whole or in part at any time except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the occurrence of any Event of Default, then at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Note or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Note shall bear interest until paid in full at a rate per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under this Note. The Borrowers agree that such late charges and Default Rate of interest are reasonable and do not constitute a penalty. LAWFUL INTEREST. Notwithstanding any provision to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Note or the Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, 6 the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the applicable Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the applicable Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of the Borrowers or their successors or assigns to pay the outstanding principal balance of this Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Mortgages or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of any Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by the Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note shall be binding upon the Borrowers and their successors and assigns. EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan Agreement, Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Note, the Loan Agreement, the Mortgages and any or all of the other Loan Documents. Lender shall be released of any obligations to the extent that the same are so assigned or transferred, and the rights and obligations of "Lender" hereunder shall become the rights and obligations of the transferee holder. LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of the Borrowers hereunder are limited in accordance with Article XII of the Loan Agreement. This 7 provision shall not limit any rights of Lender under the Guaranty of Recourse Obligations or the Environmental Indemnity, each dated as of the date hereof. ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrowers shall pay to Lender on demand all out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by the Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York and applicable federal law. TIME OF ESSENCE. Time shall be of the essence as to all of the terms, covenants and conditions of this Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, the Borrowers shall be required to make such payment on the next succeeding Business Day. JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of the Borrowers hereunder shall be joint and several. [NO ADDITIONAL TEXT ON THIS PAGE] 8 IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the date first written above. BORROWERS: [LODGIAN ENTITIES] By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory SCHEDULE 1 MONTHLY DEBT SERVICE PAYMENT AMOUNTS EX-10.25.3 18 g87458a3exv10w25w3.txt EX-10.25.3 GUARANTY OF RECOURSE OBLIGATIONS EXHIBIT 10.25.3 FORM OF GUARANTY OF RECOURSE OBLIGATIONS This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of June __, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"), having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "LENDER"). R E C I T A L S: A. Pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as the same may be amended, modified, supplemented or restated from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein (each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has agreed to make a loan to Borrowers in the aggregate original principal amount of up to **[_____________________]** (the "LOAN"), subject to the terms and conditions of the Loan Agreement; B. As a condition to Lender's making the Loan, Lender is requiring that Guarantor execute and deliver to Lender this Guaranty; and C. Guarantor hereby acknowledges that Guarantor holds a direct and/or indirect ownership interest in each Borrower and that Guarantor will materially benefit from Lender's agreeing to make the Loan. NOW, THEREFORE, in consideration of the premises set forth herein and as an inducement for and in consideration of the agreement of Lender to make the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor hereby agrees, covenants, represents and warrants to Lender as follows: SECTION 1. DEFINITIONS. All capitalized terms used and not defined herein shall have the respective meanings given such terms in the Loan Agreement. SECTION 2. GUARANTY. (a) Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) hereby irrevocably, absolutely and unconditionally assumes liability for, guarantees payment to Lender of, and agrees to pay, protect, defend, indemnify and save harmless Lender from and against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter defined). The obligations which are the subject of the guaranty referred to in this Section 2 are hereinafter collectively referred to as the "GUARANTEED OBLIGATIONS". (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used in this Guaranty shall mean all obligations and liabilities of Borrowers for which Borrowers shall be personally liable under the provisions of Section 12.2 of the Loan Agreement. (c) All sums payable to Lender under this Guaranty shall be payable on demand and without reduction for any offset, claim, counterclaim or defense. SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to Lender as follows (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Guaranty): (a) DUE EXECUTION. This Guaranty has been duly executed and delivered by Guarantor. (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, or application of general principles of equity in any legal proceeding. (c) NO VIOLATION. The execution, delivery and performance by Guarantor of its obligations under this Guaranty do not violate any law, regulation, order, writ, injunction or decree of any court or governmental body, agency or other instrumentality applicable to Guarantor, or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the assets of Guarantor pursuant to the terms of any mortgage, indenture, agreement or instrument to which Guarantor is a party or by which it or any of its properties is bound. Guarantor is not in default under any other guaranty which it has provided to Lender. (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan Agreement, there are no actions, suits or proceedings at law or at equity, pending or, to Guarantor's knowledge, threatened against or affecting Guarantor or which involve or could reasonably be expected to involve the validity or enforceability of this Guaranty or which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. Guarantor is not in default beyond any applicable grace or cure period with respect to any order, writ, injunction, decree or demand of any Governmental Authority which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. (e) CONSENTS. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities (collectively, the "CONSENTS") that are required in connection with the valid execution, delivery and performance by Guarantor of this Guaranty have been obtained and Guarantor agrees that all Consents required in connection with the carrying out or performance of any of Guarantor's obligations under this Guaranty will be obtained when required. (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial statements of Guarantor heretofore delivered to Lender fairly present the financial condition of Guarantor as of 2 the respective dates thereof, and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. None of the aforesaid financial statements or any certificate or statement furnished to Lender by or on behalf of Guarantor in connection with the transactions contemplated hereby, and none of the representations and warranties in this Guaranty contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading. Guarantor is not insolvent within the meaning of the Bankruptcy Code or any other applicable law, code or regulation and the execution, delivery and performance of this Guaranty will not render Guarantor insolvent. SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the benefit of Lender that Guarantor will deliver to Lender each of the financial statements required to be delivered pursuant to Section 5.1 of the Loan Agreement. SECTION 5. INTENTIONALLY DELETED. SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR. (a) The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Mortgages or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any Borrower, Guarantor or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrowers under the Note, the Loan Agreement, the Mortgages or any other Loan Documents or Guarantor under this Guaranty, or any setoff, counterclaim, and irrespective of any other circumstances which might otherwise limit recourse against Guarantor by Lender or constitute a legal or equitable discharge or defense of a guarantor or surety. Lender may enforce the obligations of Guarantor under this Guaranty by a proceeding at law, in equity or otherwise, independent of any loan foreclosure or similar proceeding or any deficiency action against Borrowers or any other Person at any time, either before or after an action against the Properties or any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION. Guarantor waives diligence, notice of acceptance of this Guaranty, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Mortgages or any other Loan Documents, against Guarantor, Borrowers or any other Person, any right to require a proceeding first against Borrowers or any other Person, or to exhaust any security (including, without limitation, the Properties or any of them or any part thereof) for the performance of the Guaranteed Obligations or any other obligations of Borrowers or any other Person, or any protest, presentment, notice of default (except as may be expressly required under the Loan Documents) or other notice or demand whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not be discharged of its obligations hereunder. (b) The obligations of Guarantor under this Guaranty, and the rights of Lender to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: 3 (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower, any Property or any part thereof, Guarantor or any other Person; (ii) any failure by Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Loan Agreement, or any other Loan Documents, or any document or instrument relating thereto; (iii) except (A) with respect to activities occurring after the date of a Permitted Assumption or, (B) activities relating to a Released Property after the date of a Release with respect thereto, the sale, transfer or conveyance of any Property or any interest therein to any Person, whether now or hereafter having or acquiring an interest in any Property or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against any Borrower or any Property or any interest therein; (iv) the conveyance to Lender, any Affiliate of Lender or Lender's nominee of any Property or any interest therein by a deed-in-lieu of foreclosure; (v) the release of any Borrower or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise; (vi) the release in whole or in part of any collateral for any or all Guaranteed Obligations or for the Loan or any portion thereof; or (vii) the exercise by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan Documents, including, without limitation, foreclosure or similar remedies under any pledge agreement encumbering Mezzanine Borrower's interest in any General Partner, any Member, and/or any Borrower except with respect to actions taken by the Mezzanine Lender following the Mezzanine Lender succeeding to the interests of the Mezzanine Borrowers in and to the Borrowers. (c) Except as otherwise specifically provided in this Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an action brought by Lender to enforce this Guaranty based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise. (d) Lender may deal with Borrowers and Affiliates of Borrowers in the same manner and as freely as if this Guaranty did not exist and shall be entitled, among other things, to grant Borrowers or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Lender, at any time and from time to time, without terminating, affecting or impairing the validity of this Guaranty or the obligations of Guarantor hereunder. (e) No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with 4 respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Loan Agreement, the Mortgages or the other Loan Documents or any amendment, modification or other change of any legal requirement shall in any way alter, impair or affect any of the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan Documents are modified with Lender's consent, the Guaranteed Obligations shall automatically be deemed modified to include such modifications. (f) Lender may proceed to protect and enforce any or all of its rights under this Guaranty by suit in equity or action at law, whether for the specific performance of any covenants or agreements contained in this Guaranty or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Guarantor. Each and every remedy of Lender shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. (g) No waiver shall be deemed to have been made by Lender of any rights hereunder unless the same shall be in writing and signed by Lender, and any such waiver shall be a waiver only with respect to the specific matter involved and shall in no way impair the rights of Lender or the obligations of Guarantor to Lender in any other respect or at any other time. (h) At the option of Lender, Guarantor may be joined in any action or proceeding commenced by Lender against Borrowers in connection with or based upon the Note, the Loan Agreement, the Mortgages or any other Loan Documents and recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor to the extent of Guarantor's liability hereunder, without any requirement that Lender first assert, prosecute or exhaust any remedy or claim against Borrowers or any other Person, or any security for the obligations of Borrowers or any other Person. (i) Guarantor agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Borrowers or Guarantor to Lender and such payment is rescinded or must otherwise be returned by Lender (as determined by Lender in its sole and absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower or Guarantor, all as though such payment had not been made. (j) In the event that Guarantor shall advance or become obligated to pay any sums under this Guaranty or in connection with the Guaranteed Obligations or in the event that for any reason whatsoever any Borrower or any subsequent owner of any Property or any part thereof is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to the lien, the time of payment and in all other respects to all sums, including principal and interest and other amounts, at any time owed to Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive payment thereof until all principal, interest and other sums due pursuant to the Loan Documents have been paid in full. Nothing herein contained is intended or shall be construed to give Guarantor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Lender 5 in or to any collateral for the Loan, notwithstanding any payments made by Guarantor under this Guaranty, until the actual and irrevocable receipt by Lender of payment in full of all principal, interest and other sums due with respect to the Loan or otherwise payable under the Loan Documents. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when any such sums due and owing to Lender shall not have been fully paid, such amount shall be paid by Guarantor to Lender for credit and application against such sums due and owing to Lender. The foregoing shall not prohibit Borrowers from using the proceeds of the Loan for any permitted use under the Loan Agreement, including, without limitation, the making of distributions to Guarantor. (k) Guarantor's obligations hereunder shall survive a foreclosure, delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or similar proceeding involving any Property or any part thereof and the exercise by Lender of any of all of its remedies pursuant to the Loan Documents. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Guarantor under this Guaranty shall survive for a period of two (2) years following payment in full of the Obligations in accordance with the terms of the Loan Documents, provided, however, in the event that any Guaranteed Obligations or liabilities of the Guarantor under this Guaranty shall have arisen prior to the expiration of such period, then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Guarantor hereunder shall survive. SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED, AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN INSTRUMENT SIGNED BY LENDER AND GUARANTOR. SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor, and its successors and assigns, may not be assigned or delegated by Guarantor and shall inure to the benefit of Lender and its successors and assigns. Lender shall have the right to assign this Guaranty and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. All references to "Lender" hereunder shall be deemed to include the successors and assigns of Lender and the parties hereto acknowledge that actions taken by Lender hereunder may be taken by Lender's agents and by the agents of the successors and assigns of Lender. SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the City and County of New York or in the Courts of the United States of America located in the Southern District of New York, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Guarantor at its address set forth on the first page hereof. Nothing in this Section 9, however, shall affect the right of Lender to serve legal process in any other manner permitted by law or affect the right of 6 Lender to bring any suit, action or proceeding against Guarantor or its property in the courts of any other jurisdictions. SECTION 10. SECTION HEADINGS. The headings of the sections and paragraphs of this Guaranty have been inserted for convenience of reference only and shall in no way define, modify, limit or amplify any of the terms or provisions hereof. SECTION 11. SEVERABILITY. Any provision of this Guaranty which may be determined by any competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Guarantor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH. SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL LIABILITY. (a) The obligations of Guarantor hereunder are separate and distinct from, and in addition to, the obligations of Guarantor now or hereafter arising under the other guaranties pursuant to which Guarantor has guaranteed the payment and performance of certain other obligations of Borrowers described therein. (b) If there is more than one entity comprising Guarantor, all references to Guarantor herein shall be to Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) or any one or more of them. All obligations and liabilities of Guarantor hereunder are in addition to, not in lieu of and are independent of: (i) all obligations of Borrowers under any other Loan Document, including the Note and the Loan Agreement; and (ii) any obligation of Guarantor under any other Loan Document to which Guarantor is a party. (c) If there is more than one entity comprising Guarantor, all obligations of Guarantor hereunder shall be joint and several. SECTION 14. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder to Lender or Guarantor or which are given to Lender or Guarantor with respect to this Guaranty shall be in writing and shall be delivered to Lender at the address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the address set forth on the first page hereof, each in the manner provided in Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less than ten (10) days' prior written notice of any change in the location of Guarantor's principal place of business. SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its execution hereof acknowledges receipt of true copies of all of the Loan Documents, the terms and conditions of which are hereby incorporated herein by reference. 7 SECTION 16. INTEREST; EXPENSES. (a) If Guarantor fails to pay all or any sums due hereunder within ten (10) days of demand by Lender, the amount of such sums payable by Guarantor to Lender shall bear interest from the date of demand until paid at the Default Rate in effect from time to time. (b) Guarantor hereby agrees to pay all reasonable out of pocket costs, charges and expenses, including, without limitation, reasonable attorneys' fees and disbursements, that may be incurred by Lender in enforcing the covenants, agreements, obligations and liabilities of Guarantor under this Guaranty. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written. GUARANTOR: LODGIAN, INC., a Delaware corporation By:____________________________ Name: Daniel E. Ellis Title: Senior Vice-President EX-10.26.1 19 g87458a3exv10w26w1.txt EX-10.26.1 LOAN & SECURITY AGMT (FIXED RATE #3) EXHIBIT 10.26.1 FORM OF LOAN AND SECURITY AGREEMENT (FIXED RATE #3) DATED AS OF JUNE __, 2004 BETWEEN THE BORROWERS LISTED ON SCHEDULE 1 HERETO AS BORROWERS AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms......................................................................... 1 Section 1.2 Accounting Terms.............................................................................. 23 Section 1.3 Other Definitional Provisions................................................................. 23 ARTICLE II TERMS OF THE LOAN Section 2.1 Loan.......................................................................................... 24 Section 2.2 Interest...................................................................................... 24 Section 2.3 Interest Rate Cap Agreement................................................................... 25 Section 2.4 Payments...................................................................................... 25 Section 2.5 Maturity...................................................................................... 26 Section 2.6 Prepayment.................................................................................... 26 Section 2.7 Outstanding Balance........................................................................... 27 Section 2.8 Taxes......................................................................................... 27 Section 2.9 Reasonableness of Charges..................................................................... 28 Section 2.10 Funding Losses/Change in Law Etc.............................................................. 28 Section 2.11 Servicing/Special Servicing................................................................... 28 ARTICLE III CONDITIONS TO LOAN Section 3.1 Conditions to Funding of the Loan on the Closing Date......................................... 33 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1 Organization, Powers, Capitalization, Good Standing, Business................................. 39 Section 4.2 Authorization of Borrowing, etc............................................................... 39 Section 4.3 Financial Statements.......................................................................... 40 Section 4.4 Indebtedness and Contingent Obligations....................................................... 40 Section 4.5 Title to the Properties....................................................................... 40 Section 4.6 Zoning; Compliance with Laws.................................................................. 41 Section 4.7 Leases; Agreements............................................................................ 41 Section 4.8 Condition of the Properties................................................................... 43 Section 4.9 Litigation; Adverse Facts..................................................................... 43 Section 4.10 Payment of Taxes.............................................................................. 43 Section 4.11 Adverse Contracts............................................................................. 43 Section 4.12 Performance of Agreements..................................................................... 44 Section 4.13 Governmental Regulation....................................................................... 44 Section 4.14 Employee Benefit Plans........................................................................ 44
i Section 4.15 Broker's Fees................................................................................. 44 Section 4.16 Intentionally Deleted......................................................................... 44 Section 4.17 Solvency...................................................................................... 44 Section 4.18 Disclosure.................................................................................... 45 Section 4.19 Use of Proceeds and Margin Security........................................................... 45 Section 4.20 Insurance..................................................................................... 45 Section 4.21 Separate Tax Lots............................................................................. 45 Section 4.22 Investments................................................................................... 45 Section 4.23 Bankruptcy.................................................................................... 45 Section 4.24 Defaults...................................................................................... 45 Section 4.25 No Plan Assets................................................................................ 45 Section 4.26 Governmental Plan............................................................................. 46 Section 4.27 Not Foreign Person............................................................................ 46 Section 4.28 No Collective Bargaining Agreements........................................................... 46 Section 4.29 Condominium Property Documents................................................................ 46 Section 4.30 Ground Leases................................................................................. 46 Section 4.31 No Prohibited Persons......................................................................... 47 ARTICLE V COVENANTS OF BORROWER PARTIES Section 5.1 Financial Statements and Other Reports........................................................ 48 Section 5.2 Existence; Qualification...................................................................... 52 Section 5.3 Payment of Impositions and Claims............................................................. 53 Section 5.4 Maintenance of Insurance...................................................................... 54 Section 5.5 Operation and Maintenance of the Properties; Casualty......................................... 57 Section 5.6 Inspection.................................................................................... 60 Section 5.7 O&M Plan...................................................................................... 61 Section 5.8 Reserved...................................................................................... 61 Section 5.9 Compliance with Laws and Contractual Obligations.............................................. 61 Section 5.10 Further Assurances............................................................................ 61 Section 5.11 Performance of Agreements and Leases.......................................................... 61 Section 5.12 Leases........................................................................................ 62 Section 5.13 Management; Franchise Agreement............................................................... 63 Section 5.14 Material Agreements........................................................................... 65 Section 5.15 Deposits; Application of Receipts............................................................. 65 Section 5.16 Estoppel Certificates......................................................................... 65 Section 5.17 Indebtedness.................................................................................. 66 Section 5.18 No Liens...................................................................................... 66 Section 5.19 Contingent Obligations........................................................................ 67 Section 5.20 Restriction on Fundamental Changes............................................................ 67 Section 5.21 Transactions with Related Persons............................................................. 67 Section 5.22 Bankruptcy, Receivers, Similar Matters........................................................ 67 Section 5.23 ERISA......................................................................................... 68 Section 5.24 Press Release................................................................................. 68 Section 5.25 Ground Leases................................................................................. 68 Section 5.26 Condominium Property.......................................................................... 71

ii Section 5.27 Lender's Expenses............................................................................. 73 Section 5.28 Distributions................................................................................. 74 Section 5.29 Completion of Required Capital Improvements................................................... 73 Section 5.30 Cancellation of Indebtedness; Settlement of Claims............................................ 74 ARTICLE VI RESERVES Section 6.1 Security Interest in Reserves; Other Matters Pertaining to Reserves........................... 74 Section 6.2 Funds Deposited with Lender................................................................... 75 Section 6.3 Impositions and Insurance Reserve............................................................. 75 Section 6.4 FF&E Reserve.................................................................................. 76 Section 6.5 Capital Improvement Reserve; Required Capital Improvements.................................... 76 Section 6.6 Hazardous Materials Remediation Reserve....................................................... 76 Section 6.7 Conditions to Disbursements from Hazardous Materials Remediation Reserve and Capital Improvement Reserve; Performance of Work...................................................... 77 Section 6.8 Cash Trap Reserve............................................................................. 81 ARTICLE VII LOCK BOX; CLEARING ACCOUNT; CENTRAL ACCOUNT; CASH MANAGEMENT Section 7.1 Establishment of Deposit Account and Lock Box Account......................................... 82 Section 7.2 Application of Funds in Lock Box Account...................................................... 84 Section 7.3 Application of Funds After Event of Default................................................... 84 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES Section 8.1 Event of Default.............................................................................. 84 Section 8.2 Acceleration and Remedies..................................................................... 87 Section 8.3 Performance by Lender......................................................................... 89 Section 8.4 Evidence of Compliance........................................................................ 89 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS Section 9.1 Applicable to all Primary Borrower Parties.................................................... 89 Section 9.2 Applicable to Borrowers, General Partner and Member........................................... 92 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS Section 10.1 Secondary Market Transactions Generally....................................................... 93 Section 10.2 Cooperation; Limitations...................................................................... 94 Section 10.3 Information................................................................................... 95 Section 10.4 Additional Provisions......................................................................... 94

iii ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES Section 11.1 Restrictions on Transfer and Encumbrance...................................................... 96 Section 11.2 Transfers of Beneficial Interests in Borrowers................................................ 96 Section 11.3 Assumability.................................................................................. 97 Section 11.4 Release of Properties......................................................................... 99 Section 11.5 Reserved...................................................................................... 100 Section 11.6 Sale of Building Equipment.................................................................... 100 Section 11.7 Immaterial Transfers and Easements, etc....................................................... 101 ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE Section 12.1 Limitations on Recourse....................................................................... 101 Section 12.2 Partial Recourse.............................................................................. 102 Section 12.3 Miscellaneous................................................................................. 102 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES Section 13.1 Waivers....................................................................................... 103 ARTICLE XIV MISCELLANEOUS Section 14.1 Expenses and Attorneys' Fees.................................................................. 105 Section 14.2 Indemnity..................................................................................... 105 Section 14.3 Amendments and Waivers........................................................................ 106 Section 14.4 Retention of the Borrowers' Documents......................................................... 106 Section 14.5 Notices....................................................................................... 106 Section 14.6 Survival of Warranties and Certain Agreements................................................. 107 Section 14.7 Failure or Indulgence Not Waiver; Remedies Cumulative......................................... 107 Section 14.8 Marshaling; Payments Set Aside................................................................ 108 Section 14.9 Severability.................................................................................. 108 Section 14.10 Headings...................................................................................... 108 Section 14.11 APPLICABLE LAW................................................................................ 108 Section 14.12 Successors and Assigns........................................................................ 109 Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship............................ 109 Section 14.14 Reasonableness of Determinations.............................................................. 109 Section 14.15 Limitation of Liability....................................................................... 109 Section 14.16 No Duty....................................................................................... 110 Section 14.17 Entire Agreement.............................................................................. 110 Section 14.18 Construction; Supremacy of Loan Agreement..................................................... 110 Section 14.19 Consent to Jurisdiction....................................................................... 110 Section 14.20 Waiver of Jury Trial.......................................................................... 110 Section 14.21 Counterparts; Effectiveness................................................................... 111

iv Section 14.22 Servicer...................................................................................... 111 Section 14.23 Obligations of Borrower Parties............................................................... 111 Section 14.24 Additional Inspections; Reports............................................................... 111

v LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate re: Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 2.12(G) - Crossed Loans/Crossed Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.29 - Condominium Property Documents Schedule 4.30 - Ground Leases Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work/O&M Plans Schedule 6.7 - Reserve Funding Conditions i LOAN AND SECURITY AGREEMENT This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as of June __, 2004 and entered into by and between the parties listed as Borrowers on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrowers and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT I. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any other accounts pledged to Lender pursuant to this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, directors, managing members, or general partners of the entity. "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT D. "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Mezzanine Loan and the Loan. "ALLOCABLE PORTION" means 25.70%. "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each Property as set forth on EXHIBIT D. "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7. "ARCHITECT" has the meaning set forth in Section 5.5. "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and Rents of even date herewith from each of the Borrowers to Lender, constituting assignments of each Borrower's right, title and interest in the Leases and proceeds therefrom for each of their respective Properties as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain Conditional Assignments of Hotel Management Agreements of even date herewith executed by each of the Borrowers and the applicable Manager, constituting an assignment of each Management Agreement as Collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "BEVERAGE COMPANY" means any Person (other than any of the Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property. 2 "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Condominium Property Documents. "BORROWER" and "BORROWERS" have the meanings set forth in the preamble; provided that, following a Release, "BORROWERS" means each of the Borrowers remaining as a party to the Loan Documents, and whose Properties remain encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any of such remaining parties. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrowers, General Partner, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing offices of the Servicer, and, if the Loan becomes a "specially serviced mortgage loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1(D) hereof. "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations (including any improvements, repairs or alterations required pursuant to a Property Improvement Plan), FF&E and other capital items (whether paid in cash or property or accrued as liabilities) made by the Borrowers that, in conformity with GAAP, would not be included in the Borrowers' annual financial statements as an Operating Expense of the Properties. "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5. "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank. "CASH TRAP EVENT" has the meaning set forth in Section 6.8. 3 "CASH TRAP RESERVE" has the meaning set forth in Section 6.8. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan. "CLOSING DATE" means the date on which the Closing occurs. "COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan Documents, including without limitation the Properties and the Account Collateral. "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "CONDOMINIUM BORROWER" means, Servico Centre Associates, Ltd., the Borrower that owns the Condominium Property. "CONDOMINIUM DEFAULT" has the meaning set forth in Section 4.29. "CONDOMINIUM PROPERTY" means the Property currently operated as a Crowne Plaza, located in West Palm Beach, Florida. "CONDOMINIUM PROPERTY DOCUMENTS" means those certain documents identified on SCHEDULE 4.29. "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise 4 acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1. "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set forth in Section 7.1. "CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan, each dated as of the date hereof, executed by each of the Crossed Borrowers, and (ii) those certain Guaranties of each of the Crossed Loans, each dated as of the date hereof, executed by each of the Borrowers. "CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G). "CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other "Indebtedness" as defined in each Crossed Loan Agreement. "CROSSED LOANS" shall mean each of the mortgage loans (other than the Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with respect to each Crossed Borrower, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each dated as of the date hereof, between Lender and the Crossed Borrowers for the respective Crossed Loans, each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in each Crossed Loan Agreement for each Crossed Loan, including without limitation the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing and/or securing each Crossed Loan, and each of the Crossed Guaranties relating to the respective Crossed Loans, subject to modification pursuant to Section 2.12(G) hereof. 5 "CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and deeds to secure debt, each dated as of the date hereof, from each Crossed Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed Property as security for the respective Crossed Loans, each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan, as described in the respective Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G) hereof. "D&O INSURANCE" has the meaning set forth in Section 5.4. "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the amount of interest that will be required to be paid over the succeeding twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan, plus principal amortization of the Loan and the Allocable Portion of the Mezzanine Loan that would be required in respect of the then outstanding principal amount of the Loan and the Allocable Portion of the Mezzanine Loan over the succeeding twelve (12) months based on a twenty-five (25) year amortization schedule, calculated using the Interest Rate for the Loan and the actual interest rate on the Mezzanine Loan. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. "DEBT YIELD" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the then outstanding principal balance of the Loan and the Allocable Portion of the Mezzanine Loan. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1. "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1. "DEPOSIT BANK" has the meaning set forth in Section 7.1. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the 6 United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "ELIGIBLE ACCOUNT" means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations ss. 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of any of the Borrowers or any current or former ERISA Affiliate or (iii) for which any of the Borrowers or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrowers and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAWS" means all present and future local, state, federal or other governmental authority, statutes, ordinances, codes, orders, decrees, laws, rules or regulations pertaining to or imposing liability or standards of conduct concerning environmental regulation (including, without limitation, regulations concerning health and safety), contamination or clean-up or the handling, generation, release or storage of Hazardous Material affecting the Properties including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, as amended, the Hazardous Substances Transportation Act, as amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as amended, the Safe Drinking Water Act, as amended, the Occupational Safety and Health Act, as amended, any state superlien and environmental clean-up statutes and all regulations adopted in respect of the foregoing laws whether now or hereafter in effect. "ENVIRONMENTAL REPORTS" means those certain environmental reports and audits for the Properties as described on EXHIBIT B. "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6. 7 "EO13224" has the meaning set forth in Section 4.31. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions and which is also a Business Day. "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning set forth in the Cash Management Agreement. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash Management Agreement. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, 8 dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. "FF&E RESERVE" means the reserve established pursuant to Section 6.4. "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the applicable Borrower Parties as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FITCH" means Fitch, Inc. "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrowers or their Affiliates, or other causes beyond the reasonable control of the Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrowers. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT C and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Borrowers, as franchisee, pursuant to which the Borrowers have the right to operate the Properties under names and hotel systems controlled by the Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to each Property or any other successor franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" means, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "FUNDING LOSSES" has the meaning set forth in Section 2.10. "FUNDING PARTY" means any bank or other entity, if any, which is indirectly or directly funding Lender with respect to the Loan, in whole or in part, including, without limitation, any direct or indirect assignee of, or participant in, the Loan. 9 "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. "GENERAL PARTNER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which is now or hereafter becomes a general partner of any of the Borrowers under such Borrower's limited partnership agreement. "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30. "GROUND LEASED PROPERTIES" means the Properties subject to the Ground Leases described on SCHEDULE 4.30 attached hereto. "GROUND LEASES" means the ground leases described on SCHEDULE 4.30 attached hereto. "GROUND LESSORS" means the lessors under the Ground Leases described on SCHEDULE 4.30 attached hereto. "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity. "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse Obligations of even date herewith from Guarantor to Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIAL" means all or any of the following: (A) substances, materials, compounds, wastes, products, emissions and vapors that are defined or listed in, regulated by, or otherwise classified pursuant to, any applicable Environmental Laws, including any so defined, listed, regulated or classified as "hazardous substances", "hazardous materials", "hazardous wastes", "toxic substances", "pollutants", "contaminants", or any other formulation intended to regulate, define, list or classify substances by reason of deleterious, harmful or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (C) any flammable substances or explosives or any radioactive materials; (D) asbestos in any 10 form; (E) electrical or hydraulic equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G) mold; or (H) urea formaldehyde, provided, however, such definition shall not include cleaning materials and other substances commonly used in the ordinary course of the Borrowers' business, which materials exist only in reasonable quantities and are stored, contained, transported, used, released, and disposed of in accordance with all applicable Environmental Laws. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.6. "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Borrowers under each of the Ground Leases and under the Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties. "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, and (v) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. 11 "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of General Partner, Member, any of the Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (except that such individual may be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to the Borrowers, Member, General Partner or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INITIAL TERM" means the period from the Closing Date to the Scheduled Maturity Date. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Borrowers with respect to the Properties under Section 5.4. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. "INTEREST RATE" has the meaning set forth in Section 2.2. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. "IRS" means the Internal Revenue Service or any successor thereto. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrowers or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation or inquiry unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of each Borrower and 12 Member, with respect to operational issues of any Property or any of the Borrowers; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) the person signing such document or certificate. "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. "LENDER" is defined in the preamble. "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7 "LETTER OF CREDIT" means an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrowers shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrowers that the institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LOAN" has the meaning set forth in Section 2.1. "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the Assignments of Leases, the Assignments of Management Agreements, the Guaranty, the Financing Statements, the Cash Management Agreement and any and all other documents and agreements from any of the Borrowers, General Partner, Member, Guarantor or Manager and accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mezzanine Loan Documents. "LOAN YEAR" means the twelve (12) month period commencing on July 1st of any calendar year during the term of the Loan and ending on June 30th of the following calendar year; provided that the first Loan Year shall commence on the Closing Date and end on June 30, 2005. 13 "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT E, between each Borrower and the applicable Manager described therein, and any management agreement which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT E or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties approved by Lender in accordance with the terms and conditions hereof. "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations, properties, assets or condition (financial or otherwise) of any of the Borrowers or Guarantor, or (B) the impairment of the ability of any of the Borrowers or Guarantor to perform its obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers receives in compensation, more than $500,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers (or all the Borrowers in the aggregate) receives in compensation, not more than $1,000,000 per annum and (y) which is terminable by the Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. "MATERIAL ALTERATION" means any improvement or alteration to a Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget then in effect, or as approved Work under Section 6.7 hereof. "MATERIAL LEASE" means any Lease of space in a Property which (i) is with an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other payments in an amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, 14 penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, or (iv) obligates the Borrowers to make any improvements to the Properties either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. "MATURITY DATE" means July 1, 2009, or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. "MEMBER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the Borrowers which are limited liability companies) and any other entity which is now or hereafter becomes the managing or sole member of any of the Borrowers under such Borrower's limited liability company operating agreement. "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE BORROWER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Mezzanine Borrower". "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its successors and assigns. "MEZZANINE LOAN" means that certain loan being made on the date hereof from Mezzanine Lender to Mezzanine Borrower. "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the Mezzanine Loan, as same may be amended, modified or restated from time to time. "MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii) during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year, 11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th) Loan Year, 13%. "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4. "MOODY'S" means Moody's Investors Service. "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments of Leases and Security Agreements, (ii) those certain Deeds of Trust, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security Agreements, each of even date herewith, from each Borrower to Lender (or deed trustee on 15 behalf of Lender, as applicable), constituting a Lien on such Borrower's respective Property as Collateral for the Loan as same may be modified or amended from time to time. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which any of the Borrowers or any Affiliate has any liability, including contingent liability. "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which Operating Revenues exceed Operating Expenses (excluding Management Fees, interest, income taxes, depreciation, amortization, FF&E reserves, and fees due to all Franchisors for such period). "NOTE" has the meaning set forth in Section 2.1. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrowers under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against any of the Borrowers, and the performance of all other terms, conditions and covenants under the Loan Documents. "OFAC" has the meaning set forth in Section 4.31. "O&M PLANS" has the meaning set forth in Section 5.7. "OPERATING BUDGET" means, collectively, for any period, the Borrowers' budgets setting forth the Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties for such period, which budgets have been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" means, for any period, without duplication, all costs and expenses of operating, maintaining and managing the Properties determined in accordance with GAAP, including, without limitation, Impositions (due and payable during the applicable period of determination), Insurance Premiums, repair and maintenance costs, Management Fees and costs, fees payable to all Franchisors, utilities, accounting, legal and other professional fees, fees relating to environmental and financial audits, wages, salaries, payroll taxes and benefits, business franchise taxes, tips and gratuities paid to employees and staff and other personnel expenses, costs and expenses related to operating and maintaining all guest rooms, restaurants (including inventory and supplies), retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, and all other "costs and expenses" as defined in 16 the Uniform System; but excluding principal and interest payments on the Loan, fees and expenses of a non-operating nature and fees and expenses due and payable to or for the benefit of Lender under this Loan Agreement or any of the other Loan Documents (including, without limitation, all loan servicing fees and expenses, and expenses related to a Cap), expenses which, in accordance with GAAP, should be capitalized, any expense paid by a tenant that would otherwise be an Operating Expense, capital expenditures, tenant improvement allowances and leasing commissions, if any, asset management fees, any payment or expense for which each Borrower was or is to be reimbursed from proceeds of the Loan or insurance or by any third party, any fees or expenses paid to any partner or member of the Borrowers for services provided to any of the Borrowers and any non-cash charges such as depreciation and amortization. Operating Expenses shall not include federal, state or local income taxes or legal and other professional fees unrelated to the operation of the Properties. "OPERATING REVENUES" means, without duplication, all revenues and receipts of the Borrowers from operation of the Properties or otherwise arising in respect of the Properties which are properly allocable to the Properties for the applicable period in accordance with GAAP, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants and bars (including without limitation, service charges for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, health club membership fees, food and beverage wholesale and retail sales, service charges, convention services, special events, audio-visual services, boat cruises, travel agency fees, internet booking fees, telephone charges, laundry services, vending machines and otherwise, all rents, revenues and receipts now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the possession, use or occupancy of all or any portion of the Properties or personalty located thereon, or rendering of service by any of the Borrowers or any operator or manager of the hotel or commercial space (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores and deposits securing reservations of such space (only to the extent such deposits are not required to be returned or refunded to the depositor)), proceeds from rental or business interruption insurance relating to business interruption or loss of income for the period in question and any other items of revenue which would be included in operating revenues under the Uniform System; but excluding proceeds from the sale of FF&E, abatements, reductions or refunds of real estate or personal property taxes relating to the Properties, dividends on insurance policies relating to the Properties, condemnation proceeds arising from a temporary taking of all or a part of any Properties, security and other deposits until they are forfeited by the depositor, advance rentals until they are earned, proceeds from a sale, financing or other disposition of the Properties or any part thereof or interest therein and other non-recurring revenues as determined by Lender, insurance proceeds (other than proceeds from rental or business interruption insurance), other condemnation proceeds, capital contributions or loans to any of the Borrowers, disbursements to any of the Borrowers from the Reserves, sales, use and occupancy taxes collected from customers or patrons of the Properties to be remitted to the applicable taxing authorities, and gratuities or service charges collected on behalf of and remitted to employees or contractors of the Properties. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. 17 "PAYMENT DATE" means the first day of each calendar month occurring during the term of the Loan (or if such day is not a Business Day, the immediately succeeding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the other Liens of the Loan Documents in favor of Lender, (ii) the items shown in Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not yet due and payable or Liens arising after the date hereof which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case of Liens arising after the date hereof, statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business and discharged by the Borrowers by payment, bonding or otherwise within forty-five (45) days after the filing thereof or which are being contested in good faith in accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and customary purchase money financing of personal property and equipment leasing to the extent the same are created in the ordinary course of business in accordance with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against real property which do not materially adversely affect (A) the ability of the Borrowers to pay any of their obligations to any Person as and when due, (B) the marketability of title to the Properties, (C) the fair market value of the Properties, or (D) the use or operation of the Properties as of the Closing Date and thereafter; (vii) rights of existing and future tenants, as tenants only, pursuant to the Leases; (viii) any other Lien to which Lender may expressly consent in writing; and (ix) Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, 18 controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5. "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6. "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General Partner and Member. "PROHIBITED PERSON" has the meaning set forth in Section 4.31. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT A, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the Borrowers and which shall be encumbered by and are more particularly described in the respective Mortgages: provided that, following a Release, "PROPERTIES" means each of the Properties that remain encumbered by the Mortgages as Collateral for the Loan. "PROPERTY CONDITION REPORT" means those certain property condition reports for the Properties as described on EXHIBIT J. "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties described on EXHIBIT G and any future Property Improvement Plans required to be implemented by the applicable Franchisor. "PROPERTY RELEASE" has the meaning set forth in Section 11.4. 19 "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization; and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. "RATING CRITERIA" with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" means all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties received by the Borrowers or any Related Person of the Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which any of the Borrowers or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE" has the meaning set forth in Section 11.4. "RELEASE DATE" has the meaning set forth in Section 11.4. "RELEASE PRICE" means an amount equal to one hundred twenty-five percent (125%) of the Allocated Loan Amount of the applicable Property. "RENT ROLL" has the meaning set forth in Section 3.1. "RENTS" has the meaning set forth in the Mortgages. "REPLACEMENTS" has the meaning set forth in Section 6.4. "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5. 20 "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "RESERVES" means the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Document, including without limitation, the reserves established pursuant to Article VI. "RESTORATION" has the meaning set forth in Section 5.5. "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five percent (5%) of the Aggregate Allocated Loan amount of the applicable Property, not to exceed $500,000, per Property per occurrence. "REVPAR" means average room revenues per available room per day. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto; which payment amounts were calculated based upon a twenty-five (25) year amortization schedule at the Interest Rate. In the event that the amount of principal prepayments on the Loan from application of casualty insurance proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in the aggregate, from the Closing Date or from the date of the last re-amortization of the Loan under this sentence, Lender shall recalculate the Scheduled Mortgage Principal Payments based upon the then remaining principal amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE 2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto in its entirety. "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" means a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEE" has the meaning set forth in Section 2.11. "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the date of formation of the applicable Person in its respective jurisdiction of formation. 21 "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period, (iii) a calculation of the Debt Service Coverage Ratio and the Debt Yield for the applicable period (which shall not be binding on Lender), and (iv) such other financial reports as the subject entity shall routinely and regularly prepare. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TIER 1 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT I. "TIER 2 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT I. "TIER 3 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT I. "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart Title Insurance Company, as co-insurers, and/or such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title insurance pertaining to the Mortgages issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, (y) the failure to pay to any Franchisor any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT") and the continuance thereof beyond any applicable notice and grace period under such Franchise Agreement or the occurrence of one or more breaches or defaults (other than Franchise Payment Defaults) and the continuance thereof beyond all applicable notice and grace periods, if any, under such Franchise Agreements (or such other cure periods as may be provided by the applicable Franchisors in writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or more of the outstanding principal balance of the Loan; provided, however, no Uncured Franchise Default shall be deemed to have occurred under clause (x) above with respect to any Property following 22 the voluntary or involuntary termination of the applicable Franchise Agreement if (a) within ten (10) Business Days of the termination of such Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)), the applicable Borrower delivers to Lender evidence reasonably satisfactory to Lender that such Borrower is diligently pursuing efforts to enter into a new Franchise Agreement with an Acceptable Franchisor for the applicable Property and such Borrower shall thereafter diligently and continuously pursue such efforts to enter into a new Franchise Agreement, (b) at the time of such termination no other Property shall be in operation without being subject to a Franchise Agreement, (c) the Allocated Loan Amount of the Property covered by such Franchise Agreement is not more than five percent (5%) of the outstanding principal balance of the Loan or such Property shall not be in operation for more than five (5) consecutive days without being subject to a Franchise Agreement, and (d) no Property shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. "WORK" has the meaning set forth in Section 6.7. "WORK RESERVES" has the meaning set forth in Section 6.7. "ZONING REPORTS" means those certain zoning and site requirements summaries for the Properties as described on EXHIBIT K. SECTION 1.2 ACCOUNTING TERMS. For purposes of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any reference to any Person may include such Person's respective permitted successors and assigns 23 or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrowers contained herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to borrow from Lender, a loan in the original principal amount of $66,818,500 (the "LOAN"). (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to Lender a Promissory Note, dated of even date herewith (as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the order of Lender, in the original principal amount of $66,818,500. (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be used to (i) refinance existing indebtedness; (ii) pay all recording fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable legal fees and expenses of counsel to Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) establish the Reserves required hereunder; and (iv) provide for general corporate purposes, including, without limitation, payment of transaction costs and expenses incurred by the Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrowers. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall bear interest at a rate per annum equal to _____ percent (__%) (the "INTEREST RATE"). (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is four percent (4%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT RATE"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in arrears. (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum 24 amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 RESERVED. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments of interest and principal on the Note as follows: (i) The Borrowers shall make a payment to Lender of interest only on the Closing Date for the period from and including the Closing Date through and including the last day of the calendar month in which the Closing occurs; and (ii) Commencing on August 1, 2004 and on each Payment Date thereafter through but not including the Maturity Date, the Borrowers shall make a payment of interest on the Loan for the prior calendar month, and in addition shall make a payment of principal on the Loan in an amount equal to the Scheduled Mortgage Principal Payment for such Payment Date. 25 (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrowers on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to have satisfied their obligations to make such payments. Upon the occurrence and during the continuance of an Event of Default, payments shall be applied to the Obligations in such order as Lender shall determine in its sole and absolute discretion. SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance with the Loan Documents, the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon, and all other sums then owing to Lender hereunder and under the Note, the Mortgages and the other Loan Documents, shall be due and payable on the Maturity Date. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or in part at any time, except as expressly set forth in this provision. On and after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part, without payment of Prepayment Consideration, provided that (i) the Borrowers shall provide to Lender not less than fifteen (15) days prior written notice of such prepayment, (ii) together with such prepayment the Borrowers also shall pay all accrued and unpaid interest and all other Obligations then due and owing, (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith the Borrowers also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to the end of such calendar month. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur prior to May 1 2009, on account of acceleration of the Loan (whether or not due to an Event of Default), or otherwise, then except only as expressly provided in this Loan Agreement or the other Loan Documents to the contrary, the Borrowers shall pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due 26 and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due as to a prepayment of the Loan in connection with (i) application of insurance or condemnation proceeds required by Lender pursuant to this Loan Agreement or the Mortgages in the absence of an Event of Default, (ii) Scheduled Mortgage Principal Payments. The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. (C) DEFINITIONS. The following terms shall have the meanings indicated: "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii) the Yield Maintenance Amount. "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if any, between (i) the present value on the date of prepayment (by acceleration or otherwise) of all future installments of principal and interest which the Borrowers would otherwise be required to pay under the Note from the date of such prepayment until the Maturity Date absent such prepayment, including the unpaid principal amount which might otherwise be due upon the Maturity Date absent such prepayment, with such present value being determined by the use of a discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent Basis" pursuant to the standards and practices of the Securities Industry Association), on the date of such prepayment of the United States Treasury Security having the term to maturity closest to what otherwise would have been the remaining term hereof absent such prepayment and (ii) the principal balance of the Loan on the date of such prepayment. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrowers; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrowers' obligation to pay the Obligations. SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrowers shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. 27 SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 RESERVED. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths of one percent (.05%) per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrowers and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrowers be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF CROSS-COLLATERALIZATION. (A) Until repayment of the Indebtedness and the Crossed Indebtedness and satisfaction of all obligations under this Agreement and the Crossed Loan Agreement, each Borrower acknowledges and agrees (subject to Lender's election(s) at Lender's sole discretion from time to time pursuant to Section 2.12(G) below): (i) that the Properties shall secure not only the Loan but also the Crossed Loans, and that the Liens of the Loan Documents shall constitute Liens securing not only the Loan but also the Crossed Loans; (ii) that the Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured by such Crossed Properties; and (iii) that Lender would not make the Loan to the Borrowers or the loans constituting the Crossed Loans unless the Borrowers and the Crossed Borrowers granted liens on the Properties and, in addition, the Crossed Properties of the Crossed Borrowers to secure the payment of the Loan and the Crossed Loans. (B) Until the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, the Borrowers (i) shall have no right of subrogation with respect to the Crossed Loans and (ii) waive any right to enforce any remedy which Lender now has or may hereafter have against the Crossed Borrowers, any endorser or any guarantor of all or any part of the Crossed Loans or any other individual or entity, and the Borrowers waive any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of the Crossed Loans or any other liability of any of the Crossed Borrowers to Lender. Should any Borrower have the right, notwithstanding the foregoing, to 28 exercise its subrogation rights, each Borrower hereby expressly and irrevocably (1) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that such Borrower may have to the payment in full in cash of the Loan and the Crossed Loans and (2) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Loan and the Crossed Loans are paid in full in cash. Each Borrower acknowledges and agrees that this subordination is intended to benefit Lender and shall not limit or otherwise affect any Borrower's liability hereunder or the enforceability of this Loan Agreement or the Crossed Loan Documents. (C) Each Borrower agrees that any and all claims of such Borrower against any of the Crossed Borrowers or any endorser or any guarantor of all or any part of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with respect to any obligations, liabilities or indebtedness now or hereafter owing by the Crossed Obligors, or any of them, to such Borrower, or otherwise existing or claimed to be owed or to exist on the part of any of the Crossed Obligors, or against any of their respective properties (collectively, the "CROSSED PARTY OBLIGATIONS") shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any right of any Borrower to ask, demand, sue for, take or receive any payment from any of the Crossed Obligors, all rights, liens and security interests of each Borrower, whether now or hereafter arising and howsoever existing, in and to any assets of any of the Crossed Obligors shall be and are subordinated to the rights of Lender in those assets under the Loan Documents, the Crossed Loan Documents or otherwise, and no Borrower shall, until the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, (i) assert, collect, sue upon, or enforce all or any part of the Crossed Party Obligations; (ii) commence or join with any other creditors of any of the Crossed Obligors in commencing any bankruptcy, reorganization, receivership or insolvency proceeding against any of the Crossed Obligors; (iii) take, accept, ask for, sue for, receive, set off or demand any payments upon the Crossed Party Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to be created liens, security interests, mortgages, deeds of trust or pledges of or with respect to any of the assets of any of the Crossed Obligors in favor of or for the benefit of such Borrower. (D) If all or any part of the assets of any of the Crossed Obligors, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Crossed Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Crossed Obligor is dissolved or if substantially all of the assets of any such Crossed Obligor are sold, then, and in any such event (such events being herein referred to as an "CROSSED OBLIGOR INSOLVENCY EVENT"), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable to any Borrower upon or with respect to any Crossed Party Obligations shall be paid or delivered directly to the Lender for application on the Loan and the Crossed Loans, due or to become due, until such Loan and Crossed Loans shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by any Borrower upon or with respect to the Crossed Party Obligations after any Crossed Obligor Insolvency Event and prior to the payment in full and satisfaction of all of the Loan and Crossed Loans, such Borrower shall receive and hold the same in trust, as trustee, for the benefit of Lender and shall forthwith deliver the same to Lender in precisely the form 29 received (except for the endorsement or assignment of such Borrower where necessary), for application to any of the Loan or Crossed Loans, due or not due, and, until so delivered, the same shall be held in trust by such Borrower as the property of Lender. If such Borrower fails to make any such endorsement or assignment to Lender, Lender or any of its officers or employees is irrevocably authorized to make the same. Each Borrower agrees that until the Loan and Crossed Loans have been paid in full (in cash) and satisfied, no Borrower will assign or transfer to any individual or entity (other than Lender) any claim such Borrower has or may have against any Crossed Obligor. (E) Subject to the provisions of Section 2.12(G), to the extent that any collection upon any of the Loan or the Crossed Loans is made by Lender from one of the Crossed Borrowers or the Crossed Properties or other assets of the Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all other Crossed Loans Collections then previously or concurrently made by such Crossed Borrower, exceeds the amount which otherwise would have been collected from such Crossed Borrower if each Borrower and each Crossed Borrower had paid the portion of the Loan and Crossed Loans satisfied by such Crossed Loans Collection in the same proportion as such Crossed Borrower's Allocable Amount (as defined below) (as determined immediately prior to such Crossed Loans Collection) bore to the aggregate Allocable Amounts of each Borrower and each Crossed Borrower as determined immediately prior to the making of such Crossed Loans Collection, then, following payment in full in cash of the entire Loan and Crossed Loans, such Crossed Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each Borrower and each of the other Crossed Borrowers for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Crossed Loans Collection. As of any date of determination, the "ALLOCABLE AMOUNT" of any Borrower or any Crossed Borrower shall be equal to the maximum amount of the claim which could then be recovered from such Borrower or Crossed Borrower under the Loan Documents and Crossed Loan Documents without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. The foregoing provision shall be for the benefit of each of the Crossed Borrowers and Lender, but shall be subject to modification as provided in Section 2.12(G) below and to amendment by agreement of the Borrowers and Lender, in each case without necessity of any agreement, acknowledgment or approval of any Crossed Borrower or any notice to any Crossed Borrower. Section 2.12(E) of each of the Crossed Loan Agreements contains provisions similar to this Section 2.12(E) for the benefit of Lender and (subject to the terms thereof) the Crossed Borrowers. This Section 2.12(E) and Section 2.12(E) of each of the Crossed Loan Agreements are intended only to define the relative rights of the Borrowers and Crossed Borrowers, and nothing set forth in this Section 2.12(E) or in Section 2.12(E) of each of the Crossed Loan Agreements is intended to or shall impair the liens and security interests of the Loan Documents and the Crossed Loan Documents or the obligations of the Borrowers and the Crossed Borrowers thereunder. Each Borrower acknowledges that the rights of contribution and indemnification under this Section 2.12(E) and under Section 2.12(E) of the Crossed Loan Agreements constitute assets of the Borrowers or Crossed Borrowers to which such contribution and indemnification is owing, and any such right of contribution and indemnification owing to any Borrower under Section 2.12(E) of any of the Crossed Loan Agreements shall constitute additional Crossed Party Obligations for all purposes under this Section 2.12. 30 (F) Each Borrower hereby consents and agrees to each of the following, and agrees that such Borrower's obligations under this Loan Agreement and the other Loan Documents and the Liens created under this Loan Agreement and the other Loan Documents securing the Loan and the Crossed Loans shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) that such Borrower might otherwise have as a result of or in connection with any of the following: (i) Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Crossed Loans, the Crossed Loan Documents, or other document, instrument, contract or understanding between the Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed Loans or any failure of Lender to notify such Borrower of any such action. (ii) Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to the Crossed Borrowers. (iii) The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of any of the Crossed Borrowers or any other party at any time liable for the payment of all or part of the Crossed Loans; or any dissolution of any of the Crossed Borrowers, or any sale, lease or transfer of any or all of the assets of any of the Crossed Borrowers, or any changes in the shareholders, partners or members of any of the Crossed Borrowers; or any reorganization of any of the Crossed Borrowers. (iv) The invalidity, illegality or unenforceability of all or any part of the Crossed Loans, or any document or agreement executed in connection therewith, for any reason whatsoever, including without limitation the fact that (A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law, (B) the act of creating the Crossed Loans or any part thereof is ultra vires, (C) the officers or representatives executing the Crossed Loan Documents or otherwise creating the Crossed Loans acted in excess of their authority, (D) the Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Crossed Loans wholly or partially uncollectible from the Crossed Borrowers, (F) the creation, performance or repayment of the Crossed Loans (or the execution, delivery and performance of any document or instrument representing part of the Crossed Loans or executed in connection with the Crossed Loans, or given to secure the repayment of the Crossed Loans) is illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that each Borrower shall remain liable hereon regardless of whether the Crossed Borrowers or any other person be found not liable on the Crossed Loans or any part thereof for any reason. (v) Any full or partial release of the liability of the Crossed Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Crossed Loans, or any part thereof, it being recognized, acknowledged and agreed by each Borrower that such Borrower has not been induced to enter into this Loan Agreement or the other Loan Documents on the basis of a 31 contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Loan or such Borrower's obligations under the Loan Agreement or the other Loan Documents, or that Lender will look to other parties to pay or perform the Crossed Loans. (vi) The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Crossed Loans. (vii) Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Crossed Loans. (viii) The failure of or refusal of Lender or any other party acting on behalf of Lender to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (A) to take or prosecute any action for the collection of any of the Crossed Loans, (B) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (C) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Crossed Loans. (ix) The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Crossed Loans, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by each Borrower that it is not entering into this Loan Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Crossed Loans. (x) Any payment by any of the Crossed Borrowers to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to any of the Crossed Borrowers or someone else. (xi) Any other action taken or omitted to be taken with respect to the Crossed Loan Documents, the Crossed Loans, or the security and collateral therefor. (G) Notwithstanding anything to the contrary set forth in this Loan Agreement, Lender may, at its sole option and in its sole discretion, from time to time (one or more times) deliver written notice to the Borrowers stating that this Loan Agreement, the Mortgages and the other Loan Documents shall no longer secure one or more (at Lender's sole election) of the Crossed Loans (each a "CROSS RELEASE NOTICe"), whereupon (i) this Loan Agreement and the other Loan Documents shall no longer secure any of the Crossed Loans for which a Cross Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and, collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side Agreement and other Crossed Loan Documents executed and delivered by the Excluded Borrowers with respect to any Excluded Loan are herein referred to as 32 the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT" and "EXCLUDED LOAN DOCUMENTS", respectively, and each Crossed Property encumbered by the Excluded Loan Documents is herein referred to as an "EXCLUDED PROPERTY"), (ii) each Cross Guaranty of the Loan executed by each Excluded Borrower, together with each Cross Guaranty of an Excluded Loan executed by the Borrowers (herein collectively referred to as the "EXCLUDED GUARANTIES") shall be deemed automatically terminated and of no further force or effect, (iii) each reference herein and in the other Loan Documents to the "Crossed Loans" shall be deemed to exclude the Excluded Loans, (iv) each reference herein and in the other Loan Documents to the "Crossed Loan Agreements", "Crossed Mortgages", "Crossed Loan Documents", "Crossed Properties", "Cross Side Agreements" and "Cross Guaranties" shall be deemed to exclude the Excluded Loan Agreement, the Excluded Mortgages, the Excluded Loan Documents, the Excluded Property, the Excluded Side Agreements and the Excluded Guaranties, respectively, (v) each reference herein and in the other Loan Documents to the "Crossed Borrowers" and the "Crossed Obligors" shall be deemed to exclude each Excluded Borrower, (vi) the provisions of Section 2.12(E) of this Loan Agreement shall not apply to any Crossed Loans Collection from any Excluded Borrower or its Excluded Property and the Borrowers shall have no obligation or liability on account thereof; and (vii) Borrowers shall no longer be beneficiaries of the covenants and agreements set forth in Section 2.12(E) of any Excluded Loan Agreement, and the Borrowers shall have no rights or claims on account of any contribution or indemnification obligations of any Excluded Borrower under Section 2.12(E) of any Excluded Loan Agreement. In addition to and without limiting the foregoing, the Borrowers hereby agree to fully cooperate with Lender, if Lender is considering the termination of the cross collateralization and cross default of the Loan and Loan Documents with any of the Crossed Loans, including, but not limited to (x) amending this Loan Agreement and the other Loan Documents as may be required by Lender to effectuate such termination of the cross collateralization and cross default provisions thereof, and (y) updating and/or endorsing the title insurance policies (at Lender's cost as to additional premium charges, if any) to reflect the continuation of the first priority lien of this Loan Agreement. (H) In the event the Loan is repaid or defeased in full in accordance with the provisions of this Loan Agreement and the other Loan Documents, then provided no Event of Default then exists hereunder, and no "Event of Default" (as defined in any of the Other Crossed Loan Agreements) exists under any of the Other Crossed Loan Documents, the cross collateralization and cross default of the Loan and Loan Documents with the Other Crossed Loans shall terminate and all the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan and the provisions of Section 2.12(G) above shall become automatically applicable with respect thereto. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to fund the Loan are subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in 33 any other agreement in writing between the Borrowers and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender a certificate duly executed by the Borrowers stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. (B) DEPOSITS. The deposits required herein, including without limitation, the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrowers' option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower Party and all other Persons executing any agreement on behalf of any Borrower Party shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of each Borrower by the chief financial officer (or similar officer of the Borrowers) stating that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrowers or the projected cash flow of the Borrowers or the Properties, in each case taken as a whole, has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, specifying such change in detail), and that, to the Borrowers' Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operations of the Borrowers and the Properties, in each case taken as a whole, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrowers' Knowledge, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Morris, Manning & Martin, LLP or other legal counsel for the Borrowers satisfactory to 34 Lender, written legal opinions, each in form and substance acceptable to Lender, as to such matters as Lender shall request, including opinions to the effect that (i) each of the Borrower Parties is duly formed, validly existing, and in good standing in its state of organization and, in the case of each Borrower, in each state where its Property is located, (ii) this Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Deposit Account Agreement and Cash Management Agreement have been duly authorized, executed and delivered by Borrower and Manager and are enforceable in accordance with their terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) no Borrower, Member or General Partner would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrowers' local counsel in each state where the Properties are located as to the enforceability of, and the creation and perfection of Liens under, the Mortgages and the Assignments of Leases and such other matters as Lender may reasonably request; (b) [intentionally omitted]; (c) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for each Borrower that is a single member limited liability company formed under the laws of the State of Delaware that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous written consent of the board of directors of Member including the Independent Directors, or the unanimous prior written consent of the board of managers' of each Borrower, including the Independent Directors') would be required for a voluntary bankruptcy filing by each such Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors) would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law the bankruptcy or dissolution of Member would not cause the dissolution of any of the Borrowers and the bankruptcy or dissolution of the sole shareholder or member would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of any of the Borrowers and creditors of Guarantor shall have no legal or equitable remedies with respect to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of each Borrower and Member; and (d) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received and approved pro forma Title Policies for the Mortgages, and as of the Closing, each Title Company shall be irrevocably committed and prepared immediately to issue the Title Policies or binding commitments. The Title Policies shall be in form and substance satisfactory to Lender. Without limitation, each Title Policy shall be issued on an ALTA form acceptable to Lender by each Title Company or if an ALTA form is not available in the applicable jurisdiction, another form acceptable to Lender, together with such reinsurance and direct access agreements as Lender may require, insuring that the Mortgages are valid first and prior enforceable liens on each Borrower's fee simple interest or ground leasehold interest, as the case may be, in the applicable Property (including any easements appurtenant thereto) subject only to such exceptions to coverage as are acceptable to Lender, including the Permitted Exceptions. Each Title Policy 35 shall contain such endorsements as Lender may require (to the extent available in the state where the Properties is located) in form acceptable to Lender, including deletion of the creditors' rights exception and affirmative endorsement coverage for creditors' rights risks. (G) SURVEY. Lender shall have received a survey of each of the Properties, certified to Lender and its successors, assigns and designees and to each Title Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or Lender shall have received both (x) a "no change" affidavit from each Borrower with respect to such Borrower's most recent Survey sufficient to cause the Title Company to provide current survey coverage to Lender in the applicable Title Policy without exception for matters that would be revealed by a current and accurate survey of the applicable Property, except for matters specifically shown on such most recent Survey, and (y) a reliance letter (to the extent any such surveys are not currently addressed to Lender) in form and substance satisfactory to Lender, permitting Lender to rely on the Survey (and any certification thereof) as if originally addressed and certified to Lender. Each Survey shall contain the minimum detail for land surveys as most recently adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall contain Lender's standard form certification, and shall show no state of facts or conditions reasonably objectionable to Lender. (H) ZONING. On or before the Closing Date, Lender shall have received evidence reasonably satisfactory to Lender as to the zoning and subdivision compliance of each of the Properties. (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business (including without limitation, each state in which the Properties are located for the applicable Borrower(s) and, to the extent required by law, Member and General Partner). Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to 36 Lender for each Borrower Party (including for Guarantor) and for the Properties. If any such statements are not available for the Properties, then the Borrowers shall provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year. (M) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the applicable Borrower. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements (including any Property Improvement Plan) and Franchisor Letters for each of the Properties duly executed by the applicable Franchisors. (O) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL") in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases, and the amount of security deposit being held by the Borrowers under each Material Lease, if any. (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases, as amended. (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender shall have received copies of the final, unconditional certificates of occupancy issued with respect to each of the Properties, together with all other applicable licenses (including, without limitation, each liquor license and beer permit), permits and approvals required for each Borrower to own, use, occupy, operate and maintain each of the Properties as a hotel. (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date, Lender shall have received copies of certificates of insurance (dated not more than twenty (20) days prior to the Closing Date) regarding insurance required to be maintained under this Loan Agreement and the other Loan Documents, together with endorsements satisfactory to Lender naming Lender as an additional insured and loss payee, as required by this Loan Agreement, under such policies. In addition, as to any insurance matters arising under Environmental Laws or pertaining to any environmental insurance that any of the Borrowers has with respect to any 37 Property, the same shall be endorsed to Lender as required by this Loan Agreement and shall name Lender as an insured, additional insured and/or loss payee, as applicable. (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to each of the Properties, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender shall have received a property condition report for each of the Properties, which shall be prepared by an engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion. Each such report shall set forth any items of deferred maintenance at the applicable Property. (U) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of each of the Properties from a state certified appraiser engaged by Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search reports with respect to the Borrowers, Guarantor, Managers, General Partner and Member, all dated not more than thirty (30) days prior to the Closing Date. (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days prior to the Closing Date, Lender shall have received payoff demand letters and wiring instructions from each lender or other obligee of any existing indebtedness which is required to be repaid pursuant to this Loan Agreement. (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (Z) OTHER REVIEW. Lender shall have completed all other review of the Borrower Parties, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrower Parties shall have satisfied such other reasonable criteria as Lender may reasonably specify. (AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date, Lender shall have received (i) true and complete copies of each of the Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements acceptable to Lender, duly executed by each Ground Lessor. 38 (BB) CONDOMINIUM PROPERTY AGREEMENTS. On or before the Closing Date, Lender shall have received an estoppel and agreement of the Board of Managers with respect to the Condominium Property Documents in form and substance reasonably acceptable to Lender. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, each Borrower represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrowers, General Partners and Members. SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower Party of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower Party; (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower Party; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower Party or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower Party or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or 39 imposition of any material Lien (other than the Lien of the Loan Documents) upon the Properties or assets of any Borrower Party; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower Party, which approvals or consents as set forth on SCHEDULE 4.2 have been obtained on or before the dates required under such material Contractual Obligation, but in no event later than the Closing Date. (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower Party that is a party thereto, enforceable against each of the Borrower Parties, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No Borrower Party has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower Party has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the Borrowers, their Affiliates and the Properties which have been furnished by or on behalf of the Borrowers to Lender pursuant to this Loan Agreement present fairly the financial condition of the Persons covered thereby as of the dates thereof and the results of their operations for the periods then ended, and, to the Borrowers' Knowledge after due inquiry, have been prepared in accordance with GAAP consistently applied (except as disclosed therein). Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements. SECTION 4.4 NDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the Borrowers shall have no outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to the Properties, free and clear of all Liens except for the Permitted Encumbrances. The Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Borrowers as permitted hereunder), subject only to the Permitted Encumbrances. The Mortgages, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) a valid, perfected first lien on each of the Properties, subject only to the Permitted Encumbrances, and (ii) perfected first priority security interests in and to, and perfected collateral assignments of, all personalty (including the Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. Lender will have a perfected first priority security interest in and to the FF&E 40 owned by the Borrowers, if any, not located at the Properties. To the Borrowers' Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual Knowledge of the Borrowers, none is threatened. Except as set forth on SCHEDULE 4.5(A), no Person has any option or other right to purchase all or any portion of any of the Properties or any interest therein. To the Borrowers' Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties which are or will be liens prior to, or equal or coordinate with, the lien of any of the Mortgages. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgages and this Loan Agreement, materially and adversely affect the value of any of the Properties, impair the use or operations of the Properties or impair the Borrowers' ability to pay its obligations in a timely manner. SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrowers' Knowledge, there are no illegal activities relating to controlled substances on any of the Properties. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, all material permits, licenses and certificates for the lawful use, occupancy and operation of each component of each of the Properties in the manner in which it is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, in the event that all or any part of the Improvements located on any Property is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrowers' Knowledge, no legal proceedings are pending or threatened with respect to the zoning of any Property. To the Borrowers' Knowledge, except as set forth in the Title Policies and/or the Surveys, neither the zoning nor any other right to construct, use or operate any Property is in any way dependent upon or related to any real estate other than such Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Borrowers with respect to any Property without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and complete copies (in all material respects) of all (i) Leases for more than five hundred (500) square feet of space at any Property and (ii) Material Agreements affecting the operation and management of the Properties, and such Leases and Material Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Except for the rights of 41 each of the current Managers pursuant to the existing Management Agreements, no Person has any right or obligation to manage any of the Properties or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the Properties, or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, none of the Properties are subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrowers' Knowledge, (i) the Material Leases are in full force and effect; (ii) the Borrowers have not given any notice of default to any tenant under any Material Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Material Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrowers, threatened) against the Borrowers by any tenant or former tenant. No rental in excess of one month's rent has been prepaid under any of the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. (C) NO RESIDENTIAL UNITS. There are no residential units in any of the Properties and, to each Borrower's Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Properties for dwelling purposes other than on a transient basis. (D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true and complete copy of each of the Management Agreements to which they are a party that will be in effect on the Closing Date, and such Management Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. The Management Agreements are in full force and effect and no default by any of the Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have delivered to Lender a true and complete copy of each of the Franchise Agreements to which they are a party, and such Franchise Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material default by the Borrowers, Manager or the applicable Franchisor exists thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the aggregate, do not and will not have a Material Adverse Effect. Except for the Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no other property improvement plans or similar 42 capital improvement plans or obligations required by any Franchisor pursuant to any Franchise Agreement, in effect for any of the Properties. SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as set forth in the Property Condition Reports for the Properties delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in good condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrowers are not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of each of the Properties (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of each of the Properties as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of each of the Properties as now used or presently contemplated. Except as may be shown on the applicable Survey, to the Borrowers' Knowledge no part of any of the Properties is within a flood plain and none of the Improvements create encroachments over, across or upon the Properties' boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each of the Properties for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrowers' Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at any of the Properties is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, there are no judgments outstanding against any Borrower Party, or affecting any of the Properties or any property of any Borrower, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the Borrowers' Knowledge, threatened against any Borrower Party that could reasonably be expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each Primary Borrower Party required to be filed have been timely filed (or each Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon such Person and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrowers' Knowledge, there is not presently pending any special assessment against any of the Properties or any part thereof. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Primary Borrower Parties is a party to or bound by, nor is any property of such Person subject to or bound 43 by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no Primary Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of any Primary Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from any Borrower Parties' actions. SECTION 4.16 INTENTIONALLY DELETED. SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the aggregate fair saleable value of the Borrowers' assets exceed and will, immediately following the making of the Loan, exceed the Borrowers' total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The aggregate fair saleable value of the Borrowers' assets is and will, immediately following the making of the Loan, be greater than the Borrowers' probable total liabilities, including the maximum amount of their Contingent Obligations on their debts as such debts become absolute and matured. Each Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond their ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrowers and the amounts to be payable on or in respect of obligations of the Borrowers). 44 SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrowers that has had or could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrowers. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrowers or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate description of all policies of insurance for each Borrower that are in effect as of the Closing Date. No notice of cancellation has been received with respect to such policies, and, to each Borrower's Knowledge, the Borrowers are in compliance with all conditions contained in such policies. SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1) or more parcels which constitute separate tax lots. No part of any of the Properties is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lots or parcels comprising any of the Properties. SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person (other than the Beverage Companies), or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including any Property) is property of the estate, in any voluntary or involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law now or hereafter in effect. No Borrower Party and no property of any of them is under the possession or control of a receiver, trustee or other custodian. No Borrower Party has made any assignment for the benefit of creditors. No such assignment or bankruptcy or similar case or proceeding is now contemplated. SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to Lender in writing herein or in any of the Loan Documents, no Default exists. SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in 45 Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrowers have assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers are not and will not be subject to state statutes applicable to the Borrowers' regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining agreement. SECTION 4.29 CONDOMINIUM PROPERTY DOCUMENTS. (A) The Borrowers have delivered true and correct copies of each of the Condominium Property Documents to Lender and same have not been modified, amended or assigned except as set forth on SCHEDULE 4.29, and to the Borrowers' Knowledge, there are no other material documents or agreements affecting the Condominium Borrower's interest in the Condominium Property. (B) Each of the Condominium Property Documents is in full force and effect and, to the Condominium Borrower's Knowledge, no breach or default, or event that, with the giving of notice or the passage of time or both would constitute a breach or default, under any of the Condominium Property Documents (a "CONDOMINIUM DEFAULT") exists or has occurred on the part of the Condominium Borrower or on the part of any other party to any of the Condominium Property Documents. The Condominium Borrower has not received any written notice that a default under the Condominium Property Documents has occurred or exists, or that the Board of Managers or any third party alleges the same to have occurred or exist. SECTION 4.30 GROUND LEASES. (A) Each Ground Lease contains the entire agreement of the Ground Lessor and the applicable Borrower pertaining to each Ground Leased Property covered thereby. The Borrowers have no estate, right, title or interest in or to the Ground Leased Properties except under and pursuant to the Ground Leases. The Borrowers have delivered true and correct copies of each of the Ground Leases to Lender and the Ground Leases have not been modified, amended or assigned except as set forth on SCHEDULE 4.30. 46 (B) To the Knowledge of the Borrowers, each Ground Lessor is the exclusive fee simple owner of its Ground Leased Property, subject only to the Ground Lease and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the lessor's interest in the applicable Ground Lease. (C) There are no rights to terminate any Ground Lease other than any Ground Lessor's right to terminate by reason of default, casualty, condemnation or other reasons, in each case as expressly set forth in the applicable Ground Lease. (D) Each Ground Lease is in full force and effect and to the Borrowers' Knowledge, no breach or default or event that with the giving of notice or passage of time would constitute a breach or default under any Ground Lease (a "GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or on the part of any Ground Lessor under any Ground Lease. All base rent and additional rent due and payable under the Ground Leases has been paid through the date hereof and the Borrowers are not required to pay any deferred or accrued rent after the date hereof under any of the Ground Leases. The Borrowers have not received any written notice that a Ground Lease Default has occurred or exists, or that any Ground Lessor or any third party alleges the same to have occurred or exist. (E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive owner of the lessee's interest under and pursuant to the applicable Ground Lease and has not assigned, transferred, or encumbered its interest in, to, or under any Ground Lease (other than assignments that will terminate on or prior to Closing), except in favor of Lender pursuant to this Loan Agreement and the other Loan Documents. SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective officers, directors, partners, members, Affiliates or, to the knowledge of the Borrowers, shareholders is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED PERSON"). ARTICLE V COVENANTS OF BORROWER PARTIES The Borrowers covenant and agree that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrowers shall perform and comply with all covenants in this Article V applicable to such Person. 47 SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrowers (on a consolidated basis), and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of their Financial Statements for such year to Lender. All such Financial Statements shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information for such calendar year. The annual Financial Statements for the Borrowers (on a consolidated basis) and Guarantor shall also be accompanied by a certification executed by the entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days after the end of each calendar quarter, the Borrowers on a consolidated basis (other than with respect to income statements, which shall be on an individual property basis) shall provide copies of their Financial Statements for such quarter to Lender, together with a certification executed on behalf of each of the Borrowers by their respective chief executive officers or chief financial officers (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after the end of each calendar year, each Borrower shall provide to Lender a certified Rent Roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after the end of each calendar year, each Borrower shall also provide to Lender (a) a schedule of any retail Material Leases that expired during such calendar year and a schedule of retail Material Leases scheduled to expire within the next calendar year and (b) to the extent the Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar year. Within ninety (90) days after the end of each calendar year, each Borrower shall provide to Lender a statement of income and expenses for all retail space at each of the Properties owned and operated by the Borrowers and, to the extent provided to the Borrowers and not subject to confidentiality restrictions, sales reports for retail tenants for such year. 48 (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, each Borrower shall provide, or cause Manager to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for each of the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly, and year to date operating statements prepared for such calendar month and for the trailing twelve (12) month period then ended, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of each of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a detailed explanation for any material deviations from budget) and setting forth that all disbursements and/or withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E Reserve have been made with respect to items of Capital Improvement only (as opposed to items that, in accordance with GAAP, would be included as an Operating Expense); (e) monthly and year to date detailed reports of Operating Expenses for each of the Properties, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement) for which Lender has approved a disbursement from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently available "OSI", or similar quality index, scores (including detailed information regarding criteria and thresholds); (g) prior to Securitization of the Loan, market segmentation reports for the trailing twelve (12) month period for each of the Properties; and (h) a report setting forth (i) the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has continued beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the original Aggregate Allocated Loan Amount represented by such Properties), (iii) a summary report establishing that the Borrowers are diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. All of the above statements, reports and information shall be provided to Lender by email in Microsoft Excel format or other spreadsheet format reasonably acceptable to Lender (in the case of any statements, reports or information provided by third parties that are not Affiliates of the Borrowers, to the extent same are available in such format). Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of such Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to Lender such further documents 49 and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice to the Borrowers. (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender by or on behalf of the Borrowers or Guarantor under this Section, the Borrowers or Guarantor also shall deliver to Lender a certification to Lender, executed on behalf of the Borrowers or Guarantor by their respective chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of the Borrowers, Guarantor and/or the Properties for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating (a) that, to their Knowledge after due inquiry, there does not exist any Default or Event of Default under the Loan Documents (or if any exists, specifying the same in detail), and (b) the Borrowers and Guarantor have complied with the applicable reporting requirements of this Section 5.1. (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and that of the Guarantor ends on December 31, and agrees that no change shall be made to each such fiscal year, without Lender's prior written consent. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business operations of such Borrower made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, each Borrower shall deliver to Lender a copy of its Federal income tax returns (or the return of the applicable Person into which such Borrower's Federal income tax return is consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of each calendar year, each Borrower shall deliver to Lender for its review for its Property a 50 proposed Operating Budget and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap Event or Event of Default exists, the Borrowers may make changes to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Borrower, provided no such modification (together with all prior modifications taken as a whole) shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without Lender's prior written approval, which approval shall not be unreasonably withheld; provided, however, notwithstanding the foregoing during a Cash Trap Event, increases to the Operating Budget for any Property (not to exceed ten percent (10%) of the Operating Budget for such Property as a whole) will be permitted without Lender's consent for actual verifiable increases in utilities, water and sewer assessments and charges and real property taxes for the applicable Property over the amounts therefor set forth in the Operating Budget for such Property for the prior period. Notice of any modifications to the Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating Budget shall identify and set forth each Borrower's reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and the Borrowers shall promptly amend and resubmit for approval revised budgets or plans, as applicable, making such changes as are necessary to comply with the reasonable requirements of Lender. Until any such budget or plan for any year requiring Lender's approval has been approved or deemed approved, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is approved or deemed approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. 51 (E) MATERIAL NOTICES. (i) The Borrowers shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of any Borrower, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrowers shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plan received from a Franchisor related to such Borrower's Property. (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining knowledge of any of the following events or conditions, such Borrower shall deliver a certificate executed on its behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action such Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrowers or any of the Properties not previously disclosed in writing by the Borrowers to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrowers or the Properties which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect, the Borrowers will give notice thereof to Lender and, upon request from Lender, provide such other information as may be reasonably available to them to enable Lender and its counsel to evaluate such matter. (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Borrowers, the Borrowers will deliver certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Borrowers and all material insurance coverage planned to be maintained by the Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver such other information and data with respect to such Person and its Affiliates or the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full force and effect their existence as a limited partnership, limited liability company, or 52 corporation, as the case may be, and all rights and franchises material to its business, including their qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, each Borrower and, to the extent required by applicable law, General Partner and Member, shall at all times be qualified to do business in each of the states where the Properties are located. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) Except for those matters being contested pursuant to clause (B) below, the Borrowers will pay (i) all Impositions; (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrowers on their business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrowers shall not be required to pay, discharge or remove any Imposition or Claim relating to a Property so long as the Borrowers contest in good faith such Imposition, Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Property or any portion thereof, and so long as: (i) no Event of Default shall have occurred and be continuing, (ii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have given Lender prior written notice of their intent to contest said Imposition or Claim; (iii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have deposited with Lender (or with a court of competent jurisdiction or other appropriate body reasonably approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss of any interest in the applicable Property or any part thereof arises, in Lender's reasonable judgment, during the pendency of such contest; (v) such contest does not, in Lender's reasonable determination, have a Material Adverse Effect; and (vi) such contest is based on bona fide, material, and reasonable claims or defenses. Any such contest shall be prosecuted with due diligence, and the Borrowers shall promptly pay the amount of such Imposition or Claim as finally determined, together with all interest and penalties payable in connection therewith. Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture of the applicable Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Claim for which a deposit was made shall be promptly repaid to the Borrowers unless an Event of Default shall have occurred, in which case said surplus may be retained by Lender to be applied to the Obligations. Notwithstanding any provision of this Section to the contrary, the Borrowers shall pay any Imposition or Claim which they might otherwise be entitled to contest if an Event of Default shall occur and be continuing, or if, in the reasonable determination of Lender, the applicable Property is in danger of being forfeited or foreclosed. If the Borrowers refuse to pay 53 any such Imposition or Claim, Lender may (but shall not be obligated to) make such payment and the Borrowers shall reimburse Lender on demand for all such advances. SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrowers will continuously maintain the following described policies of insurance on each of the respective Properties without cost to Lender (the "INSURANCE POLICIES"): (i) Property insurance against loss and damage by all risks of physical loss or damage, including fire, sprinkler leakage, windstorm, hurricane, terrorism, and other risks covered by the so-called extended coverage endorsement covering the Improvements and personal property in amounts not less than the full insurable replacement value of all Improvements (less building foundations and footings) and personal property from time to time on the Properties and without sublimits, and bearing a replacement cost agreed-amount endorsement; (ii) Commercial general liability insurance, including death, bodily injury, innkeeper legal liability and broad form property damage coverage with a combined single limit in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate for any policy year; (iii) If any of the Properties are in an area prone to geological phenomena, including, but not limited to, sinkholes, mine subsidence or earthquakes, insurance covering such risks in an amount equal to 100% of the full replacement cost of all improvements (without any deductions for depreciation) and with a maximum permissible deductible equal to the lesser of $25,000 or 10% of the face value of the policy; (iv) For each Property located in whole or in part in a federally designated "special flood hazard area", flood insurance in the maximum available amount; (v) An umbrella excess liability policy with a limit of not less than Twenty Million Dollars ($20,000,000) over primary insurance, which policy shall include coverage for so-called assumed and contractual liability coverage and automobile liability coverage, and coverage for safeguarding of personalty and shall also include such additional coverages and insured risks which are acceptable to Lender; (vi) Business interruption and/or rent loss insurance with an aggregate limit equal to at least the gross income from the Properties for an indemnity period commencing on the date of such casualty and ending at least six (6) months after completion of the Restoration (such amount being adjusted annually); (vii) Crime protection insurance covering all employees with access to funds and located in Guarantor's corporate offices with a limit of not less than One Million Dollars ($1,000,000) and with the same coverages and deductibles as currently in place at the Properties; (viii) Steam boiler, machinery and pressurized vessel insurance insuring against breakdown or explosion of such equipment on a replacement cost value basis, which shall not contain any exclusions for testing procedures; 54 (ix) Worker's Compensation Insurance in statutory amounts, if any, at all times; (x) Insurance against loss or damage from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), in an amount at least equal to the Aggregate Allocated Loan Amount; (xi) During any period of construction, repair or restoration, builder's "all risk" insurance in an amount equal to not less than the full insurable value of the Properties (excluding building foundations and footings) against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may reasonably request; (xii) If the Properties are or become a "non-conforming use" under applicable zoning and building ordinances, or other requirements of the applicable Governmental Authority, law or ordinance coverage to compensate for the cost of demolition and the increased cost of construction, if available; (xiii) If the Borrowers, Manager or any of their respective Affiliates holds a liquor license for the Properties, liquor liability insurance (including "dram shop" liability) in an amount not less than $1,000,000 for each common cause and $3,000,000 in the aggregate; provided that if such liquor license is held by any tenant under a Lease, the Borrowers shall cause such tenant to cause liquor liability insurance in an amount not less than the limits set forth above to be carried in such tenant's name, and shall include the Borrowers and Lender as additional insureds thereunder; (xiv) If reasonably required by Lender as a result of the release, disposal or existence of any Hazardous Materials on or about any Property after the date hereof (or as to which Lender obtains knowledge after the date hereof) or if such insurance is then customarily required by institutional lenders for securitized loans, environmental insurance, including mold coverage, in form and with coverages (including business interruption coverage) reasonably satisfactory to Lender; provided, however, without limiting or affecting Lender's right to require such environmental insurance with respect to any other Properties after the date hereof, Lender acknowledges that, as of the date hereof, environmental insurance shall only be required with respect to the Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford, Connecticut; (xv) Fiduciary liability insurance and directors and officers liability insurance ("D&O INSURANCE") with coverages at levels in effect as of the Closing Date; (xvi) Insurance against acts of terrorism, or insurance policies without an exclusion for damages resulting from acts of terrorism on terms consistent with the commercial property insurance policies required under subsection (i), (ii), (v) and (vi) above; (xvii) Such other insurance as may from time to time be reasonably required by Lender and which is then customarily required by institutional lenders for securitized loans 55 secured by similar properties similarly situated, against other insurable hazards, including, but not limited to, malicious mischief, vandalism, windstorm and or earthquake, due regard to be given to the size and type of the Properties, Improvements, fixtures and equipment and their location, construction and use. Additionally, the Borrowers shall carry such insurance coverage as Lender may from time to time require if the failure to carry such insurance would result in a downgrade, qualification or withdrawal of any class of securities issued in connection with a Securitization. All Insurance Policies shall be in content (including, without limitation, endorsements or exclusions, if any), form, and amounts, and issued by companies, satisfactory to Lender from time to time and shall name Lender and its successors and assignees as their interests may appear as (x) an "additional insured" for each of the liability policies under this Section 5.4 hereof, and (y) a "mortgagee" for each of the property and casualty policies under this Section hereof, and shall (except for Worker's Compensation Insurance) contain a waiver of subrogation clause reasonably acceptable to Lender. Other than with respect to D&O Insurance, an insurance company shall not be satisfactory unless such insurance company (a) is licensed or authorized to issue insurance in the State where the applicable Property is located and (b) has a claims paying ability rating by the Rating Agencies of AA- (or its equivalent). Notwithstanding the foregoing, a carrier which does not meet the foregoing ratings requirement shall nevertheless be deemed acceptable hereunder provided that such carrier is reasonably acceptable to Lender and the Borrowers shall obtain and deliver to Lender a Rating Confirmation with respect to such carrier from each of the Rating Agencies, provided, however, that: (a) if any insurance coverage required under this Section 5.4 is maintained by a syndicate of insurers, the preceding ratings requirements shall be deemed satisfied (without any required Rating Confirmation) as long as at least seventy five percent (75%) of the coverage (if there are four or fewer members of the syndicate) or at least sixty percent (60%) of the coverage (if there are five or more members of the syndicate) is maintained with carriers meeting the claims-paying ability ratings requirements by S&P and Moody's (if applicable) set forth above and all carriers in such syndicate have a claims-paying ability rating by S&P of not less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier providing the insurance described in clause (ii) above, so long as such carrier maintains a claims paying ability of not less than A- by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby) and (c) until the expiration of the current term of the applicable policies, Lender hereby approves Landmark American as the carrier providing the insurance described in clauses (i), (iv) and (vi) above (covering losses over the first $25,000,000 of coverage), so long as thereafter such carrier or any other carrier providing the above coverages maintains a claims paying ability of not less than A by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby). All Insurance Policies under Sections 5.4 (i), (iv), (vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438 BFU NS), or their equivalents (such endorsements shall entitle Lender to collect any and all proceeds payable under all such insurance, with the insurance company waiving any claim or defense against Lender for premium payment, deductible, self-insured retention or claims reporting provisions). All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Lender without ten (10) days' advance written notice to Lender. The Borrowers may obtain any insurance required by this Section through blanket 56 policies; provided, however, that such blanket policies shall separately set forth the amount of insurance in force with respect to the Properties (which shall not be reduced by reason of events occurring on property other than the Properties) and shall afford all the protections to Lender as are required under this Section. Except as may be expressly provided above, all policies of insurance required hereunder shall contain no annual aggregate limit of liability, other than with respect to liability insurance. If a blanket policy is issued, a certified copy of said policy shall be furnished, together with a certificate indicating that Lender is an additional insured (and, if applicable, loss payee) under such policy in the designated amount. The Borrowers will deliver duplicate originals of all Insurance Policies, premium prepaid through the current expiration dates of such Insurance Policies, to Lender and, in case of Insurance Policies about to expire, the Borrowers will deliver duplicate originals of replacement policies satisfying the requirements hereof to Lender not less than ten (10) days prior to the date of expiration; provided, however, if such replacement policy is not yet available, the Borrowers shall provide Lender with an insurance certificate executed by the insurer or its authorized agent evidencing that the insurance required hereunder is being maintained under such policy, which certificate shall be acceptable to Lender on an interim basis until the duplicate original of the policy is available. The Borrowers shall furnish Lender receipts for the payment of premiums on such insurance policies or other evidence of such payment reasonably satisfactory to Lender in the event that such premiums have not been paid by Lender pursuant to the Loan Agreement. The requirements of this Section 5.4 shall apply to any separate policies of insurance taken out by the Borrowers concurrent in form or contributing in the event of loss with the Insurance Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure to act or negligence of the Borrowers or their agents or employees, Lender or any other insured party which might, absent such agreement, result in a forfeiture or all or part of such insurance payment, other than the willful misconduct of Lender knowingly in violation of the conditions of such policy, (2) the occupation or use of the Properties or any part thereof for purposes more hazardous than permitted by the terms of such policy, (3) any foreclosure or other action or proceeding taken pursuant to this Loan Agreement or (4) any change in title to or ownership of the Properties or any part thereof. The property insurance and the boiler and machinery insurance described in Sections 5.4(i) and (x) hereof shall include "underground hazards" coverage; "time element" coverage by which Lender shall be assured payment of all amounts due under the Note, this Loan Agreement and the other Loan Documents; "extra expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage; and "expediting expense" coverage to facilitate rapid repair or restoration of the Properties. The Insurance Policies shall not contain any deductible in excess of $250,000. SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrowers will operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Borrowers, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each Borrower, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, each Borrower will operate and maintain its Property substantially in accordance with the applicable Operating Budget and the CapEx/FF&E Budget. All work required or permitted 57 under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrowers may, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Borrowers shall not perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the Properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Borrowers may perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrowers deliver notice to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Borrowers have cash available for payment of the cost of such Material Alteration or, if the Borrowers fail to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an amount equal to 125% of the cost of such Material Alteration as reasonably estimated by Lender. Cash deposited by the Borrowers with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the conditions for disbursement of amounts from the Capital Improvement Reserve under Section 6.5 (including the requirements set forth under Section 6.7). Upon completion of the Material Alteration, the Borrowers shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. The Borrowers shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrowers shall give immediate written notice of the same to the insurance carrier and to Lender and shall promptly commence and diligently prosecute to completion, in accordance with the terms hereof, the repair and restoration of the Property as nearly as possible to the Pre-Existing Condition (a "RESTORATION"). The Borrowers hereby authorize and empower Lender as attorney-in-fact for 58 the Borrowers (jointly with the Borrowers unless an Event of Default has occurred and is continuing), or any of them, to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this Section shall require Lender to incur any expense or take any action hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to hold the balance of such proceeds to be used to reimburse the Borrowers for the cost of Restoration of any of the Properties or (ii) subject to Subsection 5.5(C), to apply such proceeds to payment of the Obligations whether or not then due, in any order. Notwithstanding the foregoing, in the event of a casualty where the loss does not exceed the Restoration Threshold, the Borrowers may settle and adjust such claim; provided that (a) no Event of Default has occurred and is continuing and (b) such adjustment is carried out in a commercially reasonable and timely manner. (C) Lender shall not exercise Lender's option to apply insurance proceeds to payment of the Obligations if all of the following conditions are met: (i) no Event of Default then exists; (ii) Lender reasonably determines that there will be sufficient funds to complete the Restoration of the Property to at least substantially the Pre-Existing Condition and to timely make all payments due under the Loan Documents during the Restoration of the affected Property; (iii) Lender reasonably determines that the Net Operating Income of the Properties (including rental income or business interruption insurance) will be sufficient to pay principal and interest on the Loan and the Mezzanine Loan and Operating Revenues of the Properties, after the Restoration thereof to the Pre-Existing Condition, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Note and the Mezzanine Loan; (iv) Lender determines that the Restoration of the affected Property to the Pre-Existing Condition will be completed not later than five (5) months prior to the expiration of any business interruption insurance, but in no event later than six (6) months prior to the Maturity Date; (v) less than fifty percent (50%) of the total floor area of the Improvements has been damaged, destroyed or rendered unusable as a result of such fire or other casualty; and (vi) such Property can be restored and repaired substantially to the condition it was in immediately prior to such casualty and in compliance with all applicable zoning, building and other laws and codes (the "PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to payment of the Obligations, such application shall be made on the Payment Date immediately following such election in accordance with the terms of the Cash Management Agreement. (D) If Lender elects or is obligated to make the insurance proceeds available for the Restoration of any Property and Lender is holding such proceeds, the Borrowers agree that, if at any time during the Restoration, the cost of completing such Restoration, as reasonably determined by Lender, exceeds the undisbursed insurance proceeds, the Borrowers shall, within ten (10) Business Days following the written demand by Lender, deposit the amount of such excess with Lender, and Lender shall first disburse such deposit to pay for the costs of such Restoration on the same terms and conditions as the insurance proceeds are disbursed. If the Borrowers deposit such excess with Lender and if, after completion of the Restoration, any funds remain from the combination of insurance proceeds and the funds so deposited with Lender by the Borrowers, and if no Event of Default shall have occurred and be continuing, then Lender shall promptly disburse to the Borrowers such remaining funds. 59 (E) Lender may, at Lender's option, condition disbursement of any insurance proceeds on Lender's approval (which approval shall not be unreasonably withheld) of plans and specifications of an independent architect licensed in the state where the Property is located and reasonably satisfactory to Lender (the "ARCHITECT"), any and all contractors, subcontractors and materialmen engaged in the Restoration and the contracts under which they have been engaged, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. Lender shall not be obligated to disburse insurance proceeds more frequently than once every calendar month. If insurance proceeds are applied to the payment of the Obligations and provided no Event of Default exists, any such application of proceeds to principal shall be without any Prepayment Consideration and shall not extend or postpone the due dates of the monthly payments due under the Note or otherwise under the Loan Documents, or change the amounts of such payments. If Lender elects to apply all of such insurance proceeds toward the repayment of the Obligations, the Borrowers shall (subject to compliance with clauses (A), (B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property Release (without representation or warranty) of the applicable Property from the Lien of the Mortgage relating to such Property (in which event the Borrowers shall not be obligated to restore the applicable Property pursuant to Section 5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by which the Release Price for such Property exceeds the insurance proceeds received by Lender and applied to repayment of the Obligations. If any proceeds are applied to reduce the Obligations under this Section 5.5, provided that no Event of Default has occurred and is continuing, no Prepayment Consideration shall be due and payable in connection with such application. Any amount of insurance proceeds remaining in Lender's possession after full and final payment and discharge of all Obligations shall be refunded to, or as directed by, the Borrowers or otherwise paid in accordance with applicable law. If the Property is sold at foreclosure or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of the applicable Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to such Property prior to such sale or acquisition. (F) In no event shall Lender be obligated to make disbursements of insurance proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Architect, less a retainage equal to the lesser of (x) the actual retainage required pursuant to the permitted contract, or (y) ten percent (10%) of such costs incurred until the Restoration has been completed. The retainage shall in no event be less than the amount actually held back by the Borrowers from contractors, subcontractors and materialmen engaged in the Restoration. The retainage shall not be released until the Architect certifies to Lender, or, if no Architect has been retained by Lender, Lender is reasonably satisfied, that the Restoration has been completed in accordance with the provisions of this Section 5.5 and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental authorities, and Lender receives final lien waivers and such other evidence reasonably satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the retainage. SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized representatives designated by Lender to visit and inspect during normal business hours its Property and its 60 business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with such Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice of at least three (3) Business Days prior to visiting or inspecting any Property or such Borrower's offices. SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and delivered to Lender operations and maintenance programs (the "O&M PLANS") with respect to suspected asbestos, asbestos-containing materials, and/or mold located in certain Properties as set forth on SCHEDULE 6.6, which conditions were disclosed in the applicable Environmental Reports for such Properties. Each applicable Borrower shall at all times implement and carry out the O&M Plan in accordance with its terms. Lender's requirement that the applicable Borrowers develop and comply with the O&M Plan shall not be deemed to constitute a waiver or modification of any covenants or agreements of the Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws as set forth in the Environmental Indemnity. SECTION 5.8 INTENTIONALLY DELETED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the operation or value of any Property, (B) maintain all licenses and permits now held or hereafter acquired by any Borrower, the loss, suspension, or revocation of which, or failure to renew, could have a material adverse effect on the operation or value of any Property and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party shall duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a material adverse effect on the operation or value of any Property. 61 SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrowers shall not, nor shall the Borrowers authorize Manager or any other Person to, (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrowers shall furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Borrowers shall not under any circumstances collect any such rent more than one month in advance. The Borrowers, at Lender's request, shall furnish Lender with executed copies of all Material Leases hereafter made. Each new Material Lease or a separate agreement with the tenant of such Material Lease shall be in recordable form and shall specifically provide that such Material Lease (i) is subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; (iii) that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; (iv) that the attornment of the tenant shall not be terminated by foreclosure; (v) that in no event shall Lender, 62 as holder of the Mortgages or as successor landlord, be liable to the tenant for any act or omission of any prior landlord or for any liability or obligation of any prior landlord occurring prior to the date that Lender or any subsequent owner acquire title to the Property; and (vi) that Lender may, at Lender's option, accept or reject such attornment. SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS. (A) The Borrowers shall cause each Manager to manage the Properties in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and types customary for hotels comparable to each Property. The Borrowers shall (i) perform and observe all of the material terms, covenants and conditions of the Management Agreement on the part of each Borrower to be performed and observed, and (ii) promptly notify Lender of any notice to any of the Borrowers of any material default under the Management Agreement of which it is aware. If any of the Borrowers shall default in the performance or observance of any material term, covenant or condition of the applicable Management Agreement on the part of the Borrowers to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrowers from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrower, but shall be under no obligation, to pay any sums and to perform any act as may be reasonably appropriate to cause such material conditions of the applicable Management Agreement on the part of the Borrowers to be performed or observed. (B) The Borrowers shall not surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager, or consent to the assignment by the Manager of its interest under the Management Agreement, in each case without (i) prior to a Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies. The Borrowers shall cause any new Manager with respect to any Property to execute and deliver a subordination of management agreement in substantially the form delivered in connection with the closing of the Loan. (C) Lender shall have the right to require any of the Borrowers to replace any Manager with a Person chosen by the Borrowers and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrowers if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrowers shall not terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. Notwithstanding the foregoing, the following changes to Franchise Agreements shall be permitted without Lender's prior written consent: 63 (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with another Franchisor within the same Category, provided that the Borrowers shall not replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(ii) with respect to more than the lesser of (x) two (2) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided that the Borrowers shall not replace Franchise Agreements for more than one (1) Property, or for any Property with an Allocated Loan Amount of more than five percent (5%) of the outstanding principal balance of the Loan pursuant to this Section 5.13(D)(iii); and (iv) Entering into new Franchise Agreements (or amendments or addenda to existing Franchise Agreements) with the existing Franchisors for the applicable Properties for the same franchise brand, each in form substantially similar to the forms previously approved for the respective Properties by Lender, as required by the existing Franchisors under the respective Franchise Agreements in connection with the transfers of the applicable Properties and the direct and indirect ownership interests in the Borrowers made by the Borrower Parties and their Affiliates in connection with the Closing of the Loan. In connection with the replacement of any Franchisors permitted hereunder, the applicable Borrower shall, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender a Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, each Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants required to be performed and observed by the Franchisor under the Franchise Agreement. In addition, the Borrowers shall not, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; 64 or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become obligated under any Material Agreement pertaining to any Property without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) any Lease that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13 hereof (provided, however, that the foregoing shall not affect Borrowers' obligation to deliver Rating Confirmations with respect to any such Management Agreement if required under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all Receipts from the Properties into, and otherwise comply with, the Accounts established from time to time hereunder. Subject to Article VII hereof and the Cash Management Agreement, each Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrowers shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the 65 Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Mortgages and the other Loan Documents are legal, valid and binding obligations of the Borrowers and have not been modified or amended, or if modified or amended, describing such modification or amendments. (B) Within ten (10) Business Days following a written request by the Borrowers, Lender shall provide to the Borrowers a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrowers with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): (A) the Obligations and Crossed Indebtedness; (B) (i) unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the financing of equipment or other personal property used at any Property in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days, and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal property or otherwise referred to in clauses (i) and (ii) above (excluding therefrom utility expenses of the Properties and fees payable to the Franchisors pursuant to the terms of the Franchise Agreements) outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan; and (C) that certain unsecured loan in the original principal amount of $17,686,292, evidenced by a certain replacement promissory note dated as of November 15, 2002 given by Servico Centre Associates, Ltd. to Servico Palm Beach General Partner SPE, Inc., the outstanding principal balance of which on the Closing Date is $10,808,383, and which is subject to the terms of that certain Subordination and Standstill Agreement given by the holder of such note in favor of Lender and dated as of the Closing Date; and (D) the Mezzanine Loan. In no event shall any Indebtedness other than the Loan be secured, in whole or in part, by the Properties or any portion thereof or interest therein. SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not create, incur, assume or permit to exist any Lien on or with respect to the Properties, any other Collateral or any direct or indirect ownership interest in the Borrowers, except the Permitted 66 Encumbrances and Liens on the ownership interests in the Borrowers securing the Mezzanine Loan. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Primary Borrower Party shall directly or indirectly create or become or be liable with respect to any Contingent Obligation. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted in this Loan Agreement, no Primary Borrower Party shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of such Borrower Party's partnership agreement, certificate of limited partnership, articles of incorporation, by-laws, articles of organization, operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such Primary Borrower Party. SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to the Manager under the Management Agreement, the Borrowers shall not pay any management, consulting, director or similar fees to any Related Person of the Borrowers or to any director, officer or employee of the Borrowers. The Borrowers shall not directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of any of the Borrowers or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrowers and upon fair and reasonable terms and which are no less favorable to any of the Borrowers than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of any Borrower. The Borrowers shall not make any payment or permit any payment to be made to any Related Person of any of the Borrowers when or as to any time when any Event of Default shall exist. SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of any Borrower. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which any of the Borrowers is a debtor or any portion of the Properties is property of the estate therein. The Borrowers shall not file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or support any motion (irrespective of the subject of the motion), and the Borrowers shall not file or 67 support any plan of reorganization. The Borrowers having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrowers or any ERISA Affiliate or increase the obligation of the Borrowers, provided that the Borrower shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC. (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrowers regulating investments of governmental plans. SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 GROUND LEASES. (A) NO MODIFICATION. The Borrowers shall not modify or amend, or terminate or surrender any Ground Lease, in each case without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any attempted or 68 purported modification, amendment, or any surrender or termination of any Ground Lease without Lender's prior written consent shall be null and void and of no force or effect. (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and when due each and all of its obligations under each Ground Lease in accordance with the terms of such Ground Lease, and shall not cause or suffer to occur any material breach or default in any of such obligations. The Borrowers shall keep and maintain each Ground Lease in full force and effect. The Borrowers shall exercise any option to renew or extend any Ground Lease and give written confirmation thereof to Lender within thirty (30) days after such option is exercised. Notwithstanding that certain of the obligations of the Borrowers under this Loan Agreement may be similar or identical to certain of the obligations of the Borrowers under the Ground Leases, all of the obligations of the Borrowers under this Loan Agreement are and shall be separate from and in addition to its obligations under the Ground Leases. (C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any written notice that any Ground Lease Default has occurred, then the Borrowers immediately shall notify Lender in writing of the same and immediately deliver to Lender a true and complete copy of each such notice. Further, the Borrowers shall provide such documents and information as Lender shall reasonably request concerning the Ground Lease Default. (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be continuing, or if any Ground Lessor asserts that a Ground Lease Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Ground Lease, Lender, upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary, including, without limitation, (i) performance or attempted performance of the applicable Borrower's obligations under the applicable Ground Lease, (ii) curing or attempting to cure any actual or purported Ground Lease Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the applicable Ground Leased Property for any or all of such purposes. Upon Lender's request, each Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each Ground Lease. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender, together with interest thereon from the date of expenditure at the Default Rate. (E) LEGAL ACTION. The Borrowers shall not commence any action or proceeding against any Ground Lessor or affecting or potentially affecting any Ground Lease or the Borrowers' or Lender's interest therein, the effect of which could cause an event of default or termination of any such Ground Lease, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrowers shall notify Lender immediately if any action or proceeding shall be commenced between any Ground Lessor and either Borrower, or affecting or potentially affecting any Ground Lease or either Borrower's or Lender's interest therein (including, without limitation, any case commenced by or against any Ground Lessor under the Bankruptcy Code). Lender shall have the option, 69 exercisable upon notice from Lender to the Borrowers, to participate in any such action or proceeding with counsel of Lender's choice. The Borrowers shall cooperate with Lender, comply with the reasonable instructions of Lender, execute any and all powers, authorizations, consents or other documents reasonably required by Lender in connection therewith, and shall not settle any such action or proceeding without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the applicable Ground Lease, from time to time, at Lender's request, the Borrowers shall use commercially reasonable efforts to obtain and deliver to Lender within the time period required under the applicable Ground Lease, an estoppel certificate from each Ground Lessor setting forth (A) (i) the identities of the original lessor and lessee under the applicable Ground Lease and each of their respective successors, (ii) that the Ground Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modification), (iii) the rent payable under the Ground Lease, (iv) the dates to which all rent and other charges have been paid, (v) whether there are any alleged Ground Lease Defaults and, if so, setting forth the nature thereof in reasonable detail, and (vi) such other matters as Lender may reasonably request or (B) the matters required to be certified by the Ground Lessor under the applicable Ground Lease. The Borrowers shall not be required to request an estoppel from any Ground Lessor more than two (2) times in any calendar year. (G) BANKRUPTCY. (i) If any Ground Lessor shall reject any Ground Lease under or pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall not elect to treat the Ground Lease as terminated but shall elect to remain in possession of the applicable Ground Leased Property and the leasehold estate under such Ground Lease. The lien of the Mortgage covering such Property does and shall encumber and attach to all of the Borrowers' rights and remedies at any time arising under or pursuant to Section 365 of the Bankruptcy Code, including without limitation, all of such Borrower's rights to remain in possession of such Property and the leasehold estate. (ii) The Borrowers acknowledge and agree that in any case commenced by or against the Borrowers under the Bankruptcy Code, Lender by reason of the liens and rights granted under the Mortgage covering such Property and the Loan Documents shall have a substantial and material interest in the treatment and preservation of such Borrower's rights and obligations under such Ground Lease, and that such Borrower shall, in any such bankruptcy case, provide to Lender immediate and continuous reasonably adequate protection of such interests. Each Borrower and Lender agree that such adequate protection shall include but shall not necessarily be limited to the following: (a) Lender shall be deemed a party to the Ground Lease (but shall not have any obligations thereunder) for purposes of Section 365 of the Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such action by Lender would adversely and materially affect the Borrowers' ability to prosecute, or defend, any such claims asserted therein, have standing to appear and act as a party in interest in relation to any matter arising out of or related to the Ground Lease or such Property. 70 (b) The Borrowers shall serve Lender with copies of all notices, pleadings and other documents relating to or affecting the Ground Lease or the applicable Property. Any notice, pleading or document served by the Borrowers on any other party in the bankruptcy case shall be contemporaneously served by such Borrower on Lender, and any notice, pleading or document served upon or received by such Borrower from any other party in the bankruptcy case shall be served by such Borrower on Lender promptly upon receipt by such Borrower. (c) Upon written request of Lender, the Borrowers shall assume the Ground Lease, and shall take such steps as are necessary to preserve such Borrower's right to assume the Ground Lease, including without limitation using commercially reasonable efforts to obtain extensions of time to assume or reject the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it is applicable. (H) ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground Lessor seeks to reject any Ground Lease or have the Ground Lease deemed rejected, then prior to the hearing on such rejection Lender shall, subject to applicable law, be given no less than twenty (20) days' notice and opportunity to elect in lieu of rejection to have the Ground Lease assumed and assigned to a nominee of Lender. If Lender shall so elect to assume and assign the Ground Lease, then the Borrowers shall, subject to applicable law, continue any request to reject the Ground Lease until after the motion to assume and assign has been heard. If Lender shall not elect to assume and assign the Ground Lease, then Lender may, subject to applicable law, obtain in connection with the rejection of the Ground Lease a determination that the applicable Ground Lessor, at Lender's option, shall (1) agree to terminate the Ground Lease and enter into a new lease with Lender on the same terms and conditions as the Ground Lease, for the remaining term of the Ground Lease, or (2) treat the Ground Lease as breached and provide Lender with the rights to cure defaults under the Ground Lease and to assume the rights and benefits of the Ground Lease. Each Borrower shall join with and support any request by Lender to grant and approve the foregoing as necessary for adequate protection of Lender's interests. Notwithstanding the foregoing, Lender may seek additional terms and conditions, including such economic and monetary protections as it deems reasonably appropriate to adequately protect its interests, and any request for such additional terms or conditions shall not delay or limit Lender's right to receive the specific elements of adequate protection set forth herein. Each Borrower hereby appoints Lender as its attorney in fact to act on behalf of Lender in connection with all matters relating to or arising out of the assumption or rejection of any Ground Lease, in which the other party to the lease is a debtor in a case under the Bankruptcy Code. This grant of power of attorney is present, unconditional, irrevocable, durable and coupled with an interest. SECTION 5.26 CONDOMINIUM PROPERTY. (A) NO MODIFICATION. The Condominium Borrower shall not modify or amend any material terms of, or terminate any of the Condominium Property Documents, in each case, 71 without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (B) PERFORMANCE OF CONDOMINIUM PROPERTY DOCUMENTS. The Condominium Borrower shall fully and faithfully pay when due and payable all assessments, common charges and other charges payable by the Condominium Borrower under the Condominium Property Documents and shall perform as and when due each of its material obligations under the Condominium Property Documents in substantial accordance with their respective terms, and shall not cause or suffer to occur any breach or default in any of such obligations. The Condominium Borrower shall keep and maintain each of the Condominium Property Documents in full force and effect. (C) NOTICE OF DEFAULT. If the Condominium Borrower shall receive any written notice of any Condominium Default, the Condominium Borrower immediately shall notify Lender of same and deliver to Lender a true and complete copy of each such notice, and provide such documents and information as Lender may reasonably request concerning such Condominium Default. (D) LENDER'S RIGHT TO CURE. If any Condominium Default shall occur and be continuing, or if any party to any Condominium Property Document asserts that a Condominium Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Condominium Property Documents, after notice to the Condominium Borrower, Lender upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary to cure such Condominium Default, including, without limitation, (i) performance or attempted performance of the Borrowers' obligations under the applicable Condominium Property Documents, (ii) curing or attempting to cure any actual or purported Condominium Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the Condominium Property for any or all of such purposes. Upon Lender's request, the Condominium Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each of the Condominium Property Documents. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender pursuant to this Section 5.26, together with interest thereon from the date of expenditure at the Default Rate. (E) PRESERVATION OF CONDOMINIUM. The Condominium Borrower will do all things necessary to preserve and to keep unimpaired its material rights, powers and privileges under the Condominium Property Documents and to prevent the termination or expiration of the Condominium Property Documents, or the withdrawal of the Condominium Property from a condominium form of ownership under applicable law, to the end that the Condominium Borrower may enjoy all of the material rights granted to it as a party to the Condominium Property Documents. 72 (F) NOTICE OF CONDOMINIUM DEFAULTS. The Condominium Borrower will (i) promptly notify Lender of the receipt by the Condominium Borrower of any notice from the Board of Managers, or the owner of any other unit in the condominium, covering the Condominium Property, asserting or claiming a default by the Condominium Borrower thereunder or lack of compliance by the Condominium Borrower with the Condominium Property Documents, (ii) promptly notify Lender of the receipt by the Condominium Borrower of any notice or request from the Board of Managers or owner of any unit of the termination or purported termination of the Condominium Property Documents or to withdraw the Condominium Property from condominium ownership pursuant to applicable law or to seek any action for partition, (iii) promptly notify Lender of the receipt by the Condominium Borrower of any notice or request from the Board of Managers or owner of any unit of the material modification or change or proposed material modification or change of the Condominium Property Documents and (iv) promptly cause a copy of each such notice of request received by the Condominium Borrower from the Board of Managers or any unit owner, or from a mortgagee of a mortgage on such other unit, to be delivered to Lender. The Condominium Borrower will permit Lender to participate in any such partition or withdrawal proceeding to the extent permitted by law and the Condominium Property Documents (but Lender shall not be obligated so to do). The Condominium Borrower will promptly deliver to Lender a copy of each notice, pleading, brief and preliminary, interim and final determination or decision and other papers received by it in each such partition or withdrawal proceeding. (G) STATEMENTS, NOTICES. The Condominium Borrower will, within twenty (20) days after demand from Lender (which shall not be required more than two (2) times in any calendar year), obtain, if and to the extent that the Condominium Borrower is entitled to the same under the Condominium Property Documents, and otherwise request from and make good faith efforts to obtain, from the Board of Managers and deliver to Lender a duly signed and acknowledged certificate (signed also by the Condominium Borrower) that the Condominium Property Documents are unmodified and in full force and effect (or, if the same have been modified in compliance with this Loan Agreement, that the Condominium Property Documents are in full force and effect as to modified and that there have been no other modifications), stating the dates to which the assessments, common charges and other charges payable under the Condominium Property Documents have been paid and stating whether to each certifying party's knowledge, the Condominium Borrower is in compliance with the Condominium Property Documents, or, if not, specifying each default or failure of compliance of which the certifying party has knowledge. The Condominium Borrower will, promptly upon receipt thereof by the Condominium Borrower, furnish Lender with a copy of all notices and statements, however characterized, issued by the Board of Managers or relating to the Condominium Property Documents including without limitation, financial statements and projected budgets. SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrowers shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the 73 proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrowers. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrowers shall not cancel any indebtedness from any Person owing to any Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no Borrower Party, nor any of their respective Affiliates, officers, directors, partners or members will knowingly: (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrowers further covenants and agrees to deliver (from time to time) to Lender any such certification or other evidence as may be requested by Lender in its sole and absolute discretion, confirming that: (i) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, has to its Knowledge engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person. ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrowers hereby pledge, assign and grant to Lender a security interest in and to all of the Borrowers' right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including 74 the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any Default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. SECTION 6.2 FUNDS DEPOSITED WITH LENDER. (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein, all funds of the Borrowers which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrowers and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After repayment of all of the Obligations, all funds held as Reserves will be promptly returned to, or as directed by, the Borrowers. (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the amounts necessary to fund each of the Reserves as set forth below. Deposits into the Reserves at Closing may occur by deduction from the amount of the Loan that otherwise would be disbursed to the Borrowers, followed by deposit of the same into the applicable Sub-Account or Account of the Lock Box Account in accordance with the Cash Management Agreement on the Closing Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes to be fully disbursed at Closing. SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit with Lock Box Account Bank **[$_________]** and, pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the Payment date in July 2004, 1/12th of the annual charges (as reasonably estimated by Lender) for all Impositions and all Insurance Premiums (other than for D&O Insurance) payable with respect to the Properties hereunder (said funds, together with any interest thereon and additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made to the Impositions and Insurance Reserve from and after the date hereof is **[$__________]**. The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days of the written demand by Lender, to be added to and included within such reserve, a sum of money which Lender reasonably estimates, together with such monthly deposits, will be sufficient to make the payment of each such charge at least ten (10) Business Days prior to the date initially due. The Borrowers shall provide Lender with bills and all other documents necessary for the payment of the foregoing charges at least thirty (30) days prior to the date on which each payment shall first become subject to penalty or interest if not paid. So 75 long as (i) no Event of Default has occurred and is continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other documents in a timely manner, and (iii) sufficient funds are held by Lender for the payment of the Impositions and Insurance Premiums relating to each of the Properties, Lender shall pay said items or disburse to the Borrowers from such Reserve an amount sufficient to pay said items. Interest shall accrue in favor of the Borrowers on funds in the Impositions and Insurance Reserve and be added to the balance thereof and disbursed in accordance with the terms hereof. SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender shall establish and maintain with Lock Box Bank an account for the purpose of creating a reserve for replacements of FF&E at or in, or used in connection with, the Properties (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget approved by Lender (said funds, together with any interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve shall be held in an Eligible Account entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account shall be under the sole dominion and control of Lender, subject to the terms of the Cash Management Agreement. Pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing with the Payment Date in July 2004, an amount equal to 4.0% of the Operating Revenues generated from the Properties for the prior calendar month (such amount, the "MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the Borrowers, subject in all instances to the terms of the Cash Management Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held in the FF&E Reserve shall be used in connection with the Required Capital Improvements. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than Replacements subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d). SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At Closing, the Borrowers shall deposit with Lock Box Account Bank **[$___________]** (said funds, together with any interest thereon, the "Capital IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain Capital Improvements required to be made to the Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5 attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the Borrowers for purposes for which any other Reserve is established or for any other purpose other than completion of the Required Capital Improvements. The Borrowers shall promptly commence and diligently prosecute to completion, subject to Force Majeure, the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds held in the Capital Improvement Reserve shall be disbursed in accordance with section 6.7. subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Capital Improvement Reserve when all Required Capital Improvements are complete, and paid for, in accordance with the terms hereof. SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers shall deposit with Lock Box Account Bank, an amount equal to **[$___________]** (said funds, together with any interest thereon and additions thereto, the "HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials on the Properties as 76 indicated in the Environmental Reports for the Properties prepared and delivered prior to the Closing and as such work is more particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by any applicable Governmental Authority or (y) nine (9) months after the Closing, the Borrowers shall, subject to Force Majeure, complete such Environmental Work and shall provide to Lender such closure reports, no-further-action letters, or other evidence of compliance with law as Lender may reasonably require. The funds contained in the Hazardous Materials Remediation Reserve shall be utilized by the Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrowers for purposes for which any other Reserve is established. Subject to the Borrowers' satisfaction of the applicable conditions of Section 6.7, the Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrowers for such Environmental Work, provided that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, in accordance with the terms hereof. SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK. (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to or for the account of the Borrowers (x) from the Hazardous Materials Remediation Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT EXPENDITURES"; and together with the Approved Environmental Expenditures, collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or Required Capital Improvements to which any such request for disbursement relates shall be referred to as the "WORK"), upon satisfaction of each of the conditions listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's reasonable discretion: (i) Except as provided in this Section 6.7, each request for disbursement from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for completion of the Approved Expenditures for which disbursement is requested. (ii) A request for disbursement from the Work Reserves may be made after completion of a portion of the Work under such contract, or for payment of deposits required in connection with the Work under such Contract, provided (1) all other conditions in this Loan Agreement for disbursement have been satisfied, (2) funds remaining in the Hazardous Materials 77 Remediation Reserve are, in Lender's reasonable judgment, sufficient to complete the Environmental Work when required and/or funds remaining in the Capital Improvement Reserve are, in Lender's reasonable judgment, sufficient to complete such item of Required Capital Improvements and any other Required Capital Improvements remaining to be performed, as the case may be, and (3) if reasonably required by Lender, each contractor or subcontractor receiving payments in excess of $100,000 under such contract shall provide a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor. (iii) To the extent the contract with the relevant contractor or supplier provides for a retainage, each disbursement from a Work Reserve, except for a final disbursement, shall be in the amount of actual costs incurred less the percentage of such costs that the contract with the relevant contractor or supplier specifies to be retained and advanced as part of the final disbursement. No funds will be advanced for materials stored at any Property unless such materials are properly stored and secured at the applicable Property in accordance with the Borrowers' customary procedures and sound construction practices as reasonably determined by Lender. No funds will be advanced for materials stored at any location other than at the Properties unless Lender determines in its reasonable discretion that Lender has a perfected first priority security interest in any such materials. (iv) The amount of all invoices in connection with the Work with respect to which a disbursement is requested and which has been approved by Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers (in which event, the Borrowers covenant and agree to promptly pay such invoices) or, if an Event of Default has occurred and is continuing, at Lender's option and in Lender's sole and absolute discretion, directly to the contractor, supplier, materialman, mechanic or subcontractor indicated on said invoices unless already paid by the Borrowers and Lender has received satisfactory evidence of such payment in which case Lender shall reimburse the Borrowers. All invoices in connection with disbursements from the Capital Improvement Reserve shall be classified as requests for payment for items of Capital Improvement (as opposed to items that, in conformity with GAAP, would be included as Operating Expenses). If the Borrowers request that any amounts be disbursed directly to the Borrowers pursuant to the foregoing sentence, the Borrowers shall be required to deliver evidence reasonably acceptable to Lender of payment of all invoices for which disbursements were previously made to the Borrowers as a condition to such requested disbursement. (v) No more than two (2) disbursements will be made by Lender from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve in any calendar month, and, if made in accordance herewith or otherwise approved by Lender, requested disbursements will be made within five (5) Business Days after the request therefor. Lender shall not be required to make any disbursement from a Work Reserve with respect to the Property unless such requested disbursement is in an amount equal to or greater than $25,000 (other than the final disbursement). (vi) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the 78 Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrowers shall assign (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. (vii) The Borrowers shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost and expense. (viii) The Borrowers shall have delivered to Lender a certificate of the Borrowers substantially in the form of Exhibit L attached hereto certifying as to the actual costs which were incurred by the Borrowers to complete such Work, which costs shall not materially exceed the amount budgeted for such Work under the CapEx/FF&E Budget then in effect unless approved by Lender, which shall not be unreasonably withheld, delayed or conditioned (together with supporting documentation reasonably acceptable to Lender). (ix) The Borrowers shall have delivered to Lender all necessary material certificates, authorizations, permits and licenses which are required to permit the construction and completion of the Work, as issued by the appropriate Governmental Authority. The Borrowers, to the full extent permitted by applicable law, hereby assigns to Lender as additional security for the payment of the Obligations and the observance and performance by the Borrowers of the terms, covenants and provisions of the Loan Documents all right, title and interest which the Borrowers may now have or may hereafter acquire in and to such certificates, authorizations, permits and licenses. (x) Lender may require an inspection of the Property prior to making a monthly disbursement from the applicable Work Reserve in order to verify completion of the Work for which disbursement is sought in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may require that such inspection be conducted by Lender's Consultant and/or may require a copy of a certificate of completion by an independent qualified architect or engineer acceptable to Lender prior to the disbursement of any amounts from the applicable Work Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such inspections as reasonably required hereunder, whether such inspections are conducted by Lender, Servicer, Lender's Consultant or by an independent qualified professional. 79 (B) PERFORMANCE OF WORK. (i) The Borrowers shall complete all Work in a good and workmanlike manner as soon as practicable following the commencement thereof substantially in accordance with the applicable budget approved by Lender in accordance with the terms of this Loan Agreement. The insufficiency of the balance in the applicable Work Reserve shall not relieve the Borrowers from their obligations to perform and complete the related Work as herein provided or to fulfill all other preservation and maintenance covenants in the Loan Documents. (ii) If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrowers with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrowers of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrowers shall have commenced to cure such unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such unsatisfactory work, up to a maximum of an additional sixty (60) days, subject to Force Majeure, without the cure thereof), Lender may proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrowers, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. (iii) In order to facilitate Lender's completion or making of any Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right to enter onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrowers and secured by the applicable Mortgage. For this purpose, the Borrowers constitute and appoint Lender their true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrowers empower said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve for the purpose of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the Borrowers which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or 80 the rehabilitation and repair of such Property; and (vii) to do any and every act which the Borrowers might do in their own behalf to fulfill the terms of this Loan Agreement. (iv) Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrowers additional sums to make or complete any Work. (v) The Borrowers shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.7 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may be kept at any Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The Borrowers shall use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B). (vi) All Work and all materials, equipment, fixtures and any other item comprising a part thereof shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other liens (except for the Permitted Encumbrances). (vii) All Work shall comply with all applicable legal requirements of all Governmental Authorities having jurisdiction over the Properties and applicable insurance requirements, including, without limitation, applicable building codes, special use permits, environmental regulations and requirements of insurance underwriters. (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys' fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrowers shall assign to Lender all rights and claims the Borrowers may have against all Persons supplying labor or materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations in full, a Cash Trap Event shall occur, then for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Lender (or its Servicer or agent) and held in the Lock Box Account in accordance with the terms of the Cash Management Agreement (said funds, together with any interest thereon, the "CASH TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when the 81 Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12) month period ending on such Calculation Date and shall continue to exist until such time as the Minimum Debt Yield test has been satisfied for three (3) consecutive Calculation Dates (on a trailing twelve (12) month basis) following the commencement of the applicable Cash Trap Event. Notwithstanding that the Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no Cash Trap Event shall be deemed to have occurred as a result of such event if the Borrowers make a principal prepayment of the Aggregate Outstanding Principal Balance (which prepayment amount shall be disbursed on the next Payment Date in accordance with the terms of the Cash Management Agreement), within three (3) Business Days after the date of delivery of the financial statements disclosing the existence of such Cash Trap Event (or the date on which such financial statements are required to be delivered pursuant to Section 5.1), in an amount equal to the greater of (x) one percent (1%) of the Aggregate Outstanding Principal Balance, or (y) 120% of the amount, as determined by Lender in its reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the Minimum Debt Yield if such calculation was recalculated as provided above assuming that such amount was applied to reduce the Aggregate Outstanding Principal Balance as of the first day of the relevant measuring period. During the continuance of a Cash Trap Event, provided that no Event of Default shall have occurred and be continuing, any funds on deposit in the Cash Trap Reserve may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be applied to (i) prepayment of the Aggregate Outstanding Principal Balance as provided above, (ii) Capital Expenditures reasonably approved by Lender, or (iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal and interest under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in accordance with the terms of the Cash Management Agreement). Any funds on deposit in the Cash Trap Reserve shall continue to be held as additional Collateral in accordance with this Section 6.8 until the earlier of (a) the date that such funds are applied or disbursed pursuant to the foregoing sentence or (b) the date that the Minimum Debt Yield test has been satisfied for three (3) consecutive months (as determined above), at which time, provided no Event of Default exists, and no Cash Trap Event has commenced, such funds, together with any and all amounts then held in the Minimum Balance Sub-Account (as defined in the Cash Management Agreement), shall be automatically released to the Borrowers without any further certification requirements on the part of the Borrowers. The existence of a Cash Trap Event shall be determined by Lender in its reasonable good faith determination. If Lender determines that a Cash Trap Event has occurred, Lender shall send the Borrowers written notice thereof. Notwithstanding any provision herein to the contrary, if an Event of Default has occurred and is continuing, all funds on deposit in the Cash Trap Reserve and any subsequent Excess Cash Flow, while such Event of Default is continuing, may be applied by Lender to payment of the Loan (including payment of any Prepayment Consideration) or other Obligations (or to the obligations of the Mezzanine Borrowers to Mezzanine Lender) as Lender may elect. ARTICLE VII DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT. (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more deposit accounts shall be established at the Borrowers' sole cost and expense in the name of Lender, as 82 secured party hereunder (said accounts, and any accounts replacing same in accordance with this Loan Agreement and the Deposit Account Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"), pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT AGREEMENT") substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, executed and delivered by the Borrowers and the Deposit Bank. The Deposit Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer). Among other things, the Deposit Account Agreement shall provide that the Borrowers shall have no access to or control over the Deposit Account, that all available funds on deposit in the Deposit Account shall be transferred by wire transfer (or transfer via the ACH System) on each Business Day by the Deposit Bank into the Lock Box Account, for application in accordance with the Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall be directed to deliver to the Borrowers copies of bank statements and other information made available by the Deposit Bank and the Lock Box Account Bank concerning the Deposit Account and the Lock Box Account. (ii) Upon establishing the Deposit Account, (1) the Borrowers shall cause any and all Operating Revenues, including distributions or other payments made directly or indirectly to the Borrowers, Manager, or any of their respective Affiliates, from any Beverage Company, to be deposited promptly into the Deposit Account and in no event later than two (2) Business Days after the same are paid to or for the benefit of the Borrowers, and (2) the Borrowers shall obtain agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each of the Persons paying or disbursing credit card receivables (the "CREDIT CARD COMPANIES"), substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, pursuant to which the Credit Card Companies agree to pay all credit card receivables into the Lock Box Account, and acknowledge and agree that Lender shall have a first priority perfected security interest in such credit card receivables. To the extent that the Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed to hold the same in trust for Lender for the protection of the interests of Lender hereunder and under the Loan Documents. The Borrowers represent and warrant that, as of the date hereof, the only Credit Card Companies paying or disbursing credit card receivables with respect to the Property are Chase Merchant Services, American Express, Discover Financial Service, Diners Club, JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter into an agreement with any other Credit Card Company pursuant to which such Credit Card Company shall pay credit card receivables with respect to the Properties, such Borrower shall promptly obtain a Credit Card Receivables Payment Direction Letter in form and substance reasonably acceptable to Lender from such Credit Card Company. (iii) The Borrowers shall pay all reasonable out-of-pocket costs and expenses incurred by Lender in connection with the transactions and other matters contemplated by this Section 7.1, including but not limited to, Lender's reasonable attorneys' fees and expenses, and all reasonable fees and expenses of the Deposit Bank and the Lock Box Account Bank, including without limitation their reasonable attorneys' fees and expenses. (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms of the Cash Management Agreement, an Eligible Account shall be established in the name of Lender, 83 as secured party hereunder, to serve as the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement, the Borrowers shall not have the right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. Lender may elect to change any financial institution in which the Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrower. The Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement: (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the "Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance Sub-Account"; and (g) "Cash Trap Reserve Sub-Account". SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" means the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan 84 Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrowers; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrowers (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if (i) within forty-five (45) days after the filing thereof, the Borrowers shall either cause the same to be removed of record by payment, bonding or otherwise, or (ii) same is being contested in good faith in accordance with Section 5.3(B) hereof); or (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by any Borrower, Guarantor or Manager in any Loan Document or in any statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan Documents and such default is not fully cured within thirty (30) days after receipt by the Borrowers of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other 85 officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any Borrower Party commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceeding, it shall not constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of their business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrowers 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) and the Borrowers do not take all actions requested by Lender to correct such defect within ten (10) days after the written request by Lender to take such action, or any Person under the control of the Borrowers or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a 86 Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; (ii) or any breach or default shall occur in the material obligations of the Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, that Manager shall have the right to exercise material remedies as a consequence thereof; or (P) GROUND LEASE/CONDOMINIUM DOCUMENT DEFAULT. Any default by any of the Borrowers beyond any applicable grace period shall occur under any Ground Lease or any Condominium Property Document or any actual or attempted surrender, termination, modification or amendment of any Ground Lease or any Condominium Property Document without Lender's prior written consent. If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). SECTION 8.2 ACCELERATION AND REMEDIES. (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by the Borrowers. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrowers under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting 87 the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against each Property and the Mortgages have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose the Mortgages in any manner and for any amounts secured by the Mortgages then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrowers default beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose the Mortgage to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose the Mortgage or any of them to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Mortgage as Lender may elect. Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Mortgage to secure payment of sums secured by the Mortgage and not previously recovered. (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. The Borrowers shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their true and lawful attorney, coupled with an interest, in their name and stead to make and execute all documents reasonably necessary to effect the aforesaid severance if the Borrowers fail to do so within ten (10) days of Lender's written request, the Borrowers ratifying all that their said attorney shall do by virtue thereof. (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrowers pursuant to this Loan Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as 88 may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrowers shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrowers or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if any of the Borrowers shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrowers including making protective advances on behalf of any Borrower, or, in its sole discretion, causing the obligations of any of the Borrowers to be satisfied with the proceeds of any Reserve. In such event, the Borrowers shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the Borrowers under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. (B) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrowers. ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower Party hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that such Primary Borrower Party: (A) does not own and will not own any assets other than the Properties (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Borrowers, and other wholly owned subsidiaries of the Primary Borrower Parties established solely for the purpose of holding liquor licenses with respect to one or more of the Properties, and with respect to Member, direct or indirect 89 ownership interests in the Crossed Borrowers as of the date of this Agreement (all of the foregoing ownership interests being referred to herein, collectively, as the "OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties, such incidental assets as are necessary to enable it to discharge its obligations with respect to the Borrowers; (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Properties, the Crossed Properties as of the date of this Agreement, or the Ownership Interests; (C) has not at any time since the SPE Effective Date entered into and will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of any Primary Borrower Party except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate (including the Management Agreements); (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted Indebtedness, and (iii) the Mezzanine Loan; (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), and has not acquired and will not acquire obligations or securities (other than the Ownership Interests) of any of its Affiliates other than the other Borrower Parties; (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due; (G) has at all times since the SPE Effective Date done or caused to be done and will do all things necessary to preserve its existence, and will not, and no partner, member, shareholder, trustee, beneficiary, or principal will, further amend, modify or otherwise change, its partnership certificate, partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement, or other organizational documents, as modified, amended, restated or supplemented as of the date hereof, in any manner with respect to the matters set forth in this Article IX; (H) has at all times since the SPE Effective Date continuously maintained its existence and has at all times since the SPE Effective Date been qualified to do business, and shall continue to maintain its existence and be qualified to do, business in all states necessary to carry on its business, specifically including in the case of each Borrower, the state where its Property is located; (I) has at all times since the SPE Effective Date conducted and operated, and will conduct and operate its business as presently conducted and operated and otherwise contemplated with respect to the ownership of its Property, or the ownership of the Ownership Interests, as applicable; 90 (J) has at all times since the SPE Effective Date maintained, and will maintain books and records and bank accounts (other than bank accounts established hereunder, or established by Manager with respect to the operations of the Properties pursuant to the Management Agreement) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and has at all times since the SPE Effective Date maintained and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) has at all times since the SPE Effective Date been and held itself out to the public as, and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and has at all times since the SPE Effective Date corrected and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) has at all times since the SPE Effective Date paid, and will pay the salaries of its own employees, if any; (M) has at all times since the SPE Effective Date allocated, and will allocate fairly and reasonably any overhead for shared office space; (N) has at all times since the SPE Effective Date used, and will use its own stationery, invoices and checks; (O) has at all times since the SPE Effective Date filed, and will file its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; (P) has at all times since the SPE Effective Date maintained, and reasonably expects to maintain adequate capital (taken as a whole with all of the other Borrowers) for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (Q) will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) will not enter into any transaction of merger or consolidation, and will not acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership (other than the Ownership Interests) of, any Person; (S) has not at any time since the SPE Effective Date commingled or permitted to be commingled, and will not commingle or permit to be commingled, its funds or other assets with those of any other Person (other than, with respect to the Borrowers, each other Borrower, or as may be held by Manager, as agent, for each Borrower pursuant to the terms of the Management Agreement, and except for funds deposited in the Accounts in accordance with the Loan Documents); 91 (T) has at all times since the SPE Effective Date maintained, and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (U) does not and will not hold itself out to be responsible for the debts or obligations (other than the Obligations and the Crossed Indebtedness as of the date of this Agreement) of any other Person; (V) has not guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations and the Crossed Indebtedness as of the date of this Agreement) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to their respective obligations under Section 9.1, each Borrower, General Partner and Member hereby represents, warrants and covenants, as of the Closing Date and until such time as all Obligations are paid and satisfied in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion: (A) each General Partner shall at all times act as the sole general partner of each Borrower that is a limited partnership, with all of the rights, powers, obligations and liabilities thereof under the limited partnership agreement of such Borrower and shall take any and all actions and do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (B) Member shall at all times act as the sole member of each Borrower and Crossed Borrower as of the date of this Agreement that is a limited liability company with all of the rights, powers, obligations and liabilities thereof under the limited liability company operating agreement of such Borrower or Crossed Borrower and shall take any and all actions and will do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (C) each Borrower that is a limited liability company shall not, without the prior written consent of its Member (including the unanimous written consent of its Member's board of directors including the Independent Directors or the unanimous written consent of each of the Borrowers' board of managers including the Independent Directors), and each Borrower that is a limited partnership shall not, without the prior written consent of its General Partner (including the unanimous written consent of General Partner's Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment 92 of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (D) each Borrower that is a corporation shall not, without the prior unanimous written consent of its board of directors, including its Independent Directors, institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against it; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (E) no Member or any General Partner shall, without the unanimous vote of its board of directors or board of managers, as the case may be, including, in each case, its Independent Directors, institute proceedings for itself or any Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or any Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or any Borrower; or a substantial part of its or any Borrower's property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (F) except as otherwise permitted hereunder, no Member or any General Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself or any Borrower, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person; or (iii) amend any provisions of its or any Borrower's organizational documents containing provisions similar to those contained in this Article IX; and (G) each Member, General Partner and Borrower that is a corporation shall each promptly elect and at all times maintain at least two (2) Independent Directors on its board of directors, who shall be selected by such Member, General Partner or Borrower, as applicable, and be reasonably acceptable to Lender. Each Borrower that is a single member limited liability company shall promptly appoint and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by such Borrower, and be reasonably acceptable to Lender. ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, 93 Lender shall have the right, at Lender's sole cost (other than each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel), to cause the Note and any Mortgage to be split into a first and a second mortgage loan, or into one or more loans evidenced by multiple notes and secured by multiple mortgages and/or by ownership interests in any of the Borrowers in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting any such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything to the contrary contained in this Article X, it is acknowledged and agreed that in no event shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's) internal costs and expenses in connection with any Secondary Market Transaction. Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of each Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower Parties shall not be required to pay any third party (other than, which respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the costs and expenses of the Borrowers' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. 94 SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other than with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrowers' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent in substance with the opinions covered by the original opinions, addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrowers understand that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrowers and Guarantor shall provide in connection with each (i) preliminary and final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, prepared in connection with any Secondary Market Transaction (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor certifying that the Borrowers and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrowers, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the 95 light of the circumstances under which they were made, not materially misleading. The Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrowers shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrowers or their Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrowers or their Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, Leases entered into as permitted hereunder, and pledges in connection with the Mezzanine Loan, the Borrowers shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of any Property or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in any Borrower (other than to Mezzanine Lender), irrespective of the number of tiers of ownership, without Lender's consent. SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in any Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. 96 (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower); and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. (D) The pledge of ownership interests granted by the Mezzanine Borrowers pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan Agreement). For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving effect to such Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY. (A) The Borrowers shall have the right to request that Lender consent to (i) a transfer of all of the Properties to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the obligations of the Guarantors arising from and after such date and release of the Borrowers and Guarantor from obligations arising from and after such date and (iii) the replacement of the Mezzanine Borrowers with pledgors of the ownership interests in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the conditions set forth in paragraphs (B) and (C) of this Section. Together with such written application, the Borrowers will pay to Lender a review fee of $10,000. The Borrowers also shall pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of the Rating Agencies, if any, and other outside entities, in connection with considering any proposed Assumption, whether or not the same is permitted or occurs. 97 (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrowers shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrowers shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions; (v) The Borrowers shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; (vi) The Borrowers, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; (vii) (a) The Transferee Borrower shall be a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its reasonable discretion; and (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender. (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or Borrowers, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrowers, the Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such 98 Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, a bankruptcy non-consolidation opinion; (iii) The Borrowers shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrowers and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (iv) The Borrowers shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Transfer and Assumption, including but not limited to Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may obtain the release (each, a "RELEASE") of one or more Properties from the Lien of the applicable Mortgage(s) in connection with a partial or total defeasance of the Loan subject to the conditions of the Note and subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrowers at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) On the date proposed for such Release, the Borrowers shall defease all or a portion of the Loan by delivering a Defeasance Deposit (as defined in the Note) in an amount necessary to pay all Scheduled Defeasance Payments (as defined in the Note) for the entire principal amount of the Loan in the case of a total defeasance, or in the case of a partial defeasance, relating to the Release Price of each Property being released (together with all accrued and unpaid interest on the principal amount being so defeased), and such defeasance shall be undertaken in accordance with the terms and conditions of the Note, and Mezzanine Lender shall have received all amounts required to be paid to it in connection with such Release under the Mezzanine Loan Documents; (D) If required by any Rating Agency, the Borrowers at their sole cost and expense, in connection with any partial defeasance, shall have delivered to Lender, one or more endorsements to the Title Policies delivered to Lender on the date hereof in connection with the Mortgages insuring that, after giving effect to such Release, (i) the Liens created hereby and thereby and insured under the Title Policies are first priority Liens on the respective remaining Properties subject only to the Permitted Encumbrances applicable to the remaining Properties and (ii) that the Title Policies remain in full force and effect and unaffected by such Release; (E) Immediately following any Release in connection with any partial defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt 99 Yield (based upon a trailing twelve (12) month period) in effect at Closing, or immediately prior to the Release, whichever is greater; (A) Notwithstanding the foregoing, the Borrowers may not obtain the Release under this Section 11.4 of any Property or Properties which individually, or in the aggregate (with all Releases since the Closing Date), have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the original principal balance of the Loan except pursuant to a total defeasance; (F) The Borrowers shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Release; and (G) Immediately following such Property Release, each released Property will be owned by a Person other than the Borrowers, except as otherwise permitted in connection with any full or partial defeasance of the Loan in accordance with the terms and conditions of the Note. Upon satisfaction of the above conditions, Lender shall effectuate the following (hereinafter referred to as a "PROPERTY RELEASE"): the security interest of Lender under the Mortgage and other Loan Documents relating to each released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrowers to release and terminate or reassign, at the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and financing statements as to each released Property; provided, that such release and termination or reassignment shall be without recourse to Lender and without any representation or warranty except that Lender shall be deemed to have represented that such release and termination or reassignment has been duly authorized and that it has not assigned or encumbered the Mortgage or the other Loan Documents relating to any released Property (except as contemplated hereby) and Lender shall return the originals of any Loan Documents that relate solely to each released Property to the Borrowers; provided, further, that upon the release and termination or reassignment of Lender's security interest in the Mortgage relating to a released Property all references herein to the Mortgage relating to such released Property shall be deemed deleted, except as otherwise provided herein with respect to indemnities. In addition, promptly after consummation of any such Property Release and Lender's receipt of the Defeasance Collateral, any and all Reserves designated as applicable to each released Property held by or on behalf of Lender shall be returned to the Borrowers. SECTION 11.5 RESERVED. SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may Transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Property free from the lien of the Mortgage, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or on the Properties taken as a whole, will not materially impair the utility of any individual Property or the Properties, taken as a whole, 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 100 further that any new building equipment acquired by the Borrowers (and not so disposed of) shall be subject to the lien of the Mortgage. Lender shall, from time to time, upon the reasonable request of any Borrower, execute a written instrument in form reasonably satisfactory to Lender to confirm that such building equipment which is to be, or has been, sold or disposed of is free from the lien of the Mortgage. SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrowers may, without the consent of Lender, (i) make immaterial Transfers of portions of the any Property to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way with respect to any Property in the ordinary course of business 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 such Property or have a Material Adverse Effect on the value of such Property taken as a whole. In connection with any Transfer permitted pursuant to this Section 11.7, Lender 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 such Property affected by such transfer from the lien of the applicable Mortgage or to subordinate the applicable Mortgage to any such easement, restriction, covenant, reservation or right of way within ten (10) days of Lender's receipt of the following: (A) ten (10) days prior written notice thereof. (B) a copy of the instrument or instruments of transfer. (C) an officer's certificate given by the Borrowers stating that such transfer does not materially impair the utility and operation of the Property, materially reduce the value of the Property or have a Material Adverse Effect. (D) reimbursement of all of Lender's reasonable, out-of-pocket costs and expenses incurred in connection with such Transfer. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrowers to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrowers' obligations under the Note shall be limited to (i) the Properties, (ii) the rents, profits, issues, products and income of the Properties, and (iii) any other Collateral. Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Obligations secured by the Mortgages or to require that all collateral shall continue to secure all of the Obligations owing to Lender in accordance with the Loan Documents. 101 SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not their members, partners (other than the General Partners), employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrowers or any Borrower Party or Manager and not deposited into the Deposit Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrowers or of any change in the name of any of the Borrowers or if any of the Borrowers takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrowers, or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste with respect to any of the Properties; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully recourse to the Borrowers and Guarantor upon the happening of any of the following: (i) any Borrower Party's defense of any efforts by Lender to collect or enforce the Obligations following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any efforts by Lender to collect or enforce the Obligations without a good faith basis following any other Event of Default, and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents). SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against any Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. 102 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale 103 thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors of all or any part of the obligations of the other Borrower Parties, and of all other circumstances bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. 104 ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrowers of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including 105 claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrowers shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrowers under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Properties by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers or other Person to any other or further notice or demand in similar or other circumstances. SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrowers to Lender (other than the Note) unless the Borrowers request in writing that same be returned. Upon such request and at the Borrowers' expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). Notices shall be addressed as follows: If to the Borrowers or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 106 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Morris, Manning & Martin, LLP 3343 Peachtree Rd., NE 1600 Atlanta Financial Center Atlanta, Georgia 30326 Attention: Thomas Gryboski, Esq. Facsimile: (404) 365-9532 If to Lender: Merrill Lynch Mortgage Lending, Inc. Four World Financial Center New York, New York 10080 Attention: Robert Spinna Facsimile: (212) 449-7684 With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn: Robert L. Boyd, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrowers to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note 107 or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its 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 and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, 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. SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE 108 LAWS OF THE STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrowers may not assign their rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties, represent, warrant and acknowledge that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrowers, on behalf of themselves and all Borrower Parties, also acknowledge and agree that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any other Person. The relationship between Lender and the Borrowers is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and any other Borrower are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. Each of the Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in 109 respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any of the Borrowers or Affiliates thereof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrowers and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN 110 ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrowers have been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrowers shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrowers in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, 111 Lender shall have the right, at the Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [signatures follow on next page] 112 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWERS: MINNEAPOLIS MOTEL ENTERPRISES, INC. LODGIAN AMI, INC. LODGIAN HOTELS FIXED III, LLC By:_________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above SERVICO CENTRE ASSOCIATES, LTD. By: Servico Palm Beach General Partner SPE, Inc., its general partner By:_________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:_________________________________ Name: Title: LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate Re: Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 2.12(G) - Crossed Loans/Crossed Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.29 - Condominium Property Documents Schedule 4.30 - Ground Leases Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work/O&M Plans Schedule 6.7 - Reserve Funding Condition

List of Exhibits and Schedules EXHIBIT A PROPERTIES 1. Courtyard by Marriott, 1001 McClain Rd., Bentonville, AR 2. Crowne Plaza, 1601 Belvedere Road, West Palm Beach, FL 3. Courtyard by Marriott, 46 Cavalier Blvd., Florence, KY 4. Holiday Inn, 301 W. Lombard St., Baltimore, Inner Harbor, MD 5. Holiday Inn, 6323 Ritchie Highway, Glen Burnie, MD 6. Holiday Inn, 1000 Cromwell Bridge Rd., Towson (Cromwell Bridge), MD 7. Holiday Inn, 1201 West Country Rd. East, St. Paul, MN 8. Fairfield Inn, 4 Amherst Rd., Merrimack, NH 9. Holiday Inn Sunspree, 1601 No. Ocean Blvd., Myrtle Beach (Surfside Beach), SC EXHIBIT B ENVIRONMENTAL REPORTS EXHIBIT C FRANCHISE AGREEMENTS EXHIBIT D ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS EXHIBIT E MANAGEMENT AGREEMENTS EXHIBIT F [RESERVED] EXHIBIT G PROPERTY IMPROVEMENT PLANS None EXHIBIT H [RESERVED] EXHIBIT I ACCEPTABLE FRANCHISORS EXHIBIT J PROPERTY CONDITION REPORTS EXHIBIT K ZONING REPORTS EXHIBIT L CERTIFICATE RE: WORK RESERVES SCHEDULE 1 BORROWERS SCHEDULE 2.4 SCHEDULED MORTGAGE PRINCIPAL PAYMENTS SCHEDULE 2.12(G) CROSSED LOANS/CROSSED BORROWERS SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan and Security Agreement 2. Note 3. Mortgages 4. Assignments of Leases 5. Assignments of Agreements, Licenses, Permits and Contracts 6. Assignments of Hotel Management Agreements 7. Guaranty of Recourse Obligations 8. Environmental Indemnity 9. Deposit Account Agreements 10. Financing Statements 11. Cash Management Agreement 12. Borrower's Closing Certificate under Section 3.1(D) 13. Closing Certificate of Lodgian, Inc. 14. Cooperation Agreement 15. Agreement Regarding Right of First Offer 16. Subordination and Standstill Agreement 17. Contribution Agreement 18. Cross-Guaranty 19. Post Closing Agreement SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES SCHEDULE 4.2 CONSENTS None SCHEDULE 4.5 CONDEMNATION PROCEEDINGS None SCHEDULE 4.5(A) RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER SCHEDULE 4.7(B) RENT ROLL SCHEDULE 4.7(E) FRANCHISE DEFAULTS SCHEDULE 4.9 LITIGATION None SCHEDULE 4.14 ERISA PLANS 1. Lodgian, Inc. 401(k) Plan. 2. Lodgian, Inc. Employee Health & Welfare Plan. 3. Multiemployer Plans covering employees of the following unions: Hotel Employees & Restaurant Employees Local 17 (St. Paul, MN) (pension, welfare) SCHEDULE 4.20 INSURANCE SCHEDULE 4.28 COLLECTIVE BARGAINING AGREEMENTS
DATE OF HOTEL BORROWER UNION AGREEMENT ----- -------- ----- --------- ~~Holiday Inn - St. Minneapolis Motel Hotel Employees and Restaurant 10/1/01 Paul, MN Enterprises, Inc. Employees, Local 17~~
SCHEDULE 4.29 CONDOMINIUM PROPERTY DOCUMENTS 1. Declaration for West Palm Beach Condominium, dated as of August 15, 2003, by Servico Centre Associates, Ltd. 2. Survey of Condominium and Certification of Surveyor, dated August 19, 2003. 4. By-Laws of Condominium Association, dated August 15, 2003. 5. Certificate of Good Standing for Servico Centre Condominium Association, Inc., dated April 28, 2003. 6. Articles of Incorporation for Servico Centre Condominium Association, Inc., dated as of March 14, 2003. SCHEDULE 4.30 GROUND LEASES SCHEDULE 5.14 MATERIAL AGREEMENTS Agreement between PFG Broadline and Lodgian, Inc. dated July 1, 2003. Agreement between Harbor Linen and Lodgian, Inc. dated March 1, 2002. Various agreements between the Borrowers and On Command Video Corporation. Group booking contract between Albany Hotels, Inc, and Southwest Airlines dated SCHEDULE 6.5 REQUIRED CAPITAL IMPROVEMENTS SCHEDULE 6.6 ENVIRONMENTAL WORK/O&M PLANS SCHEDULE 6.7 RESERVE FUNDING CONDITIONS 1. The Borrowers shall have submitted to Lender a written request for disbursement at least five (5) days prior to the date on which the Borrowers request such disbursement be made, specifying the specific Work or for which the disbursement is requested and such other information (such as the price of materials and the cost of contracted labor or other services) as Lender may reasonably require, which request must be on a form specified or approved by Lender; 2. On the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured; 3. Lender shall have received a certificate from the Borrowers stating that all Work at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with any plans and specifications approved by Lender and all legal requirements of any Governmental Authority having jurisdiction over the Property, such certificate to be accompanied, in either case, by a copy of any license, permit or other approval by any Governmental Authority required to commence (only for the first advance with respect to each distinct item of work) and/or complete (only for the final advance with respect to each distinct item of work) such Work; 4. Lender shall have received a certificate from the Borrowers stating that each Person that supplied materials or labor in connection with the Work to be funded by the requested disbursement has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by copies of invoices for all items or materials purchased and all contracted labor or services provided, and, with respect to Work relating to mold, a certificate of a Certified Industrial Hygienist that the such Work has been completed in conformity with applicable mold clean-up procedures promulgated by the applicable Governmental Authority within the state in which the applicable Property is located, or, if no such procedures exist, in conformity with the New York City Department of Health or the United States Environmental Protection guidelines for mold related clean-up work; 5. Lender shall have received appropriate lien waivers (including final lien waivers) from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $10,000 for completion of its work or delivery of its materials, which lien waivers shall conform to the requirements of applicable law and shall cover all work performed and materials supplied (including equipment and fixtures) for a Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current disbursement request; and 6. At Lender's option, Lender shall have received a title search for the Property effective to the date of the disbursement, which search shows that no mechanic's or materialmen's liens or other Liens of any nature have been placed against the Property since the date of recordation of the applicable Mortgage and that title to the Property is free and clear of all Liens (other than the Permitted Encumbrances). EX-10.26.2 20 g87458a3exv10w26w2.txt EX-10.26.2 PROMISSORY NOTE EXHIBIT 10.26.2 FORM OF PROMISSORY NOTE $_____________ JUNE ___, 2004 FOR VALUE RECEIVED, the undersigned, each having an address at c/o Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (each, a "Borrower" and, collectively, the "Borrowers"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "Lender"), having an address at Four World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of _______ _________________________________, with interest on the unpaid principal balance from the date of this Note, until paid, at the Interest Rate (as hereinafter defined) in effect from time to time hereunder. This Promissory Note may be referred to herein as the "Note," and the loan evidenced hereby may be referred to herein as the "Loan." PAYMENTS OF PRINCIPAL AND INTEREST. The Borrowers shall make a payment on the date hereof to Lender of interest only on the outstanding principal balance of this Note at the Interest Rate (hereinafter defined), from the date hereof through and including the last day of the calendar month in which this Note is executed. Commencing on August 1, 2004 (the "First Payment Date") and on the first day of each calendar month (each, a "Payment Date") thereafter to and including the Maturity Date (hereinafter defined), the Borrowers shall make payments to Lender of interest and principal in monthly installments in the amounts set forth on Schedule 1 attached hereto and made a part hereof (the "Monthly Debt Service Payment Amounts"). The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon and all other amounts due hereunder and under the other Loan Documents (collectively the "Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the "Maturity Date"). Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest on this Note shall be payable in arrears. DEFINITIONS. The term "Interest Rate" as used in this Note shall have the meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined). SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered pursuant to that certain Loan and Security Agreement, dated as of the date hereof (the "Loan Agreement"), among the Borrowers and Lender and is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, each dated as of the date hereof (collectively, the "Mortgages"), each executed by the applicable Borrower, encumbering the fee interests or ground lessee's interests of such Borrower, as applicable, in and to certain properties more particularly described therein (collectively, the "Properties"). This Note, the Loan Agreement, the Mortgages, and all other documents or instruments given by the Borrowers or any of them or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Note may be referred to as the "Loan Documents." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement. DEFEASANCE. A. Notwithstanding anything to the contrary contained in this Note, the Mortgages or the other Loan Documents, at any time after the earlier to occur of (x) the second (2nd) anniversary of the date that is the "startup day," within the meaning of Section 860G of the Internal Revenue Code of 1986, as amended from time to time or any successor statute (the "Code"), of a "real estate mortgage investment conduit," within the meaning of Section 860D of the Code, that holds this Note and (y) forty-eight (48) months after the date of this Note, the Borrowers shall have the right to defease all or any portion of the Loan evidenced by this Note with U.S. Government Securities (a "Defeasance"); provided that a partial Defeasance of this Note shall be permitted only in connection with the release of one or more of the Properties from the lien of the Mortgages and the other Loan Documents in accordance with Section 11.4 of the Loan Agreement and upon the satisfaction of the following conditions precedent (all of which conditions shall become covenants upon occurrence of the Defeasance): (i) The Borrowers shall provide to Lender not less than thirty (30) days' prior written notice specifying the date on which the Defeasance Deposit (hereinafter defined) is to be made (the date so specified may be referred to as the "Defeasance Election Date"). (ii) The Borrowers shall pay to Lender on the Defeasance Election Date all interest accrued and unpaid on the outstanding principal amount of this Note due through the Defeasance Election Date, or through the end of the Interest Accrual Period during which the Defeasance Election Date occurs if the Defeasance Election Date is other than a Payment Date, and the scheduled principal amortization payment due on such Defeasance Election Date, or due upon the next succeeding Payment Date if the Defeasance Election Date is other than a Payment Date, together with all other amounts, if any, then due and payable under this Note, the Mortgages and the other Loan Documents. (iii) The Borrowers shall irrevocably deposit with Lender an amount of U.S. Government Securities (hereinafter defined) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due dates of the payments owing hereunder, cash in an amount sufficient, without reinvestment, in the opinion of a firm of independent certified public accountants reasonably acceptable to Lender expressed in a written certification thereof delivered to Lender (the "CPA Certificate"), (1) with respect to a total Defeasance, to pay and discharge the Scheduled Defeasance Payments (hereinafter defined) for the principal balance of this Note or (2) with respect to a partial Defeasance in connection with the release of one or more Properties, to pay and discharge the Scheduled Defeasance Payments relating to the Release Price for such Property or Properties (the U.S. Government Securities so deposited together with any interest or other increase from the issuer of the securities earned thereon, and any replacements thereof, shall be referred to herein as the "Defeasance Deposit"). All such U.S. Government Securities, if in registered form, shall be registered in the name of Lender or its nominee (and, if registered in nominee's name, endorsed to Lender or in blank) and, if issued in book-entry form, the name of Lender or its 2 nominee shall appear as the owner of such securities on the books of the Federal Reserve Bank or other party maintaining such book-entry system. (iv) The Borrowers shall cause the following to be delivered to Lender on or prior to the Defeasance Election Date, all in form and substance reasonably satisfactory to Lender: (a) a security agreement, in form and substance reasonably satisfactory to Lender, creating a first priority lien on the Defeasance Deposit (the "Defeasance Security Agreement"); (b) the CPA Certificate; (c) a certificate of the Borrowers certifying that all requirements for the Defeasance set forth herein have been satisfied; (d) an opinion of counsel for the Borrowers in form and substance reasonably satisfactory to Lender to the effect that (i) Lender has a perfected first priority security interest in the Defeasance Deposit, (ii) the holder of this Note will not recognize additional income, gain or loss for United States federal income tax purposes as a result of the Defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Defeasance had not occurred, (iii) any holder, trustee or custodian of this Note which is a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code will not fail to maintain its status as such as a result of the Defeasance and (iv) the Defeasance Security Agreement is enforceable against the Borrowers in accordance with its terms; (e) evidence in writing from the applicable Rating Agencies for any Securities backed in whole or in part by this Note, to the effect that the Defeasance will not result in a downgrading, withdrawal, or qualification of the ratings in effect immediately prior to such Defeasance for any class of such then outstanding Securities; (f) evidence reasonably satisfactory to Lender that each of the Borrowers remains validly existing and in good standing under the laws of the state where it is organized and, to the extent required by applicable law, qualified to do business in the state where its respective Property is located; and the Borrowers shall maintain such existence during the time thereafter when this Note shall be outstanding (unless a Successor Borrower (hereinafter defined) assumes the obligations of each of the Borrowers or the Defeasing Borrower(s) (as hereinafter defined), as the case may be, under this Note); and (g) a certificate of the Borrowers certifying that all of the representations, and warranties contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects as of the Defeasance Election Date and ratifying all of the covenants and obligations of the Borrowers under the Loan Documents as of such date and such other certificates, documents or instruments as Lender may reasonably request or as may be required by the Rating Agencies referred to above, provided that such certificates, documents or instruments shall not increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents. 3 (v) Either (1) each of the Borrowers in the case of a total Defeasance, or the Defeasing Borrower(s) in the case of a partial Defeasance shall deliver to Lender a certificate stating that at all times following the Defeasance, the Borrowers or the Defeasing Borrower(s), as the case may be, shall have no interest in any assets other than the Defeasance Deposit, or (2) such Borrower(s) shall satisfy all of the requirements of Section C below. (vi) The Borrowers shall pay to Lender all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender in connection with the Defeasance. (vii) In the event only a portion of the Loan evidenced by this Note is the subject of the Defeasance in connection with the release of any Lien of any applicable Mortgage on one or more individual Properties under Section 11.4 of the Loan Agreement, the Borrowers shall execute and deliver all necessary documents to amend and restate this Note and issue two substitute promissory notes therefor: one note having a principal balance equal to the defeased portion of the original Note (the "Defeased Note") and one note having a principal balance equal to the undefeased portion of the original Note (the "Undefeased Note"). The Defeased Note and the Undefeased Note shall have identical terms as the original Note (and the Defeased Note and the Undefeased Note or Notes shall be cross-defaulted with each other), except for the principal balance. A Defeased Note cannot be the subject of any further Defeasance. An Undefeased Note may be the subject of a further Defeasance in accordance with the terms of this Note and the Loan Agreement (the term "Note", as used above in this clause (vii) for these purposes, being deemed to refer to the Undefeased Note that is the subject of further defeasance); provided, however, that no such partial Defeasance shall take place unless the conditions hereof and the conditions of Section 11.4 of the Loan Agreement are satisfied. B. Upon compliance with the requirements of Section A above and compliance with the requirements of Section 11.4 of the Loan Agreement, Lender shall cause each of the Properties, in the case of a total Defeasance, or each Defeased Property (as hereinafter defined), in the case of a partial Defeasance, to be released from the lien of the applicable Mortgages and the other applicable Loan Documents. The obligations under the Loan Documents with respect to the Properties or each Defeased Property, as the case may be, shall no longer be applicable, and the Defeasance Deposit shall be the sole source of collateral securing this Note or the Defeased Note, as the case may be. Lender shall apply the Defeasance Deposit and the payments received therefrom to the payment of all scheduled principal and interest payments due on all successive Payment Dates under this Note or the Defeased Note, as the case may be, after the Defeasance Election Date to and including the Maturity Date and to payment of the entire remaining Debt or the entire remaining principal balance, accrued and unpaid interest and other sums due under the Defeased Note, as the case may be, on the Maturity Date (collectively, the "Scheduled Defeasance Payments"). The Borrowers, pursuant to the Defeasance Security Agreement or other appropriate document, shall direct that the payments received from the Defeasance Deposit shall be made directly to Lender and applied to satisfy the obligations of the Borrowers under this Note or the Defeased Note, as the case may be. C. If, after the Defeasance, the Borrowers, in the case of a total Defeasance, or the Defeasing Borrower(s), in the case of a partial Defeasance, will own any assets other than the Defeasance Deposit, the Borrowers or the Defeasing Borrower(s), as the case may be, shall 4 establish or designate a single-purpose, bankruptcy-remote successor entity acceptable to Lender (the "Successor Borrower"), with respect to which a nonconsolidation opinion reasonably satisfactory in form and substance to Lender and any applicable Rating Agencies shall be delivered to Lender and such Rating Agencies, in which case the Borrowers or the Defeasing Borrower(s), as the case may be, shall transfer and assign to the Successor Borrower all of their respective obligations, rights and duties under this Note or the Defeased Note, as the case may be, and the Defeasance Security Agreement, together with the pledged Defeasance Deposit. The Successor Borrower shall assume the obligations of the Borrowers or the Defeasing Borrower(s), as the case may be, under this Note or the Defeased Note, as the case may be, and the Defeasance Security Agreement, and such Borrower(s) shall be relieved and released of their respective obligations hereunder and thereunder. Each of the Borrowers or the applicable Defeasing Borrower(s), as the case may be, shall pay not less than $1,000 to the Successor Borrower as consideration for assuming such Borrower's obligations. D. As used herein, the following terms shall have the following meanings: (i) "Defeased Property" shall mean any Property being released from the lien of the Mortgage relating to such Property pursuant to a partial Defeasance in accordance with the provisions of this Note and Section 11.4 of the Loan Agreement. (ii) "U.S. Government Securities" shall mean securities that are (i) direct obligations of the United States of America for the full and timely payment of which its full faith and credit is pledged or (ii) obligations of an entity controlled or supervised by and acting as an agency or instrumentality and guaranteed as a full faith and credit obligation which shall be fully and timely paid by the United States of America, which in either case are not callable or redeemable at the option of the issuer thereof (including a depository receipt issued by a bank (as defined in Section 3(a)(2) of the United States Securities Act)) as custodian with respect to any such U.S. Government Securities or a specific payment of principal of or interest on any such U.S. Government Securities held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the securities or the specific payment of principal of or interest on the securities evidenced by such depository receipt. (iii) "Defeasing Borrower" shall mean the Borrower owning or leasing, as the case may be, a Defeased Property. (iv) "Release Price" shall have the meaning set forth in the Loan Agreement. E. If, after payment in full of all obligations evidenced by this Note or any other of the Loan Documents, any of the Defeasance Deposit remains, such remaining balance of the Defeasance Deposit shall be returned to the Borrowers (or to the Successor Borrower, as the case may be) or Lender shall assign to the Borrowers (or the Successor Borrower, as the case may be) all of Lender's right, title, and interest in the Government Securities constituting the Defeasance Deposit. 5 PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrowers may not prepay this Note in whole or in part at any time except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the occurrence of any Event of Default, then at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Note or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Note shall bear interest until paid in full at a rate per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under this Note. The Borrowers agree that such late charges and Default Rate of interest are reasonable and do not constitute a penalty. LAWFUL INTEREST. Notwithstanding any provision to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Note or the Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, 6 the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the applicable Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the applicable Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of the Borrowers or their successors or assigns to pay the outstanding principal balance of this Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Mortgages or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of any Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by the Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note shall be binding upon the Borrowers and their successors and assigns. EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan Agreement, Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Note, the Loan Agreement, the Mortgages and any or all of the other Loan Documents. Lender shall be released of any obligations to the extent that the same are so assigned or transferred, and the rights and obligations of "Lender" hereunder shall become the rights and obligations of the transferee holder. LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of the Borrowers hereunder are limited in accordance with Article XII of the Loan Agreement. This 7 provision shall not limit any rights of Lender under the Guaranty of Recourse Obligations or the Environmental Indemnity, each dated as of the date hereof. ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrowers shall pay to Lender on demand all out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by the Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York and applicable federal law. TIME OF ESSENCE. Time shall be of the essence as to all of the terms, covenants and conditions of this Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, the Borrowers shall be required to make such payment on the next succeeding Business Day. JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of the Borrowers hereunder shall be joint and several. [NO ADDITIONAL TEXT ON THIS PAGE] 8 IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the date first written above. BORROWERS: [LODGIAN ENTITIES] By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory SCHEDULE 1 MONTHLY DEBT SERVICE PAYMENT AMOUNTS EX-10.26.3 21 g87458a3exv10w26w3.txt EX-10.26.3 GUARANTY OF RECOURSE OBLIGATIONS EXHIBIT 10.26.3 FORM OF GUARANTY OF RECOURSE OBLIGATIONS This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of June __, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"), having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "LENDER"). R E C I T A L S: A. Pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as the same may be amended, modified, supplemented or restated from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein (each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has agreed to make a loan to Borrowers in the aggregate original principal amount of up to **[_____________________]** (the "LOAN"), subject to the terms and conditions of the Loan Agreement; B. As a condition to Lender's making the Loan, Lender is requiring that Guarantor execute and deliver to Lender this Guaranty; and C. Guarantor hereby acknowledges that Guarantor holds a direct and/or indirect ownership interest in each Borrower and that Guarantor will materially benefit from Lender's agreeing to make the Loan. NOW, THEREFORE, in consideration of the premises set forth herein and as an inducement for and in consideration of the agreement of Lender to make the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor hereby agrees, covenants, represents and warrants to Lender as follows: SECTION 1. DEFINITIONS. All capitalized terms used and not defined herein shall have the respective meanings given such terms in the Loan Agreement. SECTION 2. GUARANTY. (a) Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) hereby irrevocably, absolutely and unconditionally assumes liability for, guarantees payment to Lender of, and agrees to pay, protect, defend, indemnify and save harmless Lender from and against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter defined). The obligations which are the subject of the guaranty referred to in this Section 2 are hereinafter collectively referred to as the "GUARANTEED OBLIGATIONS". (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used in this Guaranty shall mean all obligations and liabilities of Borrowers for which Borrowers shall be personally liable under the provisions of Section 12.2 of the Loan Agreement. (c) All sums payable to Lender under this Guaranty shall be payable on demand and without reduction for any offset, claim, counterclaim or defense. SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to Lender as follows (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Guaranty): (a) DUE EXECUTION. This Guaranty has been duly executed and delivered by Guarantor. (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, or application of general principles of equity in any legal proceeding. (c) NO VIOLATION. The execution, delivery and performance by Guarantor of its obligations under this Guaranty do not violate any law, regulation, order, writ, injunction or decree of any court or governmental body, agency or other instrumentality applicable to Guarantor, or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the assets of Guarantor pursuant to the terms of any mortgage, indenture, agreement or instrument to which Guarantor is a party or by which it or any of its properties is bound. Guarantor is not in default under any other guaranty which it has provided to Lender. (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan Agreement, there are no actions, suits or proceedings at law or at equity, pending or, to Guarantor's knowledge, threatened against or affecting Guarantor or which involve or could reasonably be expected to involve the validity or enforceability of this Guaranty or which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. Guarantor is not in default beyond any applicable grace or cure period with respect to any order, writ, injunction, decree or demand of any Governmental Authority which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. (e) CONSENTS. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities (collectively, the "CONSENTS") that are required in connection with the valid execution, delivery and performance by Guarantor of this Guaranty have been obtained and Guarantor agrees that all Consents required in connection with the carrying out or performance of any of Guarantor's obligations under this Guaranty will be obtained when required. (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial statements of Guarantor heretofore delivered to Lender fairly present the financial condition of Guarantor as of 2 the respective dates thereof, and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. None of the aforesaid financial statements or any certificate or statement furnished to Lender by or on behalf of Guarantor in connection with the transactions contemplated hereby, and none of the representations and warranties in this Guaranty contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading. Guarantor is not insolvent within the meaning of the Bankruptcy Code or any other applicable law, code or regulation and the execution, delivery and performance of this Guaranty will not render Guarantor insolvent. SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the benefit of Lender that Guarantor will deliver to Lender each of the financial statements required to be delivered pursuant to Section 5.1 of the Loan Agreement. SECTION 5. INTENTIONALLY DELETED. SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR. (a) The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Mortgages or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any Borrower, Guarantor or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrowers under the Note, the Loan Agreement, the Mortgages or any other Loan Documents or Guarantor under this Guaranty, or any setoff, counterclaim, and irrespective of any other circumstances which might otherwise limit recourse against Guarantor by Lender or constitute a legal or equitable discharge or defense of a guarantor or surety. Lender may enforce the obligations of Guarantor under this Guaranty by a proceeding at law, in equity or otherwise, independent of any loan foreclosure or similar proceeding or any deficiency action against Borrowers or any other Person at any time, either before or after an action against the Properties or any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION. Guarantor waives diligence, notice of acceptance of this Guaranty, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Mortgages or any other Loan Documents, against Guarantor, Borrowers or any other Person, any right to require a proceeding first against Borrowers or any other Person, or to exhaust any security (including, without limitation, the Properties or any of them or any part thereof) for the performance of the Guaranteed Obligations or any other obligations of Borrowers or any other Person, or any protest, presentment, notice of default (except as may be expressly required under the Loan Documents) or other notice or demand whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not be discharged of its obligations hereunder. (b) The obligations of Guarantor under this Guaranty, and the rights of Lender to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: 3 (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower, any Property or any part thereof, Guarantor or any other Person; (ii) any failure by Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Loan Agreement, or any other Loan Documents, or any document or instrument relating thereto; (iii) except (A) with respect to activities occurring after the date of a Permitted Assumption or, (B) activities relating to a Released Property after the date of a Release with respect thereto, the sale, transfer or conveyance of any Property or any interest therein to any Person, whether now or hereafter having or acquiring an interest in any Property or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against any Borrower or any Property or any interest therein; (iv) the conveyance to Lender, any Affiliate of Lender or Lender's nominee of any Property or any interest therein by a deed-in-lieu of foreclosure; (v) the release of any Borrower or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise; (vi) the release in whole or in part of any collateral for any or all Guaranteed Obligations or for the Loan or any portion thereof; or (vii) the exercise by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan Documents, including, without limitation, foreclosure or similar remedies under any pledge agreement encumbering Mezzanine Borrower's interest in any General Partner, any Member, and/or any Borrower except with respect to actions taken by the Mezzanine Lender following the Mezzanine Lender succeeding to the interests of the Mezzanine Borrowers in and to the Borrowers. (c) Except as otherwise specifically provided in this Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an action brought by Lender to enforce this Guaranty based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise. (d) Lender may deal with Borrowers and Affiliates of Borrowers in the same manner and as freely as if this Guaranty did not exist and shall be entitled, among other things, to grant Borrowers or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Lender, at any time and from time to time, without terminating, affecting or impairing the validity of this Guaranty or the obligations of Guarantor hereunder. (e) No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with 4 respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Loan Agreement, the Mortgages or the other Loan Documents or any amendment, modification or other change of any legal requirement shall in any way alter, impair or affect any of the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan Documents are modified with Lender's consent, the Guaranteed Obligations shall automatically be deemed modified to include such modifications. (f) Lender may proceed to protect and enforce any or all of its rights under this Guaranty by suit in equity or action at law, whether for the specific performance of any covenants or agreements contained in this Guaranty or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Guarantor. Each and every remedy of Lender shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. (g) No waiver shall be deemed to have been made by Lender of any rights hereunder unless the same shall be in writing and signed by Lender, and any such waiver shall be a waiver only with respect to the specific matter involved and shall in no way impair the rights of Lender or the obligations of Guarantor to Lender in any other respect or at any other time. (h) At the option of Lender, Guarantor may be joined in any action or proceeding commenced by Lender against Borrowers in connection with or based upon the Note, the Loan Agreement, the Mortgages or any other Loan Documents and recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor to the extent of Guarantor's liability hereunder, without any requirement that Lender first assert, prosecute or exhaust any remedy or claim against Borrowers or any other Person, or any security for the obligations of Borrowers or any other Person. (i) Guarantor agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Borrowers or Guarantor to Lender and such payment is rescinded or must otherwise be returned by Lender (as determined by Lender in its sole and absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower or Guarantor, all as though such payment had not been made. (j) In the event that Guarantor shall advance or become obligated to pay any sums under this Guaranty or in connection with the Guaranteed Obligations or in the event that for any reason whatsoever any Borrower or any subsequent owner of any Property or any part thereof is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to the lien, the time of payment and in all other respects to all sums, including principal and interest and other amounts, at any time owed to Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive payment thereof until all principal, interest and other sums due pursuant to the Loan Documents have been paid in full. Nothing herein contained is intended or shall be construed to give Guarantor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Lenders 5 in or to any collateral for the Loan, notwithstanding any payments made by Guarantor under this Guaranty, until the actual and irrevocable receipt by Lender of payment in full of all principal, interest and other sums due with respect to the Loan or otherwise payable under the Loan Documents. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when any such sums due and owing to Lender shall not have been fully paid, such amount shall be paid by Guarantor to Lender for credit and application against such sums due and owing to Lender. The foregoing shall not prohibit Borrowers from using the proceeds of the Loan for any permitted use under the Loan Agreement, including, without limitation, the making of distributions to Guarantor. (k) Guarantor's obligations hereunder shall survive a foreclosure, delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or similar proceeding involving any Property or any part thereof and the exercise by Lender of any of all of its remedies pursuant to the Loan Documents. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Guarantor under this Guaranty shall survive for a period of two (2) years following payment in full of the Obligations in accordance with the terms of the Loan Documents, provided, however, in the event that any Guaranteed Obligations or liabilities of the Guarantor under this Guaranty shall have arisen prior to the expiration of such period, then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Guarantor hereunder shall survive. SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED, AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN INSTRUMENT SIGNED BY LENDER AND GUARANTOR. SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor, and its successors and assigns, may not be assigned or delegated by Guarantor and shall inure to the benefit of Lender and its successors and assigns. Lender shall have the right to assign this Guaranty and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. All references to "Lender" hereunder shall be deemed to include the successors and assigns of Lender and the parties hereto acknowledge that actions taken by Lender hereunder may be taken by Lender's agents and by the agents of the successors and assigns of Lender. SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the City and County of New York or in the Courts of the United States of America located in the Southern District of New York, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Guarantor at its address set forth on the first page hereof. Nothing in this Section 9, however, shall affect the right of Lender to serve legal process in any other manner permitted by law or affect the right of 6 Lender to bring any suit, action or proceeding against Guarantor or its property in the courts of any other jurisdictions. SECTION 10. SECTION HEADINGS. The headings of the sections and paragraphs of this Guaranty have been inserted for convenience of reference only and shall in no way define, modify, limit or amplify any of the terms or provisions hereof. SECTION 11. SEVERABILITY. Any provision of this Guaranty which may be determined by any competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Guarantor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH. SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL LIABILITY. (a) The obligations of Guarantor hereunder are separate and distinct from, and in addition to, the obligations of Guarantor now or hereafter arising under the other guaranties pursuant to which Guarantor has guaranteed the payment and performance of certain other obligations of Borrowers described therein. (b) If there is more than one entity comprising Guarantor, all references to Guarantor herein shall be to Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) or any one or more of them. All obligations and liabilities of Guarantor hereunder are in addition to, not in lieu of and are independent of: (i) all obligations of Borrowers under any other Loan Document, including the Note and the Loan Agreement; and (ii) any obligation of Guarantor under any other Loan Document to which Guarantor is a party. (c) If there is more than one entity comprising Guarantor, all obligations of Guarantor hereunder shall be joint and several. SECTION 14. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder to Lender or Guarantor or which are given to Lender or Guarantor with respect to this Guaranty shall be in writing and shall be delivered to Lender at the address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the address set forth on the first page hereof, each in the manner provided in Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less than ten (10) days' prior written notice of any change in the location of Guarantor's principal place of business. SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its execution hereof acknowledges receipt of true copies of all of the Loan Documents, the terms and conditions of which are hereby incorporated herein by reference. 7 SECTION 16. INTEREST; EXPENSES. (a) If Guarantor fails to pay all or any sums due hereunder within ten (10) days of demand by Lender, the amount of such sums payable by Guarantor to Lender shall bear interest from the date of demand until paid at the Default Rate in effect from time to time. (b) Guarantor hereby agrees to pay all reasonable out of pocket costs, charges and expenses, including, without limitation, reasonable attorneys' fees and disbursements, that may be incurred by Lender in enforcing the covenants, agreements, obligations and liabilities of Guarantor under this Guaranty. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written. GUARANTOR: LODGIAN, INC., a Delaware corporation By: __________________________________ Name: Daniel E. Ellis Title: Senior Vice-President EX-10.27.1 22 g87458a3exv10w27w1.txt EX-10.27.1 LOAN & SECURITY AGMT (FIXED RATE #4) EXHIBIT 10.27.1 FORM OF LOAN AND SECURITY AGREEMENT (FIXED RATE #4) DATED AS OF JUNE __, 2004 BETWEEN THE BORROWERS LISTED ON SCHEDULE 1 HERETO AS BORROWERS AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS...................................................................................................... 1 Section 1.1 Certain Defined Terms.......................................................................... 1 Section 1.2 Accounting Terms............................................................................... 23 Section 1.3 Other Definitional Provisions.................................................................. 23 ARTICLE II TERMS OF THE LOAN................................................................................................ 23 Section 2.1 Loan........................................................................................... 23 Section 2.2 Interest....................................................................................... 24 Section 2.3 Reserved....................................................................................... 25 Section 2.4 Payments....................................................................................... 25 Section 2.5 Maturity....................................................................................... 26 Section 2.6 Prepayment..................................................................................... 26 Section 2.7 Outstanding Balance............................................................................ 27 Section 2.8 Taxes.......................................................................................... 27 Section 2.9 Reasonableness of Charges...................................................................... 27 Section 2.10 Reserved....................................................................................... 27 Section 2.11 Servicing/Special Servicing.................................................................... 27 Section 2.12 Cross-Collateralization; Contribution; Release of Cross-Collateralization...................... 28 ARTICLE III CONDITIONS TO LOAN............................................................................................... 33 Section 3.1 Conditions to Funding of the Loan on the Closing Date.......................................... 33 ARTICLE IV REPRESENTATIONS AND WARRANTIES................................................................................... 38 Section 4.1 Organization, Powers, Capitalization, Good Standing, Business.................................. 38 Section 4.2 Authorization of Borrowing, etc................................................................ 39 Section 4.3 Financial Statements........................................................................... 39 Section 4.4 Indebtedness and Contingent Obligations........................................................ 40 Section 4.5 Title to the Properties........................................................................ 40 Section 4.6 Zoning; Compliance with Laws................................................................... 40 Section 4.7 Leases; Agreements............................................................................. 41 Section 4.8 Condition of the Properties.................................................................... 42 Section 4.9 Litigation; Adverse Facts...................................................................... 43 Section 4.10 Payment of Taxes............................................................................... 43 Section 4.11 Adverse Contracts.............................................................................. 43 Section 4.12 Performance of Agreements...................................................................... 43 Section 4.13 Governmental Regulation........................................................................ 43
i Section 4.14 Employee Benefit Plans......................................................................... 43 Section 4.15 Broker's Fees.................................................................................. 43 Section 4.16 Intentionally Deleted.......................................................................... 44 Section 4.17 Solvency. ..................................................................................... 44 Section 4.18 Disclosure..................................................................................... 44 Section 4.19 Use of Proceeds and Margin Security............................................................ 44 Section 4.20 Insurance...................................................................................... 44 Section 4.21 Separate Tax Lots.............................................................................. 45 Section 4.22 Investments.................................................................................... 45 Section 4.23 Bankruptcy..................................................................................... 45 Section 4.24 Defaults....................................................................................... 45 Section 4.25 No Plan Assets................................................................................. 45 Section 4.26 Governmental Plan.............................................................................. 45 Section 4.27 Not Foreign Person............................................................................. 45 Section 4.28 No Collective Bargaining Agreements............................................................ 45 Section 4.29 Reserved....................................................................................... 45 Section 4.30 Reserved....................................................................................... 45 Section 4.31 No Prohibited Persons.......................................................................... 46 ARTICLE V COVENANTS OF BORROWER PARTIES.................................................................................... 46 Section 5.1 Financial Statements and Other Reports......................................................... 46 Section 5.2 Existence; Qualification....................................................................... 51 Section 5.3 Payment of Impositions and Claims.............................................................. 51 Section 5.4 Maintenance of Insurance....................................................................... 52 Section 5.5 Operation and Maintenance of the Properties; Casualty.......................................... 56 Section 5.6 Inspection..................................................................................... 59 Section 5.7 O&M Plan....................................................................................... 59 Section 5.8 Reserved....................................................................................... 59 Section 5.9 Compliance with Laws and Contractual Obligations............................................... 59 Section 5.10 Further Assurances............................................................................. 60 Section 5.11 Performance of Agreements and Leases........................................................... 60 Section 5.12 Leases......................................................................................... 60 Section 5.13 Management; Franchise Agreements............................................................... 61 Section 5.14 Material Agreements............................................................................ 63 Section 5.15 Deposits; Application of Receipts.............................................................. 64 Section 5.16 Estoppel Certificates.......................................................................... 64 Section 5.17 Indebtedness................................................................................... 64 Section 5.18 No Liens....................................................................................... 65 Section 5.19 Contingent Obligations......................................................................... 65 Section 5.20 Restriction on Fundamental Changes............................................................. 65 Section 5.21 Transactions with Related Persons.............................................................. 65 Section 5.22 Bankruptcy, Receivers, Similar Matters......................................................... 65 Section 5.23 ERISA.......................................................................................... 66 Section 5.24 Press Release.................................................................................. 67 Section 5.25 Reserved....................................................................................... 67

ii Section 5.26 Reserved....................................................................................... 67 Section 5.27 Lender's Expenses.............................................................................. 67 Section 5.28 Distributions.................................................................................. 67 Section 5.29 Cancellation of Indebtedness; Settlement of Claims............................................. 67 Section 5.30 Prohibited Persons............................................................................. 67 ARTICLE VI RESERVES......................................................................................................... 68 Section 6.1 Security Interest in Reserves; Other Matters Pertaining to Reserves............................ 68 Section 6.2 Funds Deposited with Lender.................................................................... 68 Section 6.3 Impositions and Insurance Reserve.............................................................. 69 Section 6.4 FF&E Reserve................................................................................... 69 Section 6.5 Capital Improvement Reserve; Required Capital Improvements..................................... 70 Section 6.6 Hazardous Materials Remediation Reserve........................................................ 70 Section 6.7 Conditions to Disbursements from Hazardous Materials Remediation Reserve and Capital Improvement Reserve; Performance of Work............................................... 70 Section 6.8 Cash Trap Reserve.............................................................................. 75 ARTICLE VII DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT............................................................... 76 Section 7.1 Establishment of Deposit Account and Lock Box Account.......................................... 76 Section 7.2 Application of Funds in Lock Box Account....................................................... 78 Section 7.3 Application of Funds After Event of Default.................................................... 78 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES..................................................................................... 78 Section 8.1 Event of Default............................................................................... 78 Section 8.2 Acceleration and Remedies...................................................................... 80 Section 8.3 Performance by Lender.......................................................................... 82 Section 8.4 Evidence of Compliance......................................................................... 82 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS...................................... 83 Section 9.1 Applicable to all Primary Borrower Parties..................................................... 83 Section 9.2 Applicable to Borrowers, General Partner and Member............................................ 85 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS................................................................ 87 Section 10.1 Secondary Market Transactions Generally........................................................ 87 Section 10.2 Cooperation; Limitations....................................................................... 87 Section 10.3 Information.................................................................................... 88 Section 10.4 Additional Provisions.......................................................................... 89

iii ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES............................................ 89 Section 11.1 Restrictions on Transfer and Encumbrance....................................................... 89 Section 11.2 Transfers of Beneficial Interests in Borrowers. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "Transfer") of a direct, indirect or beneficial interest in any Borrower shall be permitted without Lender's consent ("Permitted Ownership Interest Transfers"):................. 90 Section 11.3 Assumability................................................................................... 90 Section 11.4 Release of Properties.......................................................................... 92 Section 11.5 Reserved....................................................................................... 94 Section 11.6 Sale of Building Equipment..................................................................... 94 Section 11.7 Immaterial Transfers and Easements, etc........................................................ 94 ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE................................................................................ 94 Section 12.1 Limitations on Recourse........................................................................ 94 Section 12.2 Partial Recourse; Full Recourse................................................................ 95 Section 12.3 Miscellaneous.................................................................................. 96 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES................................................................... 96 Section 13.1 Waivers........................................................................................ 96 ARTICLE XIV MISCELLANEOUS.................................................................................................... 98 Section 14.1 Expenses and Attorneys' Fees................................................................... 98 Section 14.2 Indemnity...................................................................................... 98 Section 14.3 Amendments and Waivers......................................................................... 99 Section 14.4 Retention of the Borrowers' Documents.......................................................... 99 Section 14.5 Notices........................................................................................ 99 Section 14.6 Survival of Warranties and Certain Agreements................................................. 100 Section 14.7 Failure or Indulgence Not Waiver; Remedies Cumulative......................................... 101 Section 14.8 Marshaling; Payments Set Aside................................................................ 101 Section 14.9 Severability.................................................................................. 101 Section 14.10 Headings...................................................................................... 101 Section 14.11 APPLICABLE LAW................................................................................ 101 Section 14.12 Successors and Assigns........................................................................ 102 Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship............................ 102 Section 14.14 Reasonableness of Determinations.............................................................. 102 Section 14.15 Limitation of Liability....................................................................... 103 Section 14.16 No Duty....................................................................................... 103 Section 14.17 Entire Agreement.............................................................................. 103

iv Section 14.18 Construction; Supremacy of Loan Agreement..................................................... 103 Section 14.19 Consent to Jurisdiction....................................................................... 103 Section 14.20 Waiver of Jury Trial.......................................................................... 104 Section 14.21 Counterparts; Effectiveness................................................................... 104 Section 14.22 Servicer...................................................................................... 104 Section 14.23 Obligations of Borrower Parties............................................................... 105 Section 14.24 Additional Inspections; Reports............................................................... 105

v LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate re: Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 2.12(G) - Crossed Loans/Crossed Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work/O&M Plans Schedule 6.7 - Reserve Funding Conditions

i LOAN AND SECURITY AGREEMENT This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as of June __, 2004 and entered into by and between the parties listed as Borrowers on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrowers and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT I. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any other accounts pledged to Lender pursuant to this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, directors, managing members, or general partners of the entity. "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT D. "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Mezzanine Loan and the Loan. "ALLOCABLE PORTION" means 23.66%. "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each Property as set forth on EXHIBIT D. "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7. "ARCHITECT" has the meaning set forth in Section 5.5. "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and Rents of even date herewith from each of the Borrowers to Lender, constituting assignments of each Borrower's right, title and interest in the Leases and proceeds therefrom for each of their respective Properties as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain Conditional Assignments of Hotel Management Agreements of even date herewith executed by each of the Borrowers and the applicable Manager, constituting an assignment of each Management Agreement as Collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "BEVERAGE COMPANY" means any Person (other than any of the Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property. 2 "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Condominium Property Documents. "BORROWER" and "BORROWERS" have the meanings set forth in the preamble; provided that, following a Release, "BORROWERS" means each of the Borrowers remaining as a party to the Loan Documents, and whose Properties remain encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any of such remaining parties. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrowers, General Partner, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing offices of the Servicer, and, if the Loan becomes a "specially serviced mortgage loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1(D) hereof. "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations (including any improvements, repairs or alterations required pursuant to a Property Improvement Plan), FF&E and other capital items (whether paid in cash or property or accrued as liabilities) made by the Borrowers that, in conformity with GAAP, would not be included in the Borrowers' annual financial statements as an Operating Expense of the Properties. "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5. "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank. "CASH TRAP EVENT" has the meaning set forth in Section 6.8. 3 "CASH TRAP RESERVE" has the meaning set forth in Section 6.8. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan. "CLOSING DATE" means the date on which the Closing occurs. "COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan Documents, including without limitation the Properties and the Account Collateral. "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. 4 "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1. "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set forth in Section 7.1. "CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan, each dated as of the date hereof, executed by each of the Crossed Borrowers, and (ii) those certain Guaranties of each of the Crossed Loans, each dated as of the date hereof, executed by each of the Borrowers. "CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G). "CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other "Indebtedness" as defined in each Crossed Loan Agreement. "CROSSED LOANS" shall mean each of the mortgage loans (other than the Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with respect to each Crossed Borrower, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each dated as of the date hereof, between Lender and the Crossed Borrowers for the respective Crossed Loans, each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in each Crossed Loan Agreement for each Crossed Loan, including without limitation the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing and/or securing each Crossed Loan, and each of the Crossed Guaranties relating to the respective Crossed Loans, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and deeds to secure debt, each dated as of the date hereof, from each Crossed Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed Property as security for the respective Crossed Loans, each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.12(G) hereof. "CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan, as described in the respective Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G) hereof. "D&O INSURANCE" has the meaning set forth in Section 5.4. 5 "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the amount of interest that will be required to be paid over the succeeding twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan, plus principal amortization of the Loan and the Allocable Portion of the Mezzanine Loan that would be required in respect of the then outstanding principal amount of the Loan and the Allocable Portion of the Mezzanine Loan over the succeeding twelve (12) months based on a twenty-five (25) year amortization schedule, calculated using the Interest Rate for the Loan and the actual interest rate on the Mezzanine Loan. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. "DEBT YIELD" means, at any time of determination, Net Cash Flow for the trailing twelve (12) month period divided by the then outstanding principal balance of the Loan and the Mezzanine Loan [POOL #4 ONLY: ; provided, however, that Debt Yield shall be determined for each Calculation Date during calendar year 2004 based upon budgeted Net Cash Flow for 2004 for the Hilton, Columbia, Maryland and Hilton, Troy, Michigan Properties (as opposed to actual Net Cash Flow for the trailing twelve (12) month period for such Properties)]. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1. "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1. "DEPOSIT BANK" has the meaning set forth in Section 7.1. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. 6 "ELIGIBLE ACCOUNT" means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations ss. 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of any of the Borrowers or any current or former ERISA Affiliate or (iii) for which any of the Borrowers or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrowers and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAWS" means all present and future local, state, federal or other governmental authority, statutes, ordinances, codes, orders, decrees, laws, rules or regulations pertaining to or imposing liability or standards of conduct concerning environmental regulation (including, without limitation, regulations concerning health and safety), contamination or clean-up or the handling, generation, release or storage of Hazardous Material affecting the Properties including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, as amended, the Hazardous Substances Transportation Act, as amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as amended, the Safe Drinking Water Act, as amended, the Occupational Safety and Health Act, as amended, any state superlien and environmental clean-up statutes and all regulations adopted in respect of the foregoing laws whether now or hereafter in effect. "ENVIRONMENTAL REPORTS" means those certain environmental reports and audits for the Properties as described on EXHIBIT B. "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6. "EO13224" has the meaning set forth in Section 4.31. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. 7 "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions and which is also a Business Day. "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning set forth in the Cash Management Agreement. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G) hereof. "EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash Management Agreement. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature 8 whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. "FF&E RESERVE" means the reserve established pursuant to Section 6.4. "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the applicable Borrower Parties as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FITCH" means Fitch, Inc. "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrowers or their Affiliates, or other causes beyond the reasonable control of the Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrowers. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT C and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Borrowers, as franchisee, pursuant to which the Borrowers have the right to operate the Properties under names and hotel systems controlled by the Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to each Property or any other successor franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" means, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "FUNDING LOSSES" has the meaning set forth in Section 2.10. "FUNDING PARTY" means any bank or other entity, if any, which is indirectly or directly funding Lender with respect to the Loan, in whole or in part, including, without limitation, any direct or indirect assignee of, or participant in, the Loan. "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. 9 "GENERAL PARTNER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which is now or hereafter becomes a general partner of any of the Borrowers under such Borrower's limited partnership agreement. "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity. "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse Obligations of even date herewith from Guarantor to Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIAL" means all or any of the following: (A) substances, materials, compounds, wastes, products, emissions and vapors that are defined or listed in, regulated by, or otherwise classified pursuant to, any applicable Environmental Laws, including any so defined, listed, regulated or classified as "hazardous substances", "hazardous materials", "hazardous wastes", "toxic substances", "pollutants", "contaminants", or any other formulation intended to regulate, define, list or classify substances by reason of deleterious, harmful or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (C) any flammable substances or explosives or any radioactive materials; (D) asbestos in any form; (E) electrical or hydraulic equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G) mold; or (H) urea formaldehyde, provided, however, such definition shall not include cleaning materials and other substances commonly used in the ordinary course of the Borrowers' business, which materials exist only in reasonable quantities and are stored, contained, transported, used, released, and disposed of in accordance with all applicable Environmental Laws. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.6. "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any 10 interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Borrowers under each of the Ground Leases and under the Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties. "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, and (v) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of General Partner, Member, any of the Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (except that such individual may be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to the Borrowers, Member, General Partner or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate 11 family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INITIAL TERM" means the period from the Closing Date to the Scheduled Maturity Date. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Borrowers with respect to the Properties under Section 5.4. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. "INTEREST RATE" has the meaning set forth in Section 2.2. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. "IRS" means the Internal Revenue Service or any successor thereto. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrowers or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation or inquiry unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of each Borrower and Member, with respect to operational issues of any Property or any of the Borrowers; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) the person signing such document or certificate. "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. "LENDER" is defined in the preamble. "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7 "LETTER OF CREDIT" means an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least 12 thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrowers shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrowers that the institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LOAN" has the meaning set forth in Section 2.1. "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the Assignments of Leases, the Assignments of Management Agreements, the Guaranty, the Financing Statements, the Cash Management Agreement and any and all other documents and agreements from any of the Borrowers, General Partner, Member, Guarantor or Manager and accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mezzanine Loan Documents. "LOAN YEAR" means the twelve (12) month period commencing on July 1st of any calendar year during the term of the Loan and ending on June 30th of the following calendar year[; provided that the first Loan Year shall commence on the Closing Date and end on June 30, 2005]. "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT E, between each Borrower and the applicable Manager described therein, and any management agreement which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT E or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties approved by Lender in accordance with the terms and conditions hereof. 13 "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations, properties, assets or condition (financial or otherwise) of any of the Borrowers or Guarantor, or (B) the impairment of the ability of any of the Borrowers or Guarantor to perform its obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers receives in compensation, more than $500,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers (or all the Borrowers in the aggregate) receives in compensation, not more than $1,000,000 per annum and (y) which is terminable by the Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. "MATERIAL ALTERATION" means any improvement or alteration to a Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget then in effect, or as approved Work under Section 6.7 hereof. "MATERIAL LEASE" means any Lease of space in a Property which (i) is with an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other payments in an amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, or (iv) obligates the Borrowers to make any improvements to the Properties either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. "MATURITY DATE" means July 1, 2009, or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. 14 "MEMBER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the Borrowers which are limited liability companies) and any other entity which is now or hereafter becomes the managing or sole member of any of the Borrowers under such Borrower's limited liability company operating agreement. "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE BORROWER" means, individually or collectively, those parties identified on SCHEDULE 4.1(C) as "Mezzanine Borrower". "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its successors and assigns. "MEZZANINE LOAN" means that certain loan being made on the date hereof from Mezzanine Lender to Mezzanine Borrower. "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the Mezzanine Loan, as same may be amended, modified or restated from time to time. "MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii) during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year, 11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th) Loan Year, 13%. "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4. "MOODY'S" means Moody's Investors Service. "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments of Leases and Security Agreements, (ii) those certain Deeds of Trust, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security Agreements, each of even date herewith, from each Borrower to Lender (or deed trustee on behalf of Lender, as applicable), constituting a Lien on such Borrower's respective Property as Collateral for the Loan as same may be modified or amended from time to time. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which any of the Borrowers or any Affiliate has any liability, including contingent liability. "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which Operating Revenues exceed Operating Expenses (excluding Management Fees, interest, income 15 taxes, depreciation, amortization, FF&E reserves, and fees due to all Franchisors for such period). "NOTE" has the meaning set forth in Section 2.1. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrowers under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against any of the Borrowers, and the performance of all other terms, conditions and covenants under the Loan Documents. "OFAC" has the meaning set forth in Section 4.31. "O&M PLANS" has the meaning set forth in Section 5.7. "OPERATING BUDGET" means, collectively, for any period, the Borrowers' budgets setting forth the Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties for such period, which budgets have been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" means, for any period, without duplication, all costs and expenses of operating, maintaining and managing the Properties determined in accordance with GAAP, including, without limitation, Impositions (due and payable during the applicable period of determination), Insurance Premiums, repair and maintenance costs, Management Fees and costs, fees payable to all Franchisors, utilities, accounting, legal and other professional fees, fees relating to environmental and financial audits, wages, salaries, payroll taxes and benefits, business franchise taxes, tips and gratuities paid to employees and staff and other personnel expenses, costs and expenses related to operating and maintaining all guest rooms, restaurants (including inventory and supplies), retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, and all other "costs and expenses" as defined in the Uniform System; but excluding principal and interest payments on the Loan, fees and expenses of a non-operating nature and fees and expenses due and payable to or for the benefit of Lender under this Loan Agreement or any of the other Loan Documents (including, without limitation, all loan servicing fees and expenses, and expenses related to a Cap), expenses which, in accordance with GAAP, should be capitalized, any expense paid by a tenant that would otherwise be an Operating Expense, capital expenditures, tenant improvement allowances and leasing commissions, if any, asset management fees, any payment or expense for which each Borrower was or is to be reimbursed from proceeds of the Loan or insurance or by any third party, any fees or expenses paid to any partner or member of the Borrowers for services provided to any of the Borrowers and any non-cash charges such as depreciation and amortization. Operating Expenses shall not include federal, state or local income taxes or legal and other professional fees unrelated to the operation of the Properties. "OPERATING REVENUES" means, without duplication, all revenues and receipts of the Borrowers from operation of the Properties or otherwise arising in respect of the Properties 16 which are properly allocable to the Properties for the applicable period in accordance with GAAP, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants and bars (including without limitation, service charges for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, health club membership fees, food and beverage wholesale and retail sales, service charges, convention services, special events, audio-visual services, boat cruises, travel agency fees, internet booking fees, telephone charges, laundry services, vending machines and otherwise, all rents, revenues and receipts now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the possession, use or occupancy of all or any portion of the Properties or personalty located thereon, or rendering of service by any of the Borrowers or any operator or manager of the hotel or commercial space (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores and deposits securing reservations of such space (only to the extent such deposits are not required to be returned or refunded to the depositor)), proceeds from rental or business interruption insurance relating to business interruption or loss of income for the period in question and any other items of revenue which would be included in operating revenues under the Uniform System; but excluding proceeds from the sale of FF&E, abatements, reductions or refunds of real estate or personal property taxes relating to the Properties, dividends on insurance policies relating to the Properties, condemnation proceeds arising from a temporary taking of all or a part of any Properties, security and other deposits until they are forfeited by the depositor, advance rentals until they are earned, proceeds from a sale, financing or other disposition of the Properties or any part thereof or interest therein and other non-recurring revenues as determined by Lender, insurance proceeds (other than proceeds from rental or business interruption insurance), other condemnation proceeds, capital contributions or loans to any of the Borrowers, disbursements to any of the Borrowers from the Reserves, sales, use and occupancy taxes collected from customers or patrons of the Properties to be remitted to the applicable taxing authorities, and gratuities or service charges collected on behalf of and remitted to employees or contractors of the Properties. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. "PAYMENT DATE" means the first day of each calendar month occurring during the term of the Loan (or if such day is not a Business Day, the immediately succeeding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the other Liens of the Loan Documents in favor of Lender, (ii) the items shown in Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not yet due and payable or Liens arising after the date hereof which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case of Liens arising after the date hereof, statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business and discharged by the Borrowers by payment, bonding or otherwise within forty-five (45) days after the filing thereof or which are being contested in good faith in accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and customary purchase money financing of personal property and equipment leasing to the extent the same are 17 created in the ordinary course of business in accordance with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against real property which do not materially adversely affect (A) the ability of the Borrowers to pay any of their obligations to any Person as and when due, (B) the marketability of title to the Properties, (C) the fair market value of the Properties, or (D) the use or operation of the Properties as of the Closing Date and thereafter; (vii) rights of existing and future tenants, as tenants only, pursuant to the Leases; (viii) any other Lien to which Lender may expressly consent in writing; and (ix) Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. 18 "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5. "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6. "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General Partner and Member. "PROHIBITED PERSON" has the meaning set forth in Section 4.31. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT A, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the Borrowers and which shall be encumbered by and are more particularly described in the respective Mortgages: provided that, following a Release, "PROPERTIES" means each of the Properties that remain encumbered by the Mortgages as Collateral for the Loan. "PROPERTY CONDITION REPORT" means those certain property condition reports for the Properties as described on EXHIBIT J. "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties described on EXHIBIT G and any future Property Improvement Plans required to be implemented by the applicable Franchisor. "PROPERTY RELEASE" has the meaning set forth in Section 11.4. "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization; and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. 19 "RATING CRITERIA" with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" means all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties received by the Borrowers or any Related Person of the Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which any of the Borrowers or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE" has the meaning set forth in Section 11.4. "RELEASE DATE" has the meaning set forth in Section 11.4. "RELEASE PRICE" means an amount equal to one hundred twenty-five percent (125%) of the Allocated Loan Amount of the applicable Property. "RENT ROLL" has the meaning set forth in Section 3.1. "RENTS" has the meaning set forth in the Mortgages. "REPLACEMENTS" has the meaning set forth in Section 6.4. "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5. "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "RESERVES" means the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Document, including without limitation, the reserves established pursuant to Article VI. "RESTORATION" has the meaning set forth in Section 5.5. "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five percent (5%) of the Aggregate Allocated Loan amount of the applicable Property, not to exceed $500,000, per Property per occurrence. "REVPAR" means average room revenues per available room per day. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. 20 "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto; which payment amounts were calculated based upon a twenty-five (25) year amortization schedule at the Interest Rate. In the event that the amount of principal prepayments on the Loan from application of casualty insurance proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in the aggregate, from the Closing Date or from the date of the last re-amortization of the Loan under this sentence, Lender shall recalculate the Scheduled Mortgage Principal Payments based upon the then remaining principal amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE 2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto in its entirety. "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" means a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEE" has the meaning set forth in Section 2.11. "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the date of formation of the applicable Person in its respective jurisdiction of formation. "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period, (iii) a calculation of the Debt Service Coverage Ratio and the Debt Yield for the applicable period (which shall not be binding on Lender), and (iv) such other financial reports as the subject entity shall routinely and regularly prepare. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TIER 1 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT I. 21 "TIER 2 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT I. "TIER 3 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT I. "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart Title Insurance Company, as co-insurers, and/or such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title insurance pertaining to the Mortgages issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, (y) the failure to pay to any Franchisor any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT") and the continuance thereof beyond any applicable notice and grace period under such Franchise Agreement or the occurrence of one or more breaches or defaults (other than Franchise Payment Defaults) and the continuance thereof beyond all applicable notice and grace periods, if any, under such Franchise Agreements (or such other cure periods as may be provided by the applicable Franchisors in writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or more of the outstanding principal balance of the Loan; provided, however, no Uncured Franchise Default shall be deemed to have occurred under clause (x) above with respect to any Property following the voluntary or involuntary termination of the applicable Franchise Agreement if (a) within ten (10) Business Days of the termination of such Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)), the applicable Borrower delivers to Lender evidence reasonably satisfactory to Lender that such Borrower is diligently pursuing efforts to enter into a new Franchise Agreement with an Acceptable Franchisor for the applicable Property and such Borrower shall thereafter diligently and continuously pursue such efforts to enter into a new Franchise Agreement, (b) at the time of such termination no other Property shall be in operation without being subject to a Franchise Agreement, (c) the Allocated Loan Amount of the Property covered by such Franchise Agreement is not more than five percent (5%) of the outstanding principal balance of the Loan or such Property shall not be in operation for more than five (5) consecutive days without being subject to a Franchise Agreement, and (d) no Property shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. 22 "WORK" has the meaning set forth in Section 6.7. "WORK RESERVES" has the meaning set forth in Section 6.7. "ZONING REPORTS" means those certain zoning and site requirements summaries for the Properties as described on EXHIBIT K. SECTION 1.2 ACCOUNTING TERMS. For purposes of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any reference to any Person may include such Person's respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrowers contained herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to borrow from Lender, a loan in the original principal amount of $_________ (the "LOAN"). (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to Lender a Promissory Note, dated of even date herewith (as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the order of Lender, in the original principal amount of $_________. 23 (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be used to (i) refinance existing indebtedness; (ii) pay all recording fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable legal fees and expenses of counsel to Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) establish the Reserves required hereunder; and (iv) provide for general corporate purposes, including, without limitation, payment of transaction costs and expenses incurred by the Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrowers. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall bear interest at a rate per annum equal to _____ percent (__%) (the "INTEREST RATE"). (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is four percent (4%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT RATE"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in arrears. (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued 24 during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 RESERVED. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments of interest and principal on the Note as follows: (i) The Borrowers shall make a payment to Lender of interest only on the Closing Date for the period from and including the Closing Date through and including the last day of the calendar month in which the Closing occurs; and (ii) Commencing on August 1, 2004 and on each Payment Date thereafter through but not including the Maturity Date, the Borrowers shall make a payment of interest on the Loan for the prior calendar month, and in addition shall make a payment of principal on the Loan in an amount equal to the Scheduled Mortgage Principal Payment for such Payment Date. (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrowers on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to have satisfied their 25 obligations to make such payments. Upon the occurrence and during the continuance of an Event of Default, payments shall be applied to the Obligations in such order as Lender shall determine in its sole and absolute discretion. SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance with the Loan Documents, the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon, and all other sums then owing to Lender hereunder and under the Note, the Mortgages and the other Loan Documents, shall be due and payable on the Maturity Date. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or in part at any time, except as expressly set forth in this provision. On and after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part, without payment of Prepayment Consideration, provided that (i) the Borrowers shall provide to Lender not less than fifteen (15) days prior written notice of such prepayment, (ii) together with such prepayment the Borrowers also shall pay all accrued and unpaid interest and all other Obligations then due and owing, (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith the Borrowers also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to the end of such calendar month. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur prior to May 1 2009, on account of acceleration of the Loan (whether or not due to an Event of Default), or otherwise, then except only as expressly provided in this Loan Agreement or the other Loan Documents to the contrary, the Borrowers shall pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due as to a prepayment of the Loan in connection with (i) application of insurance or condemnation proceeds required by Lender pursuant to this Loan Agreement or the Mortgages in the absence of an Event of Default, (ii) Scheduled Mortgage Principal Payments. The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. (C) DEFINITIONS. The following terms shall have the meanings indicated: "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii) the Yield Maintenance Amount. "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if any, between (i) the present value on the date of prepayment (by acceleration or otherwise) of all future installments of principal and interest which the Borrowers would otherwise be required to pay under the Note from the date of such prepayment until the Maturity Date absent such prepayment, including the unpaid principal amount which might otherwise be due upon the 26 Maturity Date absent such prepayment, with such present value being determined by the use of a discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent Basis" pursuant to the standards and practices of the Securities Industry Association), on the date of such prepayment of the United States Treasury Security having the term to maturity closest to what otherwise would have been the remaining term hereof absent such prepayment and (ii) the principal balance of the Loan on the date of such prepayment. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrowers; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrowers' obligation to pay the Obligations. SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrowers shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 RESERVED. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths of one percent (.05%) per annum on the outstanding 27 principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrowers and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrowers be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF CROSS-COLLATERALIZATION. (A) Until repayment of the Indebtedness and the Crossed Indebtedness and satisfaction of all obligations under this Agreement and the Crossed Loan Agreement, each Borrower acknowledges and agrees (subject to Lender's election(s) at Lender's sole discretion from time to time pursuant to Section 2.12(G) below): (i) that the Properties shall secure not only the Loan but also the Crossed Loans, and that the Liens of the Loan Documents shall constitute Liens securing not only the Loan but also the Crossed Loans; (ii) that the Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured by such Crossed Properties; and (iii) that Lender would not make the Loan to the Borrowers or the loans constituting the Crossed Loans unless the Borrowers and the Crossed Borrowers granted liens on the Properties and, in addition, the Crossed Properties of the Crossed Borrowers to secure the payment of the Loan and the Crossed Loans. (B) Until the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, the Borrowers (i) shall have no right of subrogation with respect to the Crossed Loans and (ii) waive any right to enforce any remedy which Lender now has or may hereafter have against the Crossed Borrowers, any endorser or any guarantor of all or any part of the Crossed Loans or any other individual or entity, and the Borrowers waive any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of the Crossed Loans or any other liability of any of the Crossed Borrowers to Lender. Should any Borrower have the right, notwithstanding the foregoing, to exercise its subrogation rights, each Borrower hereby expressly and irrevocably (1) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that such Borrower may have to the payment in full in cash of the Loan and the Crossed Loans and (2) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Loan and the Crossed Loans are paid in full in cash. Each Borrower acknowledges and agrees that this subordination is intended to benefit Lender and shall not limit or otherwise affect any Borrower's liability hereunder or the enforceability of this Loan Agreement or the Crossed Loan Documents. (C) Each Borrower agrees that any and all claims of such Borrower against any of the Crossed Borrowers or any endorser or any guarantor of all or any part of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with respect to any obligations, liabilities or indebtedness now or hereafter owing by the Crossed Obligors, or any of them, to such Borrower, or otherwise existing or claimed to be owed or to exist on the part of any of the Crossed Obligors, or against any of their respective properties (collectively, the "CROSSED PARTY OBLIGATIONS") shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any right of any Borrower to ask, demand, sue for, take or receive any payment from any of the Crossed Obligors, all rights, liens and security interests of each Borrower, whether now or hereafter arising and howsoever existing, in and to 28 any assets of any of the Crossed Obligors shall be and are subordinated to the rights of Lender in those assets under the Loan Documents, the Crossed Loan Documents or otherwise, and no Borrower shall, until the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, (i) assert, collect, sue upon, or enforce all or any part of the Crossed Party Obligations; (ii) commence or join with any other creditors of any of the Crossed Obligors in commencing any bankruptcy, reorganization, receivership or insolvency proceeding against any of the Crossed Obligors; (iii) take, accept, ask for, sue for, receive, set off or demand any payments upon the Crossed Party Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to be created liens, security interests, mortgages, deeds of trust or pledges of or with respect to any of the assets of any of the Crossed Obligors in favor of or for the benefit of such Borrower. (D) If all or any part of the assets of any of the Crossed Obligors, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Crossed Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Crossed Obligor is dissolved or if substantially all of the assets of any such Crossed Obligor are sold, then, and in any such event (such events being herein referred to as an "CROSSED OBLIGOR INSOLVENCY EVENT"), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable to any Borrower upon or with respect to any Crossed Party Obligations shall be paid or delivered directly to the Lender for application on the Loan and the Crossed Loans, due or to become due, until such Loan and Crossed Loans shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by any Borrower upon or with respect to the Crossed Party Obligations after any Crossed Obligor Insolvency Event and prior to the payment in full and satisfaction of all of the Loan and Crossed Loans, such Borrower shall receive and hold the same in trust, as trustee, for the benefit of Lender and shall forthwith deliver the same to Lender in precisely the form received (except for the endorsement or assignment of such Borrower where necessary), for application to any of the Loan or Crossed Loans, due or not due, and, until so delivered, the same shall be held in trust by such Borrower as the property of Lender. If such Borrower fails to make any such endorsement or assignment to Lender, Lender or any of its officers or employees is irrevocably authorized to make the same. Each Borrower agrees that until the Loan and Crossed Loans have been paid in full (in cash) and satisfied, no Borrower will assign or transfer to any individual or entity (other than Lender) any claim such Borrower has or may have against any Crossed Obligor. (E) Subject to the provisions of Section 2.12(G), to the extent that any collection upon any of the Loan or the Crossed Loans is made by Lender from one of the Crossed Borrowers or the Crossed Properties or other assets of the Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all other Crossed Loans Collections then previously or concurrently made by such Crossed Borrower, exceeds the amount which otherwise would have been collected from such Crossed Borrower if each Borrower and each Crossed Borrower had paid the portion of the Loan and Crossed Loans satisfied by such Crossed Loans Collection in the same proportion as such Crossed Borrower's Allocable Amount (as defined below) (as determined immediately prior to such Crossed Loans Collection) bore to the aggregate Allocable Amounts of each Borrower and each Crossed Borrower as determined immediately prior to the making of 29 such Crossed Loans Collection, then, following payment in full in cash of the entire Loan and Crossed Loans, such Crossed Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each Borrower and each of the other Crossed Borrowers for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Crossed Loans Collection. As of any date of determination, the "ALLOCABLE AMOUNT" of any Borrower or any Crossed Borrower shall be equal to the maximum amount of the claim which could then be recovered from such Borrower or Crossed Borrower under the Loan Documents and Crossed Loan Documents without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. The foregoing provision shall be for the benefit of each of the Crossed Borrowers and Lender, but shall be subject to modification as provided in Section 2.12(G) below and to amendment by agreement of the Borrowers and Lender, in each case without necessity of any agreement, acknowledgment or approval of any Crossed Borrower or any notice to any Crossed Borrower. Section 2.12(E) of each of the Crossed Loan Agreements contains provisions similar to this Section 2.12(E) for the benefit of Lender and (subject to the terms thereof) the Crossed Borrowers. This Section 2.12(E) and Section 2.12(E) of each of the Crossed Loan Agreements are intended only to define the relative rights of the Borrowers and Crossed Borrowers, and nothing set forth in this Section 2.12(E) or in Section 2.12(E) of each of the Crossed Loan Agreements is intended to or shall impair the liens and security interests of the Loan Documents and the Crossed Loan Documents or the obligations of the Borrowers and the Crossed Borrowers thereunder. Each Borrower acknowledges that the rights of contribution and indemnification under this Section 2.12(E) and under Section 2.12(E) of the Crossed Loan Agreements constitute assets of the Borrowers or Crossed Borrowers to which such contribution and indemnification is owing, and any such right of contribution and indemnification owing to any Borrower under Section 2.12(E) of any of the Crossed Loan Agreements shall constitute additional Crossed Party Obligations for all purposes under this Section 2.12. (F) Each Borrower hereby consents and agrees to each of the following, and agrees that such Borrower's obligations under this Loan Agreement and the other Loan Documents and the Liens created under this Loan Agreement and the other Loan Documents securing the Loan and the Crossed Loans shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) that such Borrower might otherwise have as a result of or in connection with any of the following: (i) Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Crossed Loans, the Crossed Loan Documents, or other document, instrument, contract or understanding between the Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed Loans or any failure of Lender to notify such Borrower of any such action. (ii) Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to the Crossed Borrowers. 30 (iii) The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of any of the Crossed Borrowers or any other party at any time liable for the payment of all or part of the Crossed Loans; or any dissolution of any of the Crossed Borrowers, or any sale, lease or transfer of any or all of the assets of any of the Crossed Borrowers, or any changes in the shareholders, partners or members of any of the Crossed Borrowers; or any reorganization of any of the Crossed Borrowers. (iv) The invalidity, illegality or unenforceability of all or any part of the Crossed Loans, or any document or agreement executed in connection therewith, for any reason whatsoever, including without limitation the fact that (A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law, (B) the act of creating the Crossed Loans or any part thereof is ultra vires, (C) the officers or representatives executing the Crossed Loan Documents or otherwise creating the Crossed Loans acted in excess of their authority, (D) the Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Crossed Loans wholly or partially uncollectible from the Crossed Borrowers, (F) the creation, performance or repayment of the Crossed Loans (or the execution, delivery and performance of any document or instrument representing part of the Crossed Loans or executed in connection with the Crossed Loans, or given to secure the repayment of the Crossed Loans) is illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that each Borrower shall remain liable hereon regardless of whether the Crossed Borrowers or any other person be found not liable on the Crossed Loans or any part thereof for any reason. (v) Any full or partial release of the liability of the Crossed Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Crossed Loans, or any part thereof, it being recognized, acknowledged and agreed by each Borrower that such Borrower has not been induced to enter into this Loan Agreement or the other Loan Documents on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Loan or such Borrower's obligations under the Loan Agreement or the other Loan Documents, or that Lender will look to other parties to pay or perform the Crossed Loans. (vi) The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Crossed Loans. (vii) Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Crossed Loans. (viii) The failure of or refusal of Lender or any other party acting on behalf of Lender to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (A) to take or prosecute any action for the collection of any of the Crossed Loans, (B) to foreclose, or initiate 31 any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (C) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Crossed Loans. (ix) The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Crossed Loans, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by each Borrower that it is not entering into this Loan Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Crossed Loans. (x) Any payment by any of the Crossed Borrowers to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to any of the Crossed Borrowers or someone else. (xi) Any other action taken or omitted to be taken with respect to the Crossed Loan Documents, the Crossed Loans, or the security and collateral therefor. (G) Notwithstanding anything to the contrary set forth in this Loan Agreement, Lender may, at its sole option and in its sole discretion, from time to time (one or more times) deliver written notice to the Borrowers stating that this Loan Agreement, the Mortgages and the other Loan Documents shall no longer secure one or more (at Lender's sole election) of the Crossed Loans (each a "CROSS RELEASE NOTICe"), whereupon (i) this Loan Agreement and the other Loan Documents shall no longer secure any of the Crossed Loans for which a Cross Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and, collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side Agreement and other Crossed Loan Documents executed and delivered by the Excluded Borrowers with respect to any Excluded Loan are herein referred to as the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT" and "EXCLUDED LOAN DOCUMENTS", respectively, and each Crossed Property encumbered by the Excluded Loan Documents is herein referred to as an "EXCLUDED Property"), (ii) each Cross Guaranty of the Loan executed by each Excluded Borrower, together with each Cross Guaranty of an Excluded Loan executed by the Borrowers (herein collectively referred to as the "EXCLUDED GUARANTIES") shall be deemed automatically terminated and of no further force or effect, (iii) each reference herein and in the other Loan Documents to the "Crossed Loans" shall be deemed to exclude the Excluded Loans, (iv) each reference herein and in the other Loan Documents to the "Crossed Loan Agreements", "Crossed Mortgages", "Crossed Loan Documents", "Crossed Properties", "Cross Side Agreements" and "Cross Guaranties" shall be deemed to exclude the Excluded Loan Agreement, the Excluded Mortgages, the Excluded Loan Documents, the Excluded Property, the Excluded Side Agreements and the Excluded Guaranties, respectively, (v) each reference herein and in the other Loan Documents to the "Crossed Borrowers" and the "Crossed Obligors" shall be deemed to exclude each Excluded Borrower, (vi) the provisions of Section 2.12(E) of this Loan Agreement shall not apply to any Crossed Loans Collection from any Excluded Borrower or its Excluded Property and the Borrowers shall have no obligation or liability on account thereof; and (vii) Borrowers shall no longer be 32 beneficiaries of the covenants and agreements set forth in Section 2.12(E) of any Excluded Loan Agreement, and the Borrowers shall have no rights or claims on account of any contribution or indemnification obligations of any Excluded Borrower under Section 2.12(E) of any Excluded Loan Agreement. In addition to and without limiting the foregoing, the Borrowers hereby agree to fully cooperate with Lender, if Lender is considering the termination of the cross collateralization and cross default of the Loan and Loan Documents with any of the Crossed Loans, including, but not limited to (x) amending this Loan Agreement and the other Loan Documents as may be required by Lender to effectuate such termination of the cross collateralization and cross default provisions thereof, and (y) updating and/or endorsing the title insurance policies (at Lender's cost as to additional premium charges, if any) to reflect the continuation of the first priority lien of this Loan Agreement. (H) In the event the Loan is repaid or defeased in full in accordance with the provisions of this Loan Agreement and the other Loan Documents, then provided no Event of Default then exists hereunder, and no "Event of Default" (as defined in any of the Other Crossed Loan Agreements) exists under any of the Other Crossed Loan Documents, the cross collateralization and cross default of the Loan and Loan Documents with the Other Crossed Loans shall terminate and all the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan and the provisions of Section 2.12(G) above shall become automatically applicable with respect thereto. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to fund the Loan are subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrowers and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender a certificate duly executed by the Borrowers stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. 33 (B) DEPOSITS. The deposits required herein, including without limitation, the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrowers' option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower Party and all other Persons executing any agreement on behalf of any Borrower Party shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of each Borrower by the chief financial officer (or similar officer of the Borrowers) stating that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrowers or the projected cash flow of the Borrowers or the Properties, in each case taken as a whole, has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, specifying such change in detail), and that, to the Borrowers' Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operations of the Borrowers and the Properties, in each case taken as a whole, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrowers' Knowledge, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Morris, Manning & Martin, LLP or other legal counsel for the Borrowers satisfactory to Lender, written legal opinions, each in form and substance acceptable to Lender, as to such matters as Lender shall request, including opinions to the effect that (i) each of the Borrower Parties is duly formed, validly existing, and in good standing in its state of organization and, in the case of each Borrower, in each state where its Property is located, (ii) this Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Deposit Account Agreement and Cash Management Agreement have been duly authorized, executed and delivered by Borrower and Manager and are enforceable in accordance with their terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) no Borrower, Member or General Partner would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrowers' local counsel in each state where the Properties are located as to the enforceability of, and the creation and perfection of Liens under, the Mortgages and the Assignments of Leases 34 and such other matters as Lender may reasonably request; (b) [intentionally omitted]; (c) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for each Borrower that is a single member limited liability company formed under the laws of the State of Delaware that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous written consent of the board of directors of Member including the Independent Directors, or the unanimous prior written consent of the board of managers' of each Borrower, including the Independent Directors') would be required for a voluntary bankruptcy filing by each such Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors) would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law the bankruptcy or dissolution of Member would not cause the dissolution of any of the Borrowers and the bankruptcy or dissolution of the sole shareholder or member would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of any of the Borrowers and creditors of Guarantor shall have no legal or equitable remedies with respect to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of each Borrower and Member; and (d) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received and approved pro forma Title Policies for the Mortgages, and as of the Closing, each Title Company shall be irrevocably committed and prepared immediately to issue the Title Policies or binding commitments. The Title Policies shall be in form and substance satisfactory to Lender. Without limitation, each Title Policy shall be issued on an ALTA form acceptable to Lender by each Title Company or if an ALTA form is not available in the applicable jurisdiction, another form acceptable to Lender, together with such reinsurance and direct access agreements as Lender may require, insuring that the Mortgages are valid first and prior enforceable liens on each Borrower's fee simple interest or ground leasehold interest, as the case may be, in the applicable Property (including any easements appurtenant thereto) subject only to such exceptions to coverage as are acceptable to Lender, including the Permitted Exceptions. Each Title Policy shall contain such endorsements as Lender may require (to the extent available in the state where the Properties is located) in form acceptable to Lender, including deletion of the creditors' rights exception and affirmative endorsement coverage for creditors' rights risks. (G) SURVEY. Lender shall have received a survey of each of the Properties, certified to Lender and its successors, assigns and designees and to each Title Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or Lender shall have received both (x) a "no change" affidavit from each Borrower with respect to such Borrower's most recent Survey sufficient to cause the Title Company to provide current survey coverage to Lender in the applicable Title Policy without exception for matters that would be revealed by a current and accurate survey of the applicable Property, except for matters specifically shown on such most recent Survey, and (y) a reliance letter (to the extent any such surveys are not currently addressed to Lender) in form and substance satisfactory to Lender, permitting Lender to rely on the Survey (and any certification thereof) as if originally addressed and certified to Lender. Each Survey shall contain the minimum detail for land surveys as most recently adopted by ALTA/ASCM, 35 shall comply with Lender's survey requirements and shall contain Lender's standard form certification, and shall show no state of facts or conditions reasonably objectionable to Lender. (H) ZONING. On or before the Closing Date, Lender shall have received evidence reasonably satisfactory to Lender as to the zoning and subdivision compliance of each of the Properties. (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business (including without limitation, each state in which the Properties are located for the applicable Borrower(s) and, to the extent required by law, Member and General Partner). Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to Lender for each Borrower Party (including for Guarantor) and for the Properties. If any such statements are not available for the Properties, then the Borrowers shall provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year. (M) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. 36 (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the applicable Borrower. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements (including any Property Improvement Plan) and Franchisor Letters for each of the Properties duly executed by the applicable Franchisors. (O) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL") in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases, and the amount of security deposit being held by the Borrowers under each Material Lease, if any. (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases, as amended. (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender shall have received copies of the final, unconditional certificates of occupancy issued with respect to each of the Properties, together with all other applicable licenses (including, without limitation, each liquor license and beer permit), permits and approvals required for each Borrower to own, use, occupy, operate and maintain each of the Properties as a hotel. (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date, Lender shall have received copies of certificates of insurance (dated not more than twenty (20) days prior to the Closing Date) regarding insurance required to be maintained under this Loan Agreement and the other Loan Documents, together with endorsements satisfactory to Lender naming Lender as an additional insured and loss payee, as required by this Loan Agreement, under such policies. In addition, as to any insurance matters arising under Environmental Laws or pertaining to any environmental insurance that any of the Borrowers has with respect to any Property, the same shall be endorsed to Lender as required by this Loan Agreement and shall name Lender as an insured, additional insured and/or loss payee, as applicable. (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to each of the Properties, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender shall have received a property condition report for each of the Properties, which shall be prepared by an engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion. Each such report shall set forth any items of deferred maintenance at the applicable Property. (U) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of each of the Properties from a state certified appraiser engaged by 37 Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search reports with respect to the Borrowers, Guarantor, Managers, General Partner and Member, all dated not more than thirty (30) days prior to the Closing Date. (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days prior to the Closing Date, Lender shall have received payoff demand letters and wiring instructions from each lender or other obligee of any existing indebtedness which is required to be repaid pursuant to this Loan Agreement. (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (Z) OTHER REVIEW. Lender shall have completed all other review of the Borrower Parties, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrower Parties shall have satisfied such other reasonable criteria as Lender may reasonably specify. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, each Borrower represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions 38 in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrowers, General Partners and Members. SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower Party of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower Party; (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower Party; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower Party or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower Party or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or imposition of any material Lien (other than the Lien of the Loan Documents) upon the Properties or assets of any Borrower Party; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower Party, which approvals or consents as set forth on SCHEDULE 4.2 have been obtained on or before the dates required under such material Contractual Obligation, but in no event later than the Closing Date. (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower Party that is a party thereto, enforceable against each of the Borrower Parties, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No Borrower Party has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower Party has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the Borrowers, their Affiliates and the Properties which have been furnished by or on behalf of the Borrowers to 39 Lender pursuant to this Loan Agreement present fairly the financial condition of the Persons covered thereby as of the dates thereof and the results of their operations for the periods then ended, and, to the Borrowers' Knowledge after due inquiry, have been prepared in accordance with GAAP consistently applied (except as disclosed therein). Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements. SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the Borrowers shall have no outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee simple title to the Properties, free and clear of all Liens except for the Permitted Encumbrances. The Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Borrowers as permitted hereunder), subject only to the Permitted Encumbrances. The Mortgages, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) a valid, perfected first lien on each of the Properties, subject only to the Permitted Encumbrances, and (ii) perfected first priority security interests in and to, and perfected collateral assignments of, all personalty (including the Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. Lender will have a perfected first priority security interest in and to the FF&E owned by the Borrowers, if any, not located at the Properties. To the Borrowers' Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual Knowledge of the Borrowers, none is threatened. Except as set forth on SCHEDULE 4.5(A), no Person has any option or other right to purchase all or any portion of any of the Properties or any interest therein. To the Borrowers' Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties which are or will be liens prior to, or equal or coordinate with, the lien of any of the Mortgages. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgages and this Loan Agreement, materially and adversely affect the value of any of the Properties, impair the use or operations of the Properties or impair the Borrowers' ability to pay its obligations in a timely manner. SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrowers' Knowledge, there are no illegal activities relating to controlled substances on any of the Properties. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, all material permits, licenses and certificates for the lawful use, occupancy and operation of each component of each of the Properties in the manner in which it 40 is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties delivered to Lender, in the event that all or any part of the Improvements located on any Property is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrowers' Knowledge, no legal proceedings are pending or threatened with respect to the zoning of any Property. To the Borrowers' Knowledge, except as set forth in the Title Policies and/or the Surveys, neither the zoning nor any other right to construct, use or operate any Property is in any way dependent upon or related to any real estate other than such Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Borrowers with respect to any Property without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and complete copies (in all material respects) of all (i) Leases for more than five hundred (500) square feet of space at any Property and (ii) Material Agreements affecting the operation and management of the Properties, and such Leases and Material Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Except for the rights of each of the current Managers pursuant to the existing Management Agreements, no Person has any right or obligation to manage any of the Properties or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the Properties, or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, none of the Properties are subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrowers' Knowledge, (i) the Material Leases are in full force and effect; (ii) the Borrowers have not given any notice of default to any tenant under any Material Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Material Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrowers, threatened) against the Borrowers by any tenant or former tenant. No rental in 41 excess of one month's rent has been prepaid under any of the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. (C) NO RESIDENTIAL UNITS. There are no residential units in any of the Properties and, to each Borrower's Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Properties for dwelling purposes other than on a transient basis. (D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true and complete copy of each of the Management Agreements to which they are a party that will be in effect on the Closing Date, and such Management Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. The Management Agreements are in full force and effect and no default by any of the Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have delivered to Lender a true and complete copy of each of the Franchise Agreements to which they are a party, and such Franchise Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material default by the Borrowers, Manager or the applicable Franchisor exists thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the aggregate, do not and will not have a Material Adverse Effect. Except for the Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no other property improvement plans or similar capital improvement plans or obligations required by any Franchisor pursuant to any Franchise Agreement, in effect for any of the Properties. SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as set forth in the Property Condition Reports for the Properties delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in good condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrowers are not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of each of the Properties (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of each of the Properties as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of each of the Properties as now used or presently contemplated. Except as may be shown on the applicable Survey, to the Borrowers' Knowledge no part of any of the Properties is within a flood plain and none of the Improvements create encroachments over, across or upon the Properties' boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each of the Properties for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use 42 by the public. To the Borrowers' Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at any of the Properties is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, there are no judgments outstanding against any Borrower Party, or affecting any of the Properties or any property of any Borrower, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the Borrowers' Knowledge, threatened against any Borrower Party that could reasonably be expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each Primary Borrower Party required to be filed have been timely filed (or each Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon such Person and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrowers' Knowledge, there is not presently pending any special assessment against any of the Properties or any part thereof. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Primary Borrower Parties is a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no Primary Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of any Primary Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or 43 by any of the Loan Documents. The Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from any Borrower Parties' actions. SECTION 4.16 INTENTIONALLY DELETED. SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the aggregate fair saleable value of the Borrowers' assets exceed and will, immediately following the making of the Loan, exceed the Borrowers' total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The aggregate fair saleable value of the Borrowers' assets is and will, immediately following the making of the Loan, be greater than the Borrowers' probable total liabilities, including the maximum amount of their Contingent Obligations on their debts as such debts become absolute and matured. Each Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond their ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrowers and the amounts to be payable on or in respect of obligations of the Borrowers). SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrowers that has had or could reasonably be expected to have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrowers. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrowers or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate description of all policies of insurance for each Borrower that are in effect as of the Closing Date. No notice of cancellation has been received with respect to such policies, and, to each Borrower's Knowledge, the Borrowers are in compliance with all conditions contained in such policies. 44 SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1) or more parcels which constitute separate tax lots. No part of any of the Properties is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lots or parcels comprising any of the Properties. SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person (other than the Beverage Companies), or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including any Property) is property of the estate, in any voluntary or involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or other similar law now or hereafter in effect. No Borrower Party and no property of any of them is under the possession or control of a receiver, trustee or other custodian. No Borrower Party has made any assignment for the benefit of creditors. No such assignment or bankruptcy or similar case or proceeding is now contemplated. SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to Lender in writing herein or in any of the Loan Documents, no Default exists. SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrowers have assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers are not and will not be subject to state statutes applicable to the Borrowers' regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining agreement. SECTION 4.29 RESERVED. SECTION 4.30 RESERVED. 45 SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective officers, directors, partners, members, Affiliates or, to the knowledge of the Borrowers, shareholders is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED PERSON"). ARTICLE V COVENANTS OF BORROWER PARTIES The Borrowers covenant and agree that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrowers shall perform and comply with all covenants in this Article V applicable to such Person. SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrowers (on a consolidated basis), and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of their Financial Statements for such year to Lender. All such Financial Statements shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information for such calendar year. The annual Financial Statements for the Borrowers (on a consolidated basis) and Guarantor shall also be accompanied by a certification executed by the entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days after the end of each calendar quarter, the Borrowers on a consolidated basis (other than with respect to income statements, which shall be on an individual property basis) shall provide copies of their Financial Statements for such quarter to Lender, together with a certification executed on behalf of each of the Borrowers by their respective chief executive officers or chief financial officers (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. 46 (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after the end of each calendar year, each Borrower shall provide to Lender a certified Rent Roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after the end of each calendar year, each Borrower shall also provide to Lender (a) a schedule of any retail Material Leases that expired during such calendar year and a schedule of retail Material Leases scheduled to expire within the next calendar year and (b) to the extent the Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar year. Within ninety (90) days after the end of each calendar year, each Borrower shall provide to Lender a statement of income and expenses for all retail space at each of the Properties owned and operated by the Borrowers and, to the extent provided to the Borrowers and not subject to confidentiality restrictions, sales reports for retail tenants for such year. (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, each Borrower shall provide, or cause Manager to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for each of the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly, and year to date operating statements prepared for such calendar month and for the trailing twelve (12) month period then ended, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of each of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a detailed explanation for any material deviations from budget) and setting forth that all disbursements and/or withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E Reserve have been made with respect to items of Capital Improvement only (as opposed to items that, in accordance with GAAP, would be included as an Operating Expense); (e) monthly and year to date detailed reports of Operating Expenses for each of the Properties, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement) for which Lender has approved a disbursement from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently available "OSI", or similar quality index, scores (including detailed information regarding criteria and thresholds); (g) prior to Securitization of the Loan, market segmentation reports for the trailing twelve (12) month period for each of the Properties; and (h) a report setting forth (i) the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has continued beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the original Aggregate Allocated Loan Amount represented by such Properties), (iii) a summary 47 report establishing that the Borrowers are diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. All of the above statements, reports and information shall be provided to Lender by email in Microsoft Excel format or other spreadsheet format reasonably acceptable to Lender (in the case of any statements, reports or information provided by third parties that are not Affiliates of the Borrowers, to the extent same are available in such format). Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of such Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to Lender such further documents and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice to the Borrowers. (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender by or on behalf of the Borrowers or Guarantor under this Section, the Borrowers or Guarantor also shall deliver to Lender a certification to Lender, executed on behalf of the Borrowers or Guarantor by their respective chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of the Borrowers, Guarantor and/or the Properties for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating (a) that, to their Knowledge after due inquiry, there does not exist any Default or Event of Default under the Loan Documents (or if any exists, specifying 48 the same in detail), and (b) the Borrowers and Guarantor have complied with the applicable reporting requirements of this Section 5.1. (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and that of the Guarantor ends on December 31, and agrees that no change shall be made to each such fiscal year, without Lender's prior written consent. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business operations of such Borrower made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, each Borrower shall deliver to Lender a copy of its Federal income tax returns (or the return of the applicable Person into which such Borrower's Federal income tax return is consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of each calendar year, each Borrower shall deliver to Lender for its review for its Property a proposed Operating Budget and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap Event or Event of Default exists, the Borrowers may make changes to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Borrower, provided no such modification (together with all prior modifications taken as a whole) shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without Lender's prior written approval, which approval shall not be unreasonably withheld; provided, however, notwithstanding the foregoing during a Cash Trap Event, increases to the Operating Budget for any Property (not to exceed ten percent (10%) of the Operating Budget for such Property as a whole) will be permitted without Lender's consent for actual verifiable increases in utilities, water and sewer assessments and charges and real property taxes for the applicable Property over the amounts therefor set forth in the Operating Budget for such Property for the prior period. Notice of any modifications to the Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating Budget shall identify and set forth each Borrower's reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and the Borrowers shall promptly amend and resubmit for approval revised budgets or plans, as applicable, making such changes as are necessary to comply with the reasonable requirements of Lender. Until any such budget or plan for any year requiring Lender's approval has been approved or deemed approved, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is 49 approved or deemed approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. (E) MATERIAL NOTICES. (i) The Borrowers shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of any Borrower, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrowers shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plan received from a Franchisor related to such Borrower's Property. (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining knowledge of any of the following events or conditions, such Borrower shall deliver a certificate executed on its behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action such Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrowers or any of the Properties not previously disclosed in writing by the Borrowers to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrowers or the Properties which, in each case, if adversely determined would reasonably be expected to have a 50 Material Adverse Effect, the Borrowers will give notice thereof to Lender and, upon request from Lender, provide such other information as may be reasonably available to them to enable Lender and its counsel to evaluate such matter. (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Borrowers, the Borrowers will deliver certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Borrowers and all material insurance coverage planned to be maintained by the Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver such other information and data with respect to such Person and its Affiliates or the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full force and effect their existence as a limited partnership, limited liability company, or corporation, as the case may be, and all rights and franchises material to its business, including their qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, each Borrower and, to the extent required by applicable law, General Partner and Member, shall at all times be qualified to do business in each of the states where the Properties are located. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) Except for those matters being contested pursuant to clause (B) below, the Borrowers will pay (i) all Impositions; (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrowers on their business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrowers shall not be required to pay, discharge or remove any Imposition or Claim relating to a Property so long as the Borrowers contest in good faith such Imposition, Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Property or any portion thereof, and so long as: (i) no Event of Default shall have occurred and be continuing, (ii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have given Lender prior written notice of their intent to contest said Imposition or Claim; (iii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have deposited with Lender (or with a court of competent jurisdiction or other appropriate body reasonably approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Claim then remaining unpaid, and (y) all interest, penalties, costs 51 and charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss of any interest in the applicable Property or any part thereof arises, in Lender's reasonable judgment, during the pendency of such contest; (v) such contest does not, in Lender's reasonable determination, have a Material Adverse Effect; and (vi) such contest is based on bona fide, material, and reasonable claims or defenses. Any such contest shall be prosecuted with due diligence, and the Borrowers shall promptly pay the amount of such Imposition or Claim as finally determined, together with all interest and penalties payable in connection therewith. Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture of the applicable Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Claim for which a deposit was made shall be promptly repaid to the Borrowers unless an Event of Default shall have occurred, in which case said surplus may be retained by Lender to be applied to the Obligations. Notwithstanding any provision of this Section to the contrary, the Borrowers shall pay any Imposition or Claim which they might otherwise be entitled to contest if an Event of Default shall occur and be continuing, or if, in the reasonable determination of Lender, the applicable Property is in danger of being forfeited or foreclosed. If the Borrowers refuse to pay any such Imposition or Claim, Lender may (but shall not be obligated to) make such payment and the Borrowers shall reimburse Lender on demand for all such advances. SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrowers will continuously maintain the following described policies of insurance on each of the respective Properties without cost to Lender (the "INSURANCE POLICIES"): (i) Property insurance against loss and damage by all risks of physical loss or damage, including fire, sprinkler leakage, windstorm, hurricane, terrorism, and other risks covered by the so-called extended coverage endorsement covering the Improvements and personal property in amounts not less than the full insurable replacement value of all Improvements (less building foundations and footings) and personal property from time to time on the Properties and without sublimits, and bearing a replacement cost agreed-amount endorsement; (ii) Commercial general liability insurance, including death, bodily injury, innkeeper legal liability and broad form property damage coverage with a combined single limit in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate for any policy year; (iii) If any of the Properties are in an area prone to geological phenomena, including, but not limited to, sinkholes, mine subsidence or earthquakes, insurance covering such risks in an amount equal to 100% of the full replacement cost of all improvements (without any deductions for depreciation) and with a maximum permissible deductible equal to the lesser of $25,000 or 10% of the face value of the policy; (iv) For each Property located in whole or in part in a federally designated "special flood hazard area", flood insurance in the maximum available amount; 52 (v) An umbrella excess liability policy with a limit of not less than Twenty Million Dollars ($20,000,000) over primary insurance, which policy shall include coverage for so-called assumed and contractual liability coverage and automobile liability coverage, and coverage for safeguarding of personalty and shall also include such additional coverages and insured risks which are acceptable to Lender; (vi) Business interruption and/or rent loss insurance with an aggregate limit equal to at least the gross income from the Properties for an indemnity period commencing on the date of such casualty and ending at least six (6) months after completion of the Restoration (such amount being adjusted annually); (vii) Crime protection insurance covering all employees with access to funds and located in Guarantor's corporate offices with a limit of not less than One Million Dollars ($1,000,000) and with the same coverages and deductibles as currently in place at the Properties; (viii) Steam boiler, machinery and pressurized vessel insurance insuring against breakdown or explosion of such equipment on a replacement cost value basis, which shall not contain any exclusions for testing procedures; (ix) Worker's Compensation Insurance in statutory amounts, if any, at all times; (x) Insurance against loss or damage from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), in an amount at least equal to the Aggregate Allocated Loan Amount; (xi) During any period of construction, repair or restoration, builder's "all risk" insurance in an amount equal to not less than the full insurable value of the Properties (excluding building foundations and footings) against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may reasonably request; (xii) If the Properties are or become a "non-conforming use" under applicable zoning and building ordinances, or other requirements of the applicable Governmental Authority, law or ordinance coverage to compensate for the cost of demolition and the increased cost of construction, if available; (xiii) If the Borrowers, Manager or any of their respective Affiliates holds a liquor license for the Properties, liquor liability insurance (including "dram shop" liability) in an amount not less than $1,000,000 for each common cause and $3,000,000 in the aggregate; provided that if such liquor license is held by any tenant under a Lease, the Borrowers shall cause such tenant to cause liquor liability insurance in an amount not less than the limits set forth above to be carried in such tenant's name, and shall include the Borrowers and Lender as additional insureds thereunder; 53 (xiv) If reasonably required by Lender as a result of the release, disposal or existence of any Hazardous Materials on or about any Property after the date hereof (or as to which Lender obtains knowledge after the date hereof) or if such insurance is then customarily required by institutional lenders for securitized loans, environmental insurance, including mold coverage, in form and with coverages (including business interruption coverage) reasonably satisfactory to Lender; provided, however, without limiting or affecting Lender's right to require such environmental insurance with respect to any other Properties after the date hereof, Lender acknowledges that, as of the date hereof, environmental insurance shall only be required with respect to the Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford, Connecticut; (xv) Fiduciary liability insurance and directors and officers liability insurance ("D&O INSURANCE") with coverages at levels in effect as of the Closing Date; (xvi) Insurance against acts of terrorism, or insurance policies without an exclusion for damages resulting from acts of terrorism on terms consistent with the commercial property insurance policies required under subsection (i), (ii), (v) and (vi) above; (xvii) Such other insurance as may from time to time be reasonably required by Lender and which is then customarily required by institutional lenders for securitized loans secured by similar properties similarly situated, against other insurable hazards, including, but not limited to, malicious mischief, vandalism, windstorm and or earthquake, due regard to be given to the size and type of the Properties, Improvements, fixtures and equipment and their location, construction and use. Additionally, the Borrowers shall carry such insurance coverage as Lender may from time to time require if the failure to carry such insurance would result in a downgrade, qualification or withdrawal of any class of securities issued in connection with a Securitization. All Insurance Policies shall be in content (including, without limitation, endorsements or exclusions, if any), form, and amounts, and issued by companies, satisfactory to Lender from time to time and shall name Lender and its successors and assignees as their interests may appear as (x) an "additional insured" for each of the liability policies under this Section 5.4 hereof, and (y) a "mortgagee" for each of the property and casualty policies under this Section hereof, and shall (except for Worker's Compensation Insurance) contain a waiver of subrogation clause reasonably acceptable to Lender. Other than with respect to D&O Insurance, an insurance company shall not be satisfactory unless such insurance company (a) is licensed or authorized to issue insurance in the State where the applicable Property is located and (b) has a claims paying ability rating by the Rating Agencies of AA- (or its equivalent). Notwithstanding the foregoing, a carrier which does not meet the foregoing ratings requirement shall nevertheless be deemed acceptable hereunder provided that such carrier is reasonably acceptable to Lender and the Borrowers shall obtain and deliver to Lender a Rating Confirmation with respect to such carrier from each of the Rating Agencies, provided, however, that: (a) if any insurance coverage required under this Section 5.4 is maintained by a syndicate of insurers, the preceding ratings requirements shall be deemed satisfied (without any required Rating Confirmation) as long as at least seventy five percent (75%) of the coverage (if there are four or fewer members of the syndicate) or at least sixty percent (60%) of the coverage (if there are five or more members of the syndicate) is maintained with carriers meeting the claims-paying ability ratings requirements 54 by S&P and Moody's (if applicable) set forth above and all carriers in such syndicate have a claims-paying ability rating by S&P of not less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier providing the insurance described in clause (ii) above, so long as such carrier maintains a claims paying ability of not less than A- by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby) and (c) until the expiration of the current term of the applicable policies, Lender hereby approves Landmark American as the carrier providing the insurance described in clauses (i), (iv) and (vi) above (covering losses over the first $25,000,000 of coverage), so long as thereafter such carrier or any other carrier providing the above coverages maintains a claims paying ability of not less than A by S&P (and the equivalent from each of the other Rating Agencies to the extent rated thereby). All Insurance Policies under Sections 5.4 (i), (iv), (vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438 BFU NS), or their equivalents (such endorsements shall entitle Lender to collect any and all proceeds payable under all such insurance, with the insurance company waiving any claim or defense against Lender for premium payment, deductible, self-insured retention or claims reporting provisions). All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Lender without ten (10) days' advance written notice to Lender. The Borrowers may obtain any insurance required by this Section through blanket policies; provided, however, that such blanket policies shall separately set forth the amount of insurance in force with respect to the Properties (which shall not be reduced by reason of events occurring on property other than the Properties) and shall afford all the protections to Lender as are required under this Section. Except as may be expressly provided above, all policies of insurance required hereunder shall contain no annual aggregate limit of liability, other than with respect to liability insurance. If a blanket policy is issued, a certified copy of said policy shall be furnished, together with a certificate indicating that Lender is an additional insured (and, if applicable, loss payee) under such policy in the designated amount. The Borrowers will deliver duplicate originals of all Insurance Policies, premium prepaid through the current expiration dates of such Insurance Policies, to Lender and, in case of Insurance Policies about to expire, the Borrowers will deliver duplicate originals of replacement policies satisfying the requirements hereof to Lender not less than ten (10) days prior to the date of expiration; provided, however, if such replacement policy is not yet available, the Borrowers shall provide Lender with an insurance certificate executed by the insurer or its authorized agent evidencing that the insurance required hereunder is being maintained under such policy, which certificate shall be acceptable to Lender on an interim basis until the duplicate original of the policy is available. The Borrowers shall furnish Lender receipts for the payment of premiums on such insurance policies or other evidence of such payment reasonably satisfactory to Lender in the event that such premiums have not been paid by Lender pursuant to the Loan Agreement. The requirements of this Section 5.4 shall apply to any separate policies of insurance taken out by the Borrowers concurrent in form or contributing in the event of loss with the Insurance Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure to act or negligence of the Borrowers or their agents or employees, Lender or any other insured party which might, absent such agreement, result in a forfeiture or all or part of such insurance payment, other than the willful misconduct of Lender knowingly in violation of the conditions of such policy, (2) the occupation or use of the Properties or any part thereof for purposes more hazardous than permitted by the 55 terms of such policy, (3) any foreclosure or other action or proceeding taken pursuant to this Loan Agreement or (4) any change in title to or ownership of the Properties or any part thereof. The property insurance and the boiler and machinery insurance described in Sections 5.4(i) and (x) hereof shall include "underground hazards" coverage; "time element" coverage by which Lender shall be assured payment of all amounts due under the Note, this Loan Agreement and the other Loan Documents; "extra expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage; and "expediting expense" coverage to facilitate rapid repair or restoration of the Properties. The Insurance Policies shall not contain any deductible in excess of $250,000. SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrowers will operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Borrowers, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each Borrower, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, each Borrower will operate and maintain its Property substantially in accordance with the applicable Operating Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrowers may, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Borrowers shall not perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the Properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Borrowers may perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrowers deliver notice to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Borrowers have cash available for payment of the cost of such Material Alteration or, if the Borrowers fail to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an amount equal to 125% of the cost of such Material Alteration as reasonably estimated by Lender. Cash deposited by the Borrowers with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the 56 conditions for disbursement of amounts from the Capital Improvement Reserve under Section 6.5 (including the requirements set forth under Section 6.7). Upon completion of the Material Alteration, the Borrowers shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. The Borrowers shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrowers shall give immediate written notice of the same to the insurance carrier and to Lender and shall promptly commence and diligently prosecute to completion, in accordance with the terms hereof, the repair and restoration of the Property as nearly as possible to the Pre-Existing Condition (a "RESTORATION"). The Borrowers hereby authorize and empower Lender as attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event of Default has occurred and is continuing), or any of them, to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this Section shall require Lender to incur any expense or take any action hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to hold the balance of such proceeds to be used to reimburse the Borrowers for the cost of Restoration of any of the Properties or (ii) subject to Subsection 5.5(C), to apply such proceeds to payment of the Obligations whether or not then due, in any order. Notwithstanding the foregoing, in the event of a casualty where the loss does not exceed the Restoration Threshold, the Borrowers may settle and adjust such claim; provided that (a) no Event of Default has occurred and is continuing and (b) such adjustment is carried out in a commercially reasonable and timely manner. (C) Lender shall not exercise Lender's option to apply insurance proceeds to payment of the Obligations if all of the following conditions are met: (i) no Event of Default then exists; (ii) Lender reasonably determines that there will be sufficient funds to complete the Restoration of the Property to at least substantially the Pre-Existing Condition and to timely make all payments due under the Loan Documents during the Restoration of the affected Property; (iii) Lender reasonably determines that the Net Operating Income of the Properties (including rental income or business interruption insurance) will be sufficient to pay principal and interest on the Loan and the Mezzanine Loan and Operating Revenues of the Properties, after the Restoration thereof to the Pre-Existing Condition, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Note and the Mezzanine Loan; (iv) Lender determines that the Restoration of the affected Property to the Pre-Existing Condition will be completed not later than five (5) months prior to the expiration of any business interruption insurance, but in no event later than six (6) months prior to the Maturity 57 Date; (v) less than fifty percent (50%) of the total floor area of the Improvements has been damaged, destroyed or rendered unusable as a result of such fire or other casualty; and (vi) such Property can be restored and repaired substantially to the condition it was in immediately prior to such casualty and in compliance with all applicable zoning, building and other laws and codes (the "PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to payment of the Obligations, such application shall be made on the Payment Date immediately following such election in accordance with the terms of the Cash Management Agreement. (D) If Lender elects or is obligated to make the insurance proceeds available for the Restoration of any Property and Lender is holding such proceeds, the Borrowers agree that, if at any time during the Restoration, the cost of completing such Restoration, as reasonably determined by Lender, exceeds the undisbursed insurance proceeds, the Borrowers shall, within ten (10) Business Days following the written demand by Lender, deposit the amount of such excess with Lender, and Lender shall first disburse such deposit to pay for the costs of such Restoration on the same terms and conditions as the insurance proceeds are disbursed. If the Borrowers deposit such excess with Lender and if, after completion of the Restoration, any funds remain from the combination of insurance proceeds and the funds so deposited with Lender by the Borrowers, and if no Event of Default shall have occurred and be continuing, then Lender shall promptly disburse to the Borrowers such remaining funds. (E) Lender may, at Lender's option, condition disbursement of any insurance proceeds on Lender's approval (which approval shall not be unreasonably withheld) of plans and specifications of an independent architect licensed in the state where the Property is located and reasonably satisfactory to Lender (the "ARCHITECT"), any and all contractors, subcontractors and materialmen engaged in the Restoration and the contracts under which they have been engaged, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. Lender shall not be obligated to disburse insurance proceeds more frequently than once every calendar month. If insurance proceeds are applied to the payment of the Obligations and provided no Event of Default exists, any such application of proceeds to principal shall be without any Prepayment Consideration and shall not extend or postpone the due dates of the monthly payments due under the Note or otherwise under the Loan Documents, or change the amounts of such payments. If Lender elects to apply all of such insurance proceeds toward the repayment of the Obligations, the Borrowers shall (subject to compliance with clauses (A), (B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property Release (without representation or warranty) of the applicable Property from the Lien of the Mortgage relating to such Property (in which event the Borrowers shall not be obligated to restore the applicable Property pursuant to Section 5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by which the Release Price for such Property exceeds the insurance proceeds received by Lender and applied to repayment of the Obligations. If any proceeds are applied to reduce the Obligations under this Section 5.5, provided that no Event of Default has occurred and is continuing, no Prepayment Consideration shall be due and payable in connection with such application. Any amount of insurance proceeds remaining in Lender's possession after full and final payment and discharge of all Obligations shall be refunded to, or as directed by, the Borrowers or otherwise paid in accordance with applicable law. If the Property is sold at foreclosure or if Lender acquires title to the Property, Lender shall have all of the right, title and 58 interest of the applicable Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to such Property prior to such sale or acquisition. (F) In no event shall Lender be obligated to make disbursements of insurance proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Architect, less a retainage equal to the lesser of (x) the actual retainage required pursuant to the permitted contract, or (y) ten percent (10%) of such costs incurred until the Restoration has been completed. The retainage shall in no event be less than the amount actually held back by the Borrowers from contractors, subcontractors and materialmen engaged in the Restoration. The retainage shall not be released until the Architect certifies to Lender, or, if no Architect has been retained by Lender, Lender is reasonably satisfied, that the Restoration has been completed in accordance with the provisions of this Section 5.5 and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental authorities, and Lender receives final lien waivers and such other evidence reasonably satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the retainage. SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized representatives designated by Lender to visit and inspect during normal business hours its Property and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with such Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice of at least three (3) Business Days prior to visiting or inspecting any Property or such Borrower's offices. SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and delivered to Lender operations and maintenance programs (the "O&M PLANS") with respect to suspected asbestos, asbestos-containing materials, and/or mold located in certain Properties as set forth on Schedule 6.6, which conditions were disclosed in the applicable Environmental Reports for such Properties. Each applicable Borrower shall at all times implement and carry out the O&M Plan in accordance with its terms. Lender's requirement that the applicable Borrowers develop and comply with the O&M Plan shall not be deemed to constitute a waiver or modification of any covenants or agreements of the Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws as set forth in the Environmental Indemnity. SECTION 5.8 RESERVED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the operation or value of any Property, (B) maintain all licenses and permits now held or hereafter acquired by any Borrower, the loss, suspension, or revocation of which, or failure to renew, could have a material adverse effect on the operation or 59 value of any Property and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party shall duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a material adverse effect on the operation or value of any Property. SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrowers shall not, nor shall the Borrowers authorize Manager or any other Person to, (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrowers shall furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other 60 information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Borrowers shall not under any circumstances collect any such rent more than one month in advance. The Borrowers, at Lender's request, shall furnish Lender with executed copies of all Material Leases hereafter made. Each new Material Lease or a separate agreement with the tenant of such Material Lease shall be in recordable form and shall specifically provide that such Material Lease (i) is subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; (iii) that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; (iv) that the attornment of the tenant shall not be terminated by foreclosure; (v) that in no event shall Lender, as holder of the Mortgages or as successor landlord, be liable to the tenant for any act or omission of any prior landlord or for any liability or obligation of any prior landlord occurring prior to the date that Lender or any subsequent owner acquire title to the Property; and (vi) that Lender may, at Lender's option, accept or reject such attornment. SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS. (A) The Borrowers shall cause each Manager to manage the Properties in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and types customary for hotels comparable to each Property. The Borrowers shall (i) perform and observe all of the material terms, covenants and conditions of the Management Agreement on the part of each Borrower to be performed and observed, and (ii) promptly notify Lender of any notice to any of the Borrowers of any material default under the Management Agreement of which it is aware. If any of the Borrowers shall default in the performance or observance of any material term, covenant or condition of the applicable Management Agreement on the part of the Borrowers to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrowers from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrower, but shall be under no obligation, to pay any sums and to perform any act as may be reasonably appropriate to cause such material conditions of the applicable Management Agreement on the part of the Borrowers to be performed or observed. (B) The Borrowers shall not surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager, or consent to the assignment by the Manager of its interest under the Management Agreement, in each case without (i) prior to a 61 Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies. The Borrowers shall cause any new Manager with respect to any Property to execute and deliver a subordination of management agreement in substantially the form delivered in connection with the closing of the Loan. (C) Lender shall have the right to require any of the Borrowers to replace any Manager with a Person chosen by the Borrowers and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrowers if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrowers shall not terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. Notwithstanding the foregoing, the following changes to Franchise Agreements shall be permitted without Lender's prior written consent: (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with another Franchisor within the same Category, provided that the Borrowers shall not replace Franchise Agreements (in the aggregate) pursuant to this Section 5.13(D)(ii) with respect to more than the lesser of (x) two (2) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided that the Borrowers shall not replace Franchise Agreements for more than one (1) Property, or for any Property with an Allocated Loan Amount of more than five percent (5%) of the outstanding principal balance of the Loan pursuant to this Section 5.13(D)(iii); and (iv) Entering into new Franchise Agreements (or amendments or addenda to existing Franchise Agreements) with the existing Franchisors for the applicable Properties for the same franchise brand, each in form substantially similar to the forms previously approved for the respective 62 Properties by Lender, as required by the existing Franchisors under the respective Franchise Agreements in connection with the transfers of the applicable Properties and the direct and indirect ownership interests in the Borrowers made by the Borrower Parties and their Affiliates in connection with the Closing of the Loan. In connection with the replacement of any Franchisors permitted hereunder, the applicable Borrower shall, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender a Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, each Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants required to be performed and observed by the Franchisor under the Franchise Agreement. In addition, the Borrowers shall not, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become obligated under any Material Agreement pertaining to any Property without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) any Lease that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's approval under, and 63 otherwise complies with, the provisions of Section 5.13 hereof (provided, however, that the foregoing shall not affect Borrowers' obligation to deliver Rating Confirmations with respect to any such Management Agreement if required under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not require Lender's approval under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all Receipts from the Properties into, and otherwise comply with, the Accounts established from time to time hereunder. Subject to Article VII hereof and the Cash Management Agreement, each Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrowers shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Mortgages and the other Loan Documents are legal, valid and binding obligations of the Borrowers and have not been modified or amended, or if modified or amended, describing such modification or amendments. (B) Within ten (10) Business Days following a written request by the Borrowers, Lender shall provide to the Borrowers a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrowers with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): (A) the Obligations and Crossed Indebtedness; (B) (i) unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the financing of equipment or other personal property used at any Property in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days, and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal 64 property or otherwise referred to in clauses (i) and (ii) above (excluding therefrom utility expenses of the Properties and fees payable to the Franchisors pursuant to the terms of the Franchise Agreements) outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan; and (C) the Mezzanine Loan. In no event shall any Indebtedness other than the Loan be secured, in whole or in part, by the Properties or any portion thereof or interest therein. SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not create, incur, assume or permit to exist any Lien on or with respect to the Properties, any other Collateral or any direct or indirect ownership interest in the Borrowers, except the Permitted Encumbrances and Liens on the ownership interests in the Borrowers securing the Mezzanine Loan. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Primary Borrower Party shall directly or indirectly create or become or be liable with respect to any Contingent Obligation. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted in this Loan Agreement, no Primary Borrower Party shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of such Borrower Party's partnership agreement, certificate of limited partnership, articles of incorporation, by-laws, articles of organization, operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such Primary Borrower Party. SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to the Manager under the Management Agreement, the Borrowers shall not pay any management, consulting, director or similar fees to any Related Person of the Borrowers or to any director, officer or employee of the Borrowers. The Borrowers shall not directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of any of the Borrowers or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrowers and upon fair and reasonable terms and which are no less favorable to any of the Borrowers than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of any Borrower. The Borrowers shall not make any payment or permit any payment to be made to any Related Person of any of the Borrowers when or as to any time when any Event of Default shall exist. SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. 65 (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of any Borrower. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which any of the Borrowers is a debtor or any portion of the Properties is property of the estate therein. The Borrowers shall not file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or support any motion (irrespective of the subject of the motion), and the Borrowers shall not file or support any plan of reorganization. The Borrowers having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrowers or any ERISA Affiliate or increase the obligation of the Borrowers, provided that the Borrower shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC. (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrowers regulating investments of governmental plans. 66 SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 RESERVED. SECTION 5.26 RESERVED. SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrowers shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrowers. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrowers shall not cancel any indebtedness from any Person owing to any Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no Borrower Party, nor any of their respective Affiliates, officers, directors, partners or members will knowingly: (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrowers further covenants and agrees to deliver (from time to time) to Lender any such certification or other evidence as may be requested by Lender in its sole and absolute discretion, confirming that: (i) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor their respective officers, directors, partners, members or Affiliates, has to its Knowledge engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person. 67 ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrowers hereby pledge, assign and grant to Lender a security interest in and to all of the Borrowers' right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any Default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. SECTION 6.2 FUNDS DEPOSITED WITH LENDER. (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein, all funds of the Borrowers which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrowers and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After repayment of all of the Obligations, all funds held as Reserves will be promptly returned to, or as directed by, the Borrowers. (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the amounts necessary to fund each of the Reserves as set forth below. Deposits into the Reserves at Closing may occur by deduction from the amount of the Loan that otherwise would be disbursed to the Borrowers, followed by deposit of the same into the applicable Sub-Account or Account of the 68 Lock Box Account in accordance with the Cash Management Agreement on the Closing Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes to be fully disbursed at Closing. SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit with Lock Box Account Bank **[$_________]** and, pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the Payment date in July 2004, 1/12th of the annual charges (as reasonably estimated by Lender) for all Impositions and all Insurance Premiums (other than for D&O Insurance) payable with respect to the Properties hereunder (said funds, together with any interest thereon and additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made to the Impositions and Insurance Reserve from and after the date hereof is **[$__________]**. The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days of the written demand by Lender, to be added to and included within such reserve, a sum of money which Lender reasonably estimates, together with such monthly deposits, will be sufficient to make the payment of each such charge at least ten (10) Business Days prior to the date initially due. The Borrowers shall provide Lender with bills and all other documents necessary for the payment of the foregoing charges at least thirty (30) days prior to the date on which each payment shall first become subject to penalty or interest if not paid. So long as (i) no Event of Default has occurred and is continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other documents in a timely manner, and (iii) sufficient funds are held by Lender for the payment of the Impositions and Insurance Premiums relating to each of the Properties, Lender shall pay said items or disburse to the Borrowers from such Reserve an amount sufficient to pay said items. Interest shall accrue in favor of the Borrowers on funds in the Impositions and Insurance Reserve and be added to the balance thereof and disbursed in accordance with the terms hereof. SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender shall establish and maintain with Lock Box Bank an account for the purpose of creating a reserve for replacements of FF&E at or in, or used in connection with, the Properties (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget approved by Lender (said funds, together with any interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve shall be held in an Eligible Account entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account shall be under the sole dominion and control of Lender, subject to the terms of the Cash Management Agreement. Pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing with the Payment Date in July 2004, an amount equal to 4.0% of the Operating Revenues generated from the Properties for the prior calendar month (such amount, the "MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the Borrowers, subject in all instances to the terms of the Cash Management Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held in the FF&E Reserve shall be used in connection with the Required Capital Improvements. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than Replacements subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d). 69 SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At Closing, the Borrowers shall deposit with Lock Box Account Bank **[$___________]** (said funds, together with any interest thereon, the "CAPITAL IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain Capital Improvements required to be made to the Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5 attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the Borrowers for purposes for which any other Reserve is established or for any other purpose other than completion of the Required Capital Improvements. The Borrowers shall promptly commence and diligently prosecute to completion, subject to Force Majeure, the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds held in the Capital Improvement Reserve shall be disbursed in accordance with Section 6.7. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Capital Improvement Reserve when all Required Capital Improvements are complete, and paid for, in accordance with the terms hereof. SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers shall deposit with Lock Box Account Bank, an amount equal to **[$___________]** (said funds, together with any interest thereon and additions thereto, the "HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials on the Properties as indicated in the Environmental Reports for the Properties prepared and delivered prior to the Closing and as such work is more particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by any applicable Governmental Authority or (y) nine (9) months after the Closing, the Borrowers shall, subject to Force Majeure, complete such Environmental Work and shall provide to Lender such closure reports, no-further-action letters, or other evidence of compliance with law as Lender may reasonably require. The funds contained in the Hazardous Materials Remediation Reserve shall be utilized by the Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrowers for purposes for which any other Reserve is established. Subject to the Borrowers' satisfaction of the applicable conditions of Section 6.7, the Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrowers for such Environmental Work, provided that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, but also subject to the last paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, in accordance with the terms hereof. SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK. (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to or for the account of the Borrowers (x) from the Hazardous Materials Remediation Reserve, to pay to, or pay on behalf of, the 70 Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT EXPENDITURES"; and together with the Approved Environmental Expenditures, collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or Required Capital Improvements to which any such request for disbursement relates shall be referred to as the "WORK"), upon satisfaction of each of the conditions listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's reasonable discretion: (i) Except as provided in this Section 6.7, each request for disbursement from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for completion of the Approved Expenditures for which disbursement is requested. (ii) A request for disbursement from the Work Reserves may be made after completion of a portion of the Work under such contract, or for payment of deposits required in connection with the Work under such Contract, provided (1) all other conditions in this Loan Agreement for disbursement have been satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve are, in Lender's reasonable judgment, sufficient to complete the Environmental Work when required and/or funds remaining in the Capital Improvement Reserve are, in Lender's reasonable judgment, sufficient to complete such item of Required Capital Improvements and any other Required Capital Improvements remaining to be performed, as the case may be, and (3) if reasonably required by Lender, each contractor or subcontractor receiving payments in excess of $100,000 under such contract shall provide a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor. (iii) To the extent the contract with the relevant contractor or supplier provides for a retainage, each disbursement from a Work Reserve, except for a final disbursement, shall be in the amount of actual costs incurred less the percentage of such costs that the contract with the relevant contractor or supplier specifies to be retained and advanced as part of the final disbursement. No funds will be advanced for materials stored at any Property unless such materials are properly stored and secured at the applicable Property in accordance with the Borrowers' customary procedures and sound construction practices as reasonably determined by Lender. No funds will be advanced for materials stored at any location other than at the Properties unless Lender determines in its reasonable discretion that Lender has a perfected first priority security interest in any such materials. (iv) The amount of all invoices in connection with the Work with respect to which a disbursement is requested and which has been approved by Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers (in which event, the Borrowers covenant and agree to promptly pay such invoices) or, if an Event of Default has occurred and is continuing, at Lender's option and in Lender's sole and absolute discretion, directly to the contractor, supplier, materialman, mechanic or subcontractor indicated on said invoices unless already paid by the Borrowers and Lender has received satisfactory evidence of such payment in which case Lender shall reimburse the Borrowers. All invoices in connection with 71 disbursements from the Capital Improvement Reserve shall be classified as requests for payment for items of Capital Improvement (as opposed to items that, in conformity with GAAP, would be included as Operating Expenses). If the Borrowers request that any amounts be disbursed directly to the Borrowers pursuant to the foregoing sentence, the Borrowers shall be required to deliver evidence reasonably acceptable to Lender of payment of all invoices for which disbursements were previously made to the Borrowers as a condition to such requested disbursement. (v) No more than two (2) disbursements will be made by Lender from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve in any calendar month, and, if made in accordance herewith or otherwise approved by Lender, requested disbursements will be made within five (5) Business Days after the request therefor. Lender shall not be required to make any disbursement from a Work Reserve with respect to the Property unless such requested disbursement is in an amount equal to or greater than $25,000 (other than the final disbursement). (vi) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrowers shall assign (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. (vii) The Borrowers shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost and expense. (viii) The Borrowers shall have delivered to Lender a certificate of the Borrowers substantially in the form of Exhibit L attached hereto certifying as to the actual costs which were incurred by the Borrowers to complete such Work, which costs shall not materially exceed the amount budgeted for such Work under the CapEx/FF&E Budget then in effect unless approved by Lender, which shall not be unreasonably withheld, delayed or conditioned (together with supporting documentation reasonably acceptable to Lender). 72 (ix) The Borrowers shall have delivered to Lender all necessary material certificates, authorizations, permits and licenses which are required to permit the construction and completion of the Work, as issued by the appropriate Governmental Authority. The Borrowers, to the full extent permitted by applicable law, hereby assigns to Lender as additional security for the payment of the Obligations and the observance and performance by the Borrowers of the terms, covenants and provisions of the Loan Documents all right, title and interest which the Borrowers may now have or may hereafter acquire in and to such certificates, authorizations, permits and licenses. (x) Lender may require an inspection of the Property prior to making a monthly disbursement from the applicable Work Reserve in order to verify completion of the Work for which disbursement is sought in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may require that such inspection be conducted by Lender's Consultant and/or may require a copy of a certificate of completion by an independent qualified architect or engineer acceptable to Lender prior to the disbursement of any amounts from the applicable Work Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such inspections as reasonably required hereunder, whether such inspections are conducted by Lender, Servicer, Lender's Consultant or by an independent qualified professional. (B) PERFORMANCE OF WORK. (i) The Borrowers shall complete all Work in a good and workmanlike manner as soon as practicable following the commencement thereof substantially in accordance with the applicable budget approved by Lender in accordance with the terms of this Loan Agreement. The insufficiency of the balance in the applicable Work Reserve shall not relieve the Borrowers from their obligations to perform and complete the related Work as herein provided or to fulfill all other preservation and maintenance covenants in the Loan Documents. (ii) If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrowers with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrowers of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrowers shall have commenced to cure such unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such unsatisfactory work, up to a maximum of an additional sixty (60) days, subject to Force Majeure, without the cure thereof), Lender may proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrowers, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. 73 (iii) In order to facilitate Lender's completion or making of any Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right to enter onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrowers and secured by the applicable Mortgage. For this purpose, the Borrowers constitute and appoint Lender their true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrowers empower said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve for the purpose of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the Borrowers which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of such Property; and (vii) to do any and every act which the Borrowers might do in their own behalf to fulfill the terms of this Loan Agreement. (iv) Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrowers additional sums to make or complete any Work. (v) The Borrowers shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.7 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may be kept at any Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The Borrowers shall use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B). (vi) All Work and all materials, equipment, fixtures and any other item comprising a part thereof shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other liens (except for the Permitted Encumbrances). (vii) All Work shall comply with all applicable legal requirements of all Governmental Authorities having jurisdiction over the Properties and applicable insurance 74 requirements, including, without limitation, applicable building codes, special use permits, environmental regulations and requirements of insurance underwriters. (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys' fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrowers shall assign to Lender all rights and claims the Borrowers may have against all Persons supplying labor or materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations in full, a Cash Trap Event shall occur, then for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Lender (or its Servicer or agent) and held in the Lock Box Account in accordance with the terms of the Cash Management Agreement (said funds, together with any interest thereon, the "CASH TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when the Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12) month period ending on such Calculation Date and shall continue to exist until such time as the Minimum Debt Yield test has been satisfied for three (3) consecutive Calculation Dates (on a trailing twelve (12) month basis) following the commencement of the applicable Cash Trap Event. Notwithstanding that the Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no Cash Trap Event shall be deemed to have occurred as a result of such event if the Borrowers make a principal prepayment of the Aggregate Outstanding Principal Balance (which prepayment amount shall be disbursed on the next Payment Date in accordance with the terms of the Cash Management Agreement), within three (3) Business Days after the date of delivery of the financial statements disclosing the existence of such Cash Trap Event (or the date on which such financial statements are required to be delivered pursuant to Section 5.1), in an amount equal to the greater of (x) one percent (1%) of the Aggregate Outstanding Principal Balance, or (y) 120% of the amount, as determined by Lender in its reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the Minimum Debt Yield if such calculation was recalculated as provided above assuming that such amount was applied to reduce the Aggregate Outstanding Principal Balance as of the first day of the relevant measuring period. During the continuance of a Cash Trap Event, provided that no Event of Default shall have occurred and be continuing, any funds on deposit in the Cash Trap Reserve may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be applied to (i) prepayment of the Aggregate Outstanding Principal Balance as provided above, (ii) Capital Expenditures reasonably approved by Lender, or (iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal and interest under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in accordance with the terms of the Cash Management Agreement). Any funds on deposit in the Cash Trap Reserve shall continue to be held as additional Collateral in accordance with this Section 6.8 until the earlier of (a) the date that such funds are applied or disbursed pursuant to the foregoing sentence or (b) the date that the Minimum Debt Yield test has been satisfied for three (3) consecutive months (as determined above), at which time, provided no Event of Default exists, 75 and no Cash Trap Event has commenced, such funds, together with any and all amounts then held in the Minimum Balance Sub-Account (as defined in the Cash Management Agreement), shall be automatically released to the Borrowers without any further certification requirements on the part of the Borrowers. The existence of a Cash Trap Event shall be determined by Lender in its reasonable good faith determination. If Lender determines that a Cash Trap Event has occurred, Lender shall send the Borrowers written notice thereof. Notwithstanding any provision herein to the contrary, if an Event of Default has occurred and is continuing, all funds on deposit in the Cash Trap Reserve and any subsequent Excess Cash Flow, while such Event of Default is continuing, may be applied by Lender to payment of the Loan (including payment of any Prepayment Consideration) or other Obligations (or to the obligations of the Mezzanine Borrowers to Mezzanine Lender) as Lender may elect. ARTICLE VII DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT. (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more deposit accounts shall be established at the Borrowers' sole cost and expense in the name of Lender, as secured party hereunder (said accounts, and any accounts replacing same in accordance with this Loan Agreement and the Deposit Account Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"), pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT AGREEMENT") substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, executed and delivered by the Borrowers and the Deposit Bank. The Deposit Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer). Among other things, the Deposit Account Agreement shall provide that the Borrowers shall have no access to or control over the Deposit Account, that all available funds on deposit in the Deposit Account shall be transferred by wire transfer (or transfer via the ACH System) on each Business Day by the Deposit Bank into the Lock Box Account, for application in accordance with the Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall be directed to deliver to the Borrowers copies of bank statements and other information made available by the Deposit Bank and the Lock Box Account Bank concerning the Deposit Account and the Lock Box Account. (i) Upon establishing the Deposit Account, (1) the Borrowers shall cause any and all Operating Revenues, including distributions or other payments made directly or indirectly to the Borrowers, Manager, or any of their respective Affiliates, from any Beverage Company, to be deposited promptly into the Deposit Account and in no event later than two (2) Business Days after the same are paid to or for the benefit of the Borrowers, and (2) the Borrowers shall obtain agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each of the Persons paying or disbursing credit card receivables (the "CREDIT CARD COMPANIES"), substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, pursuant to which the Credit Card Companies agree to pay all credit card receivables into the Lock Box Account, and acknowledge and agree that Lender shall have a first priority perfected security interest in such credit card receivables. To the extent that the Borrowers or any 76 Person on the Borrowers' behalf holds any Receipts, whether in accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed to hold the same in trust for Lender for the protection of the interests of Lender hereunder and under the Loan Documents. The Borrowers represent and warrant that, as of the date hereof, the only Credit Card Companies paying or disbursing credit card receivables with respect to the Property are Chase Merchant Services, American Express, Discover Financial Service, Diners Club, JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter into an agreement with any other Credit Card Company pursuant to which such Credit Card Company shall pay credit card receivables with respect to the Properties, such Borrower shall promptly obtain a Credit Card Receivables Payment Direction Letter in form and substance reasonably acceptable to Lender from such Credit Card Company. (ii) The Borrowers shall pay all reasonable out-of-pocket costs and expenses incurred by Lender in connection with the transactions and other matters contemplated by this Section 7.1, including but not limited to, Lender's reasonable attorneys' fees and expenses, and all reasonable fees and expenses of the Deposit Bank and the Lock Box Account Bank, including without limitation their reasonable attorneys' fees and expenses. (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms of the Cash Management Agreement, an Eligible Account shall be established in the name of Lender, as secured party hereunder, to serve as the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement, the Borrowers shall not have the right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. Lender may elect to change any financial institution in which the Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrower. The Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement: (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the "Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance Sub-Account"; and (g) "Cash Trap Reserve Sub-Account". 77 SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" means the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrowers; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrowers (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if (i) within forty-five (45) days after the filing thereof, the Borrowers shall either cause the same to be removed of record by payment, bonding or otherwise, or (ii) same is being contested in good faith in accordance with Section 5.3(B) hereof); or (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by any Borrower, Guarantor or Manager in any Loan Document or in any statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan 78 Documents and such default is not fully cured within thirty (30) days after receipt by the Borrowers of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any Borrower Party commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceeding, it shall not constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or 79 (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of their business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrowers 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) and the Borrowers do not take all actions requested by Lender to correct such defect within ten (10) days after the written request by Lender to take such action, or any Person under the control of the Borrowers or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; (ii) or any breach or default shall occur in the material obligations of the Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, that Manager shall have the right to exercise material remedies as a consequence thereof. If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). SECTION 8.2 ACCELERATION AND REMEDIES. (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by the Borrowers. Upon and at any time after the occurrence of any other 80 Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrowers under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against each Property and the Mortgages have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose the Mortgages in any manner and for any amounts secured by the Mortgages then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrowers default beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose the Mortgage to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose the Mortgage or any of them to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Mortgage as Lender may elect. Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Mortgage to secure payment of sums secured by the Mortgage and not previously recovered. (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. The Borrowers shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their true and lawful attorney, coupled with an interest, in their name and stead to make and execute all documents reasonably necessary to effect the aforesaid severance if the Borrowers fail to do so within ten (10) days of Lender's written request, the Borrowers ratifying all that their said attorney shall do by virtue thereof. 81 (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrowers pursuant to this Loan Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrowers shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrowers or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if any of the Borrowers shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrowers including making protective advances on behalf of any Borrower, or, in its sole discretion, causing the obligations of any of the Borrowers to be satisfied with the proceeds of any Reserve. In such event, the Borrowers shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the Borrowers under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. (B) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrowers. 82 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower Party hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that such Primary Borrower Party: (A) does not own and will not own any assets other than the Properties (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Borrowers, and other wholly owned subsidiaries of the Primary Borrower Parties established solely for the purpose of holding liquor licenses with respect to one or more of the Properties, and with respect to Member, direct or indirect ownership interests in the Crossed Borrowers as of the date of this Agreement (all of the foregoing ownership interests being referred to herein, collectively, as the "OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties, such incidental assets as are necessary to enable it to discharge its obligations with respect to the Borrowers; (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Properties, the Crossed Properties as of the date of this Agreement, or the Ownership Interests; (C) has not at any time since the SPE Effective Date entered into and will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of any Primary Borrower Party except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate (including the Management Agreements); (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted Indebtedness, and (iii) the Mezzanine Loan; (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), and has not acquired and will not acquire obligations or securities (other than the Ownership Interests) of any of its Affiliates other than the other Borrower Parties; (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due; (G) has at all times since the SPE Effective Date done or caused to be done and will do all things necessary to preserve its existence, and will not, and no partner, member, shareholder, trustee, beneficiary, or principal will, further amend, modify or otherwise change, its partnership certificate, partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement, or other organizational documents, as modified, amended, 83 restated or supplemented as of the date hereof, in any manner with respect to the matters set forth in this Article IX; (H) has at all times since the SPE Effective Date continuously maintained its existence and has at all times since the SPE Effective Date been qualified to do business, and shall continue to maintain its existence and be qualified to do, business in all states necessary to carry on its business, specifically including in the case of each Borrower, the state where its Property is located; (I) has at all times since the SPE Effective Date conducted and operated, and will conduct and operate its business as presently conducted and operated and otherwise contemplated with respect to the ownership of its Property, or the ownership of the Ownership Interests, as applicable; (J) has at all times since the SPE Effective Date maintained, and will maintain books and records and bank accounts (other than bank accounts established hereunder, or established by Manager with respect to the operations of the Properties pursuant to the Management Agreement) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and has at all times since the SPE Effective Date maintained and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) has at all times since the SPE Effective Date been and held itself out to the public as, and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and has at all times since the SPE Effective Date corrected and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) has at all times since the SPE Effective Date paid, and will pay the salaries of its own employees, if any; (M) has at all times since the SPE Effective Date allocated, and will allocate fairly and reasonably any overhead for shared office space; (N) has at all times since the SPE Effective Date used, and will use its own stationery, invoices and checks; (O) has at all times since the SPE Effective Date filed, and will file its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; (P) has at all times since the SPE Effective Date maintained, and reasonably expects to maintain adequate capital (taken as a whole with all of the other Borrowers) for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; 84 (Q) will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) will not enter into any transaction of merger or consolidation, and will not acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership (other than the Ownership Interests) of, any Person; (S) has not at any time since the SPE Effective Date commingled or permitted to be commingled, and will not commingle or permit to be commingled, its funds or other assets with those of any other Person (other than, with respect to the Borrowers, each other Borrower, or as may be held by Manager, as agent, for each Borrower pursuant to the terms of the Management Agreement, and except for funds deposited in the Accounts in accordance with the Loan Documents); (T) has at all times since the SPE Effective Date maintained, and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (U) does not and will not hold itself out to be responsible for the debts or obligations (other than the Obligations and the Crossed Indebtedness as of the date of this Agreement) of any other Person; (V) has not guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations and the Crossed Indebtedness as of the date of this Agreement) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to their respective obligations under Section 9.1, each Borrower, General Partner and Member hereby represents, warrants and covenants, as of the Closing Date and until such time as all Obligations are paid and satisfied in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion: (A) each General Partner shall at all times act as the sole general partner of each Borrower that is a limited partnership, with all of the rights, powers, obligations and liabilities thereof under the limited partnership agreement of such Borrower and shall take any and all actions and do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (B) Member shall at all times act as the sole member of each Borrower and Crossed Borrower as of the date of this Agreement that is a limited liability company with all of the 85 rights, powers, obligations and liabilities thereof under the limited liability company operating agreement of such Borrower or Crossed Borrower and shall take any and all actions and will do any and all things necessary or appropriate to the accomplishment of the same and will not engage in any other business; (C) each Borrower that is a limited liability company shall not, without the prior written consent of its Member (including the unanimous written consent of its Member's board of directors including the Independent Directors or the unanimous written consent of each of the Borrowers' board of managers including the Independent Directors), and each Borrower that is a limited partnership shall not, without the prior written consent of its General Partner (including the unanimous written consent of General Partner's Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (D) each Borrower that is a corporation shall not, without the prior unanimous written consent of its board of directors, including its Independent Directors, institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against it; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (E) no Member or any General Partner shall, without the unanimous vote of its board of directors or board of managers, as the case may be, including, in each case, its Independent Directors, institute proceedings for itself or any Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or any Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or any Borrower; or a substantial part of its or any Borrower's property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (F) except as otherwise permitted hereunder, no Member or any General Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself or any Borrower, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person; or (iii) amend any provisions of its or any Borrower's organizational documents containing provisions similar to those contained in this Article IX; and 86 (G) each Member, General Partner and Borrower that is a corporation shall each promptly elect and at all times maintain at least two (2) Independent Directors on its board of directors, who shall be selected by such Member, General Partner or Borrower, as applicable, and be reasonably acceptable to Lender. Each Borrower that is a single member limited liability company shall promptly appoint and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by such Borrower, and be reasonably acceptable to Lender. ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel), to cause the Note and any Mortgage to be split into a first and a second mortgage loan, or into one or more loans evidenced by multiple notes and secured by multiple mortgages and/or by ownership interests in any of the Borrowers in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting any such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything to the contrary contained in this Article X, it is acknowledged and agreed that in no event shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's) internal costs and expenses in connection with any Secondary Market Transaction. Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of each Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such 87 amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower Parties shall not be required to pay any third party (other than, which respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the costs and expenses of the Borrowers' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than, with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrower Parties' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other than with respect to the first successful Securitization and any related Secondary Market Transaction only (or if the Loan shall be hereafter split into multiple loans, the first successful Securitization and any related Secondary Market Transaction with respect to each of such loans), the Borrowers' internal costs and expenses and the costs and expenses of the Borrowers' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent in substance with the opinions covered by the original opinions, addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, 88 potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrowers understand that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrowers and Guarantor shall provide in connection with each (i) preliminary and final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, prepared in connection with any Secondary Market Transaction (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor certifying that the Borrowers and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrowers, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrowers shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrowers or their Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrowers or their Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, Leases entered into as permitted hereunder, and pledges in connection with the Mezzanine Loan, the Borrowers shall 89 not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of any Property or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in any Borrower (other than to Mezzanine Lender), irrespective of the number of tiers of ownership, without Lender's consent. SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in any Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower); and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. (D) The pledge of ownership interests granted by the Mezzanine Borrowers pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan Agreement). For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving effect to such Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY. (A) The Borrowers shall have the right to request that Lender consent to (i) a transfer of all of the Properties to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the 90 obligations of the Guarantors arising from and after such date and release of the Borrowers and Guarantor from obligations arising from and after such date and (iii) the replacement of the Mezzanine Borrowers with pledgors of the ownership interests in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the conditions set forth in paragraphs (B) and (C) of this Section. Together with such written application, the Borrowers will pay to Lender a review fee of $10,000. The Borrowers also shall pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of the Rating Agencies, if any, and other outside entities, in connection with considering any proposed Assumption, whether or not the same is permitted or occurs. (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrowers shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrowers shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions; (v) The Borrowers shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; (vi) The Borrowers, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; (vii) (a) The Transferee Borrower shall be a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its reasonable discretion; and (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender. 91 (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or Borrowers, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrowers, the Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, a bankruptcy non-consolidation opinion; (iii) The Borrowers shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrowers and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (iv) The Borrowers shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Transfer and Assumption, including but not limited to Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may obtain the release (each, a "RELEASE") of one or more Properties from the Lien of the applicable Mortgage(s) in connection with a partial or total defeasance of the Loan subject to the conditions of the Note and subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrowers at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) On the date proposed for such Release, the Borrowers shall defease all or a portion of the Loan by delivering a Defeasance Deposit (as defined in the Note) in an amount necessary to pay all Scheduled Defeasance Payments (as defined in the Note) for the entire principal amount of the Loan in the case of a total defeasance, or in the case of a partial defeasance, relating to the Release Price of each Property being released (together with all accrued and unpaid interest on the principal amount being so defeased), and such defeasance shall be undertaken in accordance with the terms and conditions of the Note, and Mezzanine Lender shall have received all amounts required to be paid to it in connection with such Release under the Mezzanine Loan Documents; 92 (D) If required by any Rating Agency, the Borrowers at their sole cost and expense, in connection with any partial defeasance, shall have delivered to Lender, one or more endorsements to the Title Policies delivered to Lender on the date hereof in connection with the Mortgages insuring that, after giving effect to such Release, (i) the Liens created hereby and thereby and insured under the Title Policies are first priority Liens on the respective remaining Properties subject only to the Permitted Encumbrances applicable to the remaining Properties and (ii) that the Title Policies remain in full force and effect and unaffected by such Release; (E) Immediately following any Release in connection with any partial defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) in effect at Closing, or immediately prior to the Release, whichever is greater; (F) Notwithstanding the foregoing, the Borrowers may not obtain the Release under this Section 11.4 of any Property or Properties which individually, or in the aggregate (with all Releases since the Closing Date), have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the original principal balance of the Loan except pursuant to a total defeasance; (G) The Borrowers shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Release; and (H) Immediately following such Property Release, each released Property will be owned by a Person other than the Borrowers, except as otherwise permitted in connection with any full or partial defeasance of the Loan in accordance with the terms and conditions of the Note. Upon satisfaction of the above conditions, Lender shall effectuate the following (hereinafter referred to as a "PROPERTY RELEASE"): the security interest of Lender under the Mortgage and other Loan Documents relating to each released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrowers to release and terminate or reassign, at the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and financing statements as to each released Property; provided, that such release and termination or reassignment shall be without recourse to Lender and without any representation or warranty except that Lender shall be deemed to have represented that such release and termination or reassignment has been duly authorized and that it has not assigned or encumbered the Mortgage or the other Loan Documents relating to any released Property (except as contemplated hereby) and Lender shall return the originals of any Loan Documents that relate solely to each released Property to the Borrowers; provided, further, that upon the release and termination or reassignment of Lender's security interest in the Mortgage relating to a released Property all references herein to the Mortgage relating to such released Property shall be deemed deleted, except as otherwise provided herein with respect to indemnities. In addition, promptly after consummation of any such Property Release and Lender's receipt of the Defeasance Collateral, any and all Reserves designated as applicable to each released Property held by or on behalf of Lender shall be returned to the Borrowers. 93 SECTION 11.5 RESERVED. SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may Transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Property free from the lien of the Mortgage, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or on the Properties taken as a whole, will not materially impair the utility of any individual Property or the Properties, taken as a whole, 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 building equipment acquired by the Borrowers (and not so disposed of) shall be subject to the lien of the Mortgage. Lender shall, from time to time, upon the reasonable request of any Borrower, execute a written instrument in form reasonably satisfactory to Lender to confirm that such building equipment which is to be, or has been, sold or disposed of is free from the lien of the Mortgage. SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrowers may, without the consent of Lender, (i) make immaterial Transfers of portions of the any Property to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way with respect to any Property in the ordinary course of business 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 such Property or have a Material Adverse Effect on the value of such Property taken as a whole. In connection with any Transfer permitted pursuant to this Section 11.7, Lender 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 such Property affected by such transfer from the lien of the applicable Mortgage or to subordinate the applicable Mortgage to any such easement, restriction, covenant, reservation or right of way within ten (10) days of Lender's receipt of the following: (A) ten (10) days prior written notice thereof. (B) a copy of the instrument or instruments of transfer. (C) an officer's certificate given by the Borrowers stating that such transfer does not materially impair the utility and operation of the Property, materially reduce the value of the Property or have a Material Adverse Effect. (D) reimbursement of all of Lender's reasonable, out-of-pocket costs and expenses incurred in connection with such Transfer. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrowers to pay any and all Obligations including but not limited to the principal 94 of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrowers' obligations under the Note shall be limited to (i) the Properties, (ii) the rents, profits, issues, products and income of the Properties, and (iii) any other Collateral. Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Obligations secured by the Mortgages or to require that all collateral shall continue to secure all of the Obligations owing to Lender in accordance with the Loan Documents. SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not their members, partners (other than the General Partners), employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrowers or any Borrower Party or Manager and not deposited into the Deposit Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrowers or of any change in the name of any of the Borrowers or if any of the Borrowers takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrowers, or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste with respect to any of the Properties; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully recourse to the Borrowers and Guarantor upon the happening of any of the following: (i) any Borrower Party's defense of any efforts by Lender to collect or enforce the Obligations following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any efforts by Lender to collect or enforce the Obligations without a good faith basis following any other Event of Default, and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or 95 any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents). SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against any Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by 96 reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors of all or any part of the obligations of the other Borrower Parties, and of all other circumstances bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and 97 subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) 98 that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrowers of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrowers shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrowers under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Properties by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers or other Person to any other or further notice or demand in similar or other circumstances. SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrowers to Lender (other than the Note) unless the Borrowers request in writing that same be returned. Upon such request and at the Borrowers' expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). 99 Notices shall be addressed as follows: If to the Borrowers or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Morris, Manning & Martin, LLP 3343 Peachtree Rd., NE 1600 Atlanta Financial Center Atlanta, Georgia 30326 Attention: Thomas Gryboski, Esq. Facsimile: (404) 365-9532 If to Lender: Merrill Lynch Mortgage Lending, Inc. Four World Financial Center New York, New York 10080 Attention: Robert Spinna Facsimile: (212) 449-7684 With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn: Robert L. Boyd, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan 100 Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrowers to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its 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 and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, 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. SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE 101 WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrowers may not assign their rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties, represent, warrant and acknowledge that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrowers, on behalf of themselves and all Borrower Parties, also acknowledge and agree that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any other Person. The relationship between Lender and the Borrowers is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and any other Borrower are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. 102 SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. Each of the Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any of the Borrowers or Affiliates thereof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrowers and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH 103 OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrowers have been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrowers shall not be 104 required to deal with more than one such servicing entity at any time. Lender shall notify the Borrowers in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, Lender shall have the right, at the Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [signatures follow on next page] 105 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWERS: [LODGIAN ENTITIES] LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:_____________________________________________ Name: Title: LIST OF EXHIBITS AND SCHEDULES Exhibit A - Properties Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts Exhibit E - Management Agreements Exhibit F - [Reserved] Exhibit G - Property Improvement Plans Exhibit H - [Reserved] Exhibit I - Acceptable Franchisors Exhibit J - Property Condition Reports Exhibit K - Zoning Reports Exhibit L - Certificate Re: Work Reserves Schedule 1 - Borrowers Schedule 2.4 - Scheduled Mortgage Principal Payments Schedule 2.12(G) - Crossed Loans/Crossed Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.5 - Condemnation Proceedings Schedule 4.5(A) - Rights to Purchase/Rights of First Offer Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 5.14 - Material Agreements Schedule 6.5 - Required Capital Improvements Schedule 6.6 - Environmental Work/O&M Plans Schedule 6.7 - Reserve Funding Condition List of Exhibits and Schedules EXHIBIT A PROPERTIES 1. Residence Inn, 1401 South Shackleford Rd., Little Rock , AR 2. Courtyard by Marriott, 3835 Technology Drive, Paducah, KY 3. Hilton Inn, 5485 Twin Knolls Rd., Columbia , MD 4. Holiday Inn, 999 West Partick St., Frederick , MD 5. Hilton Inn, 5500 Crooks Rd., Troy (Northfield) , MI 6. Courtyard by Marriott, 4350 Ridgemont Dr., Abilene , TX 7. Holiday Inn Select, 4441 Highway, 114 & Ester Blvd., Irving (DFW Airport), TX 8. Crowne Plaza, 12801 NW Freeway US 290, Houston , TX 9. Holiday Inn, 930 East Old Grafton Rd., Fairmont, WV Exhibit A EXHIBIT B ENVIRONMENTAL REPORTS Exhibit B EXHIBIT C FRANCHISE AGREEMENTS Exhibit C EXHIBIT D ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS Exhibit D EXHIBIT E MANAGEMENT AGREEMENTS Exhibit E EXHIBIT F [RESERVED] Exhibit F EXHIBIT G PROPERTY IMPROVEMENT PLANS None EXHIBIT H [RESERVED] Exhibit H EXHIBIT I ACCEPTABLE FRANCHISORS Exhibit I EXHIBIT J PROPERTY CONDITION REPORTS Exhibit J EXHIBIT K ZONING REPORTS Exhibit K EXHIBIT L CERTIFICATE RE: WORK RESERVES Exhibit L SCHEDULE 1 BORROWERS Schedule 1 SCHEDULE 2.4 SCHEDULED MORTGAGE PRINCIPAL PAYMENTS Schedule 2.4 SCHEDULE 2.12(G) CROSSED LOANS/CROSSED BORROWERS Schedule 2.12(G) SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan and Security Agreement 2. Note 3. Mortgages 4. Assignments of Leases 5. Assignments of Agreements, Licenses, Permits and Contracts 6. Assignments of Hotel Management Agreements 7. Guaranty of Recourse Obligations 8. Environmental Indemnity 9. Deposit Account Agreements 10. Financing Statements 11. Cash Management Agreement 12. Borrower's Closing Certificate under Section 3.1(D) 13. Closing Certificate of Lodgian, Inc. 14. Cooperation Agreement 15. Agreement Regarding Right of First Offer 16. Contribution Agreement 17. Cross-Guaranty 18. Post Closing Agreement Schedule 3.1(A) SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES Schedule 4.1(C) SCHEDULE 4.2 CONSENTS None Schedule 4.2 SCHEDULE 4.5 CONDEMNATION PROCEEDINGS None. Schedule 4.5 SCHEDULE 4.5(A) RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER Schedule 4.5(A) SCHEDULE 4.7(B) RENT ROLL Schedule 4.7(B) SCHEDULE 4.7(E) FRANCHISE DEFAULTS Schedule 4.7(E) SCHEDULE 4.9 LITIGATION None Schedule 4.9 SCHEDULE 4.14 ERISA PLANS 1. Lodgian, Inc. 401(k) Plan. 2. Lodgian, Inc. Employee Health & Welfare Plan. 3. Multiemployer Plans covering employees of the following unions: Hotel Employees & Restaurant Employees Local 24 (Northfield, MI) (pension, welfare) International Union of Operating Engineers - Local 547 - A, B, C, E, H, (Northfield, MI) (pension, welfare) Schedule 4.14 SCHEDULE 4.20 INSURANCE Schedule 4.20 SCHEDULE 4.28 COLLECTIVE BARGAINING AGREEMENTS
DATE OF HOTEL BORROWER UNION AGREEMENT - ----------------------- -------------------------- ---------------------------------------------- --------- Hilton - Northfield, MI NH Motel Enterprises, Inc. Hotel Employees and Restaurant Employees Union 11/1/03 Local 24 Hilton - Northfield, MI NH Motel Enterprises, Inc. The International Union of Operating 10/1/03 Engineers, Local 547
Schedule 4.28 SCHEDULE 5.14 MATERIAL AGREEMENTS Agreement between PFG Broadline and Lodgian, Inc. dated July 1, 2003. Agreement between Harbor Linen and Lodgian, Inc. dated March 1, 2002. Various agreements between the Borrowers and On Command Video Corporation. Group booking contract between Albany Hotels, Inc, and Southwest Airlines dated Schedule 5.14 SCHEDULE 6.5 REQUIRED CAPITAL IMPROVEMENTS Schedule 6.5 SCHEDULE 6.6 ENVIRONMENTAL WORK/ O&M WORK Schedule 6.6 SCHEDULE 6.7 RESERVE FUNDING CONDITIONS 1. The Borrowers shall have submitted to Lender a written request for disbursement at least five (5) days prior to the date on which the Borrowers request such disbursement be made, specifying the specific Work or for which the disbursement is requested and such other information (such as the price of materials and the cost of contracted labor or other services) as Lender may reasonably require, which request must be on a form specified or approved by Lender; 2. On the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured; 3. Lender shall have received a certificate from the Borrowers stating that all Work at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with any plans and specifications approved by Lender and all legal requirements of any Governmental Authority having jurisdiction over the Property, such certificate to be accompanied, in either case, by a copy of any license, permit or other approval by any Governmental Authority required to commence (only for the first advance with respect to each distinct item of work) and/or complete (only for the final advance with respect to each distinct item of work) such Work; 4. Lender shall have received a certificate from the Borrowers stating that each Person that supplied materials or labor in connection with the Work to be funded by the requested disbursement has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by copies of invoices for all items or materials purchased and all contracted labor or services provided, and, with respect to Work relating to mold, a certificate of a Certified Industrial Hygienist that the such Work has been completed in conformity with applicable mold clean-up procedures promulgated by the applicable Governmental Authority within the state in which the applicable Property is located, or, if no such procedures exist, in conformity with the New York City Department of Health or the United States Environmental Protection guidelines for mold related clean-up work; 5. Lender shall have received appropriate lien waivers (including final lien waivers) from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $10,000 for completion of its work or delivery of its materials, which lien waivers shall conform to the requirements of applicable law and shall cover all work performed and materials supplied (including equipment and fixtures) for a Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current disbursement request; and 6. At Lender's option, Lender shall have received a title search for the Property effective to the date of the disbursement, which search shows that no mechanic's or materialmen's liens or other Liens of any nature have been placed against the Property since the date of recordation of the applicable Mortgage and that title to the Property is free and clear of all Liens (other than the Permitted Encumbrances). Schedule 6.7 EX-10.27.2 23 g87458a3exv10w27w2.txt EX-10.27.2 FORM OF PROMISSORY NOTE EXHIBIT 10.27.2 FORM OF PROMISSORY NOTE $_____________ JUNE ___, 2004 FOR VALUE RECEIVED, the undersigned, each having an address at c/o Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (each, a "Borrower" and, collectively, the "Borrowers"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "Lender"), having an address at Four World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of _______ _________________________________Dollars ($_____________), with interest on the unpaid principal balance from the date of this Note, until paid, at the Interest Rate (as hereinafter defined) in effect from time to time hereunder. This Promissory Note may be referred to herein as the "Note," and the loan evidenced hereby may be referred to herein as the "Loan." PAYMENTS OF PRINCIPAL AND INTEREST. The Borrowers shall make a payment on the date hereof to Lender of interest only on the outstanding principal balance of this Note at the Interest Rate (hereinafter defined), from the date hereof through and including the last day of the calendar month in which this Note is executed. Commencing on August 1, 2004 (the "First Payment Date") and on the first day of each calendar month (each, a "Payment Date") thereafter to and including the Maturity Date (hereinafter defined), the Borrowers shall make payments to Lender of interest and principal in monthly installments in the amounts set forth on Schedule 1 attached hereto and made a part hereof (the "Monthly Debt Service Payment Amounts"). The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon and all other amounts due hereunder and under the other Loan Documents (collectively the "Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the "Maturity Date"). Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest on this Note shall be payable in arrears. DEFINITIONS. The term "Interest Rate" as used in this Note shall have the meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined). SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered pursuant to that certain Loan and Security Agreement, dated as of the date hereof (the "Loan Agreement"), among the Borrowers and Lender and is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, each dated as of the date hereof (collectively, the "Mortgages"), each executed by the applicable Borrower, encumbering the fee interests or ground lessee's interests of such Borrower, as applicable, in and to certain properties more particularly described therein (collectively, the "Properties"). This Note, the Loan Agreement, the Mortgages, and all other documents or instruments given by the Borrowers or any of them or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Note may be referred to as the "Loan Documents." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement. DEFEASANCE. A. Notwithstanding anything to the contrary contained in this Note, the Mortgages or the other Loan Documents, at any time after the earlier to occur of (x) the second (2nd) anniversary of the date that is the "startup day," within the meaning of Section 860G of the Internal Revenue Code of 1986, as amended from time to time or any successor statute (the "Code"), of a "real estate mortgage investment conduit," within the meaning of Section 860D of the Code, that holds this Note and (y) forty-eight (48) months after the date of this Note, the Borrowers shall have the right to defease all or any portion of the Loan evidenced by this Note with U.S. Government Securities (a "Defeasance"); provided that a partial Defeasance of this Note shall be permitted only in connection with the release of one or more of the Properties from the lien of the Mortgages and the other Loan Documents in accordance with Section 11.4 of the Loan Agreement and upon the satisfaction of the following conditions precedent (all of which conditions shall become covenants upon occurrence of the Defeasance): (i) The Borrowers shall provide to Lender not less than thirty (30) days' prior written notice specifying the date on which the Defeasance Deposit (hereinafter defined) is to be made (the date so specified may be referred to as the "Defeasance Election Date"). (ii) The Borrowers shall pay to Lender on the Defeasance Election Date all interest accrued and unpaid on the outstanding principal amount of this Note due through the Defeasance Election Date, or through the end of the Interest Accrual Period during which the Defeasance Election Date occurs if the Defeasance Election Date is other than a Payment Date, and the scheduled principal amortization payment due on such Defeasance Election Date, or due upon the next succeeding Payment Date if the Defeasance Election Date is other than a Payment Date, together with all other amounts, if any, then due and payable under this Note, the Mortgages and the other Loan Documents. (iii) The Borrowers shall irrevocably deposit with Lender an amount of U.S. Government Securities (hereinafter defined) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due dates of the payments owing hereunder, cash in an amount sufficient, without reinvestment, in the opinion of a firm of independent certified public accountants reasonably acceptable to Lender expressed in a written certification thereof delivered to Lender (the "CPA Certificate"), (1) with respect to a total Defeasance, to pay and discharge the Scheduled Defeasance Payments (hereinafter defined) for the principal balance of this Note or (2) with respect to a partial Defeasance in connection with the release of one or more Properties, to pay and discharge the Scheduled Defeasance Payments relating to the Release Price for such Property or Properties (the U.S. Government Securities so deposited together with any interest or other increase from the issuer of the securities earned thereon, and any replacements thereof, shall be referred to herein as the "Defeasance Deposit"). All such U.S. Government Securities, if in registered form, shall be registered in the name of Lender or its nominee (and, if registered in nominee's name, endorsed to Lender or in blank) and, if issued in book-entry form, the name of Lender or its 2 nominee shall appear as the owner of such securities on the books of the Federal Reserve Bank or other party maintaining such book-entry system. (iv) The Borrowers shall cause the following to be delivered to Lender on or prior to the Defeasance Election Date, all in form and substance reasonably satisfactory to Lender: (a) a security agreement, in form and substance reasonably satisfactory to Lender, creating a first priority lien on the Defeasance Deposit (the "Defeasance Security Agreement"); (b) the CPA Certificate; (c) a certificate of the Borrowers certifying that all requirements for the Defeasance set forth herein have been satisfied; (d) an opinion of counsel for the Borrowers in form and substance reasonably satisfactory to Lender to the effect that (i) Lender has a perfected first priority security interest in the Defeasance Deposit, (ii) the holder of this Note will not recognize additional income, gain or loss for United States federal income tax purposes as a result of the Defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Defeasance had not occurred, (iii) any holder, trustee or custodian of this Note which is a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code will not fail to maintain its status as such as a result of the Defeasance and (iv) the Defeasance Security Agreement is enforceable against the Borrowers in accordance with its terms; (e) evidence in writing from the applicable Rating Agencies for any Securities backed in whole or in part by this Note, to the effect that the Defeasance will not result in a downgrading, withdrawal, or qualification of the ratings in effect immediately prior to such Defeasance for any class of such then outstanding Securities; (f) evidence reasonably satisfactory to Lender that each of the Borrowers remains validly existing and in good standing under the laws of the state where it is organized and, to the extent required by applicable law, qualified to do business in the state where its respective Property is located; and the Borrowers shall maintain such existence during the time thereafter when this Note shall be outstanding (unless a Successor Borrower (hereinafter defined) assumes the obligations of each of the Borrowers or the Defeasing Borrower(s) (as hereinafter defined), as the case may be, under this Note); and (g) a certificate of the Borrowers certifying that all of the representations, and warranties contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects as of the Defeasance Election Date and ratifying all of the covenants and obligations of the Borrowers under the Loan Documents as of such date and such other certificates, documents or instruments as Lender may reasonably request or as may be required by the Rating Agencies referred to above, provided that such certificates, documents or instruments shall not increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents. 3 (v) Either (1) each of the Borrowers in the case of a total Defeasance, or the Defeasing Borrower(s) in the case of a partial Defeasance shall deliver to Lender a certificate stating that at all times following the Defeasance, the Borrowers or the Defeasing Borrower(s), as the case may be, shall have no interest in any assets other than the Defeasance Deposit, or (2) such Borrower(s) shall satisfy all of the requirements of Section C below. (vi) The Borrowers shall pay to Lender all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender in connection with the Defeasance. (vii) In the event only a portion of the Loan evidenced by this Note is the subject of the Defeasance in connection with the release of any Lien of any applicable Mortgage on one or more individual Properties under Section 11.4 of the Loan Agreement, the Borrowers shall execute and deliver all necessary documents to amend and restate this Note and issue two substitute promissory notes therefor: one note having a principal balance equal to the defeased portion of the original Note (the "Defeased Note") and one note having a principal balance equal to the undefeased portion of the original Note (the "Undefeased Note"). The Defeased Note and the Undefeased Note shall have identical terms as the original Note (and the Defeased Note and the Undefeased Note or Notes shall be cross-defaulted with each other), except for the principal balance. A Defeased Note cannot be the subject of any further Defeasance. An Undefeased Note may be the subject of a further Defeasance in accordance with the terms of this Note and the Loan Agreement (the term "Note", as used above in this clause (vii) for these purposes, being deemed to refer to the Undefeased Note that is the subject of further defeasance); provided, however, that no such partial Defeasance shall take place unless the conditions hereof and the conditions of Section 11.4 of the Loan Agreement are satisfied. B. Upon compliance with the requirements of Section A above and compliance with the requirements of Section 11.4 of the Loan Agreement, Lender shall cause each of the Properties, in the case of a total Defeasance, or each Defeased Property (as hereinafter defined), in the case of a partial Defeasance, to be released from the lien of the applicable Mortgages and the other applicable Loan Documents. The obligations under the Loan Documents with respect to the Properties or each Defeased Property, as the case may be, shall no longer be applicable, and the Defeasance Deposit shall be the sole source of collateral securing this Note or the Defeased Note, as the case may be. Lender shall apply the Defeasance Deposit and the payments received therefrom to the payment of all scheduled principal and interest payments due on all successive Payment Dates under this Note or the Defeased Note, as the case may be, after the Defeasance Election Date to and including the Maturity Date and to payment of the entire remaining Debt or the entire remaining principal balance, accrued and unpaid interest and other sums due under the Defeased Note, as the case may be, on the Maturity Date (collectively, the "Scheduled Defeasance Payments"). The Borrowers, pursuant to the Defeasance Security Agreement or other appropriate document, shall direct that the payments received from the Defeasance Deposit shall be made directly to Lender and applied to satisfy the obligations of the Borrowers under this Note or the Defeased Note, as the case may be. C. If, after the Defeasance, the Borrowers, in the case of a total Defeasance, or the Defeasing Borrower(s), in the case of a partial Defeasance, will own any assets other than the Defeasance Deposit, the Borrowers or the Defeasing Borrower(s), as the case may be, shall 4 establish or designate a single-purpose, bankruptcy-remote successor entity acceptable to Lender (the "Successor Borrower"), with respect to which a nonconsolidation opinion reasonably satisfactory in form and substance to Lender and any applicable Rating Agencies shall be delivered to Lender and such Rating Agencies, in which case the Borrowers or the Defeasing Borrower(s), as the case may be, shall transfer and assign to the Successor Borrower all of their respective obligations, rights and duties under this Note or the Defeased Note, as the case may be, and the Defeasance Security Agreement, together with the pledged Defeasance Deposit. The Successor Borrower shall assume the obligations of the Borrowers or the Defeasing Borrower(s), as the case may be, under this Note or the Defeased Note, as the case may be, and the Defeasance Security Agreement, and such Borrower(s) shall be relieved and released of their respective obligations hereunder and thereunder. Each of the Borrowers or the applicable Defeasing Borrower(s), as the case may be, shall pay not less than $1,000 to the Successor Borrower as consideration for assuming such Borrower's obligations. D. As used herein, the following terms shall have the following meanings: (i) "Defeased Property" shall mean any Property being released from the lien of the Mortgage relating to such Property pursuant to a partial Defeasance in accordance with the provisions of this Note and Section 11.4 of the Loan Agreement. (ii) "U.S. Government Securities" shall mean securities that are (i) direct obligations of the United States of America for the full and timely payment of which its full faith and credit is pledged or (ii) obligations of an entity controlled or supervised by and acting as an agency or instrumentality and guaranteed as a full faith and credit obligation which shall be fully and timely paid by the United States of America, which in either case are not callable or redeemable at the option of the issuer thereof (including a depository receipt issued by a bank (as defined in Section 3(a)(2) of the United States Securities Act)) as custodian with respect to any such U.S. Government Securities or a specific payment of principal of or interest on any such U.S. Government Securities held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the securities or the specific payment of principal of or interest on the securities evidenced by such depository receipt. (iii) "Defeasing Borrower" shall mean the Borrower owning or leasing, as the case may be, a Defeased Property. (iv) "Release Price" shall have the meaning set forth in the Loan Agreement. E. If, after payment in full of all obligations evidenced by this Note or any other of the Loan Documents, any of the Defeasance Deposit remains, such remaining balance of the Defeasance Deposit shall be returned to the Borrowers (or to the Successor Borrower, as the case may be) or Lender shall assign to the Borrowers (or the Successor Borrower, as the case may be) all of Lender's right, title, and interest in the Government Securities constituting the Defeasance Deposit. 5 PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrowers may not prepay this Note in whole or in part at any time except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the occurrence of any Event of Default, then at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Note or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Note shall bear interest until paid in full at a rate per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under this Note. The Borrowers agree that such late charges and Default Rate of interest are reasonable and do not constitute a penalty. LAWFUL INTEREST. Notwithstanding any provision to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Note or the Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, 6 the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the applicable Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the applicable Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of the Borrowers or their successors or assigns to pay the outstanding principal balance of this Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Mortgages or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of any Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by the Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note shall be binding upon the Borrowers and their successors and assigns. EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan Agreement, Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Note, the Loan Agreement, the Mortgages and any or all of the other Loan Documents. Lender shall be released of any obligations to the extent that the same are so assigned or transferred, and the rights and obligations of "Lender" hereunder shall become the rights and obligations of the transferee holder. LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of the Borrowers hereunder are limited in accordance with Article XII of the Loan Agreement. This 7 provision shall not limit any rights of Lender under the Guaranty of Recourse Obligations or the Environmental Indemnity, each dated as of the date hereof. ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrowers shall pay to Lender on demand all out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by the Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York and applicable federal law. TIME OF ESSENCE. Time shall be of the essence as to all of the terms, covenants and conditions of this Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, the Borrowers shall be required to make such payment on the next succeeding Business Day. JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of the Borrowers hereunder shall be joint and several. [NO ADDITIONAL TEXT ON THIS PAGE] 8 IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the date first written above. BORROWERS: [LODGIAN ENTITIES] By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory SCHEDULE 1 MONTHLY DEBT SERVICE PAYMENT AMOUNTS EX-10.27.3 24 g87458a3exv10w27w3.txt EX-10.27.3 FORM OF GUARANTY OF RECOURSE OBLIGATION EXHIBIT 10.27.3 FORM OF GUARANTY OF RECOURSE OBLIGATIONS This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of June __, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"), having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "LENDER"). R E C I T A L S: A. Pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as the same may be amended, modified, supplemented or restated from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein (each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has agreed to make a loan to Borrowers in the aggregate original principal amount of up to **[_____________________]** (the "LOAN"), subject to the terms and conditions of the Loan Agreement; B. As a condition to Lender's making the Loan, Lender is requiring that Guarantor execute and deliver to Lender this Guaranty; and C. Guarantor hereby acknowledges that Guarantor holds a direct and/or indirect ownership interest in each Borrower and that Guarantor will materially benefit from Lender's agreeing to make the Loan. NOW, THEREFORE, in consideration of the premises set forth herein and as an inducement for and in consideration of the agreement of Lender to make the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor hereby agrees, covenants, represents and warrants to Lender as follows: SECTION 1. DEFINITIONS. All capitalized terms used and not defined herein shall have the respective meanings given such terms in the Loan Agreement. SECTION 2. GUARANTY. (a) Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) hereby irrevocably, absolutely and unconditionally assumes liability for, guarantees payment to Lender of, and agrees to pay, protect, defend, indemnify and save harmless Lender from and against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter defined). The obligations which are the subject of the guaranty referred to in this Section 2 are hereinafter collectively referred to as the "GUARANTEED OBLIGATIONS". (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used in this Guaranty shall mean all obligations and liabilities of Borrowers for which Borrowers shall be personally liable under the provisions of Section 12.2 of the Loan Agreement. (c) All sums payable to Lender under this Guaranty shall be payable on demand and without reduction for any offset, claim, counterclaim or defense. SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to Lender as follows (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Guaranty): (a) DUE EXECUTION. This Guaranty has been duly executed and delivered by Guarantor. (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, or application of general principles of equity in any legal proceeding. (c) NO VIOLATION. The execution, delivery and performance by Guarantor of its obligations under this Guaranty do not violate any law, regulation, order, writ, injunction or decree of any court or governmental body, agency or other instrumentality applicable to Guarantor, or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the assets of Guarantor pursuant to the terms of any mortgage, indenture, agreement or instrument to which Guarantor is a party or by which it or any of its properties is bound. Guarantor is not in default under any other guaranty which it has provided to Lender. (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan Agreement, there are no actions, suits or proceedings at law or at equity, pending or, to Guarantor's knowledge, threatened against or affecting Guarantor or which involve or could reasonably be expected to involve the validity or enforceability of this Guaranty or which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. Guarantor is not in default beyond any applicable grace or cure period with respect to any order, writ, injunction, decree or demand of any Governmental Authority which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. (e) CONSENTS. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities (collectively, the "CONSENTS") that are required in connection with the valid execution, delivery and performance by Guarantor of this Guaranty have been obtained and Guarantor agrees that all Consents required in connection with the carrying out or performance of any of Guarantor's obligations under this Guaranty will be obtained when required. (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial statements of Guarantor heretofore delivered to Lender fairly present the financial condition of Guarantor as of 2 the respective dates thereof, and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. None of the aforesaid financial statements or any certificate or statement furnished to Lender by or on behalf of Guarantor in connection with the transactions contemplated hereby, and none of the representations and warranties in this Guaranty contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading. Guarantor is not insolvent within the meaning of the Bankruptcy Code or any other applicable law, code or regulation and the execution, delivery and performance of this Guaranty will not render Guarantor insolvent. SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the benefit of Lender that Guarantor will deliver to Lender each of the financial statements required to be delivered pursuant to Section 5.1 of the Loan Agreement. SECTION 5. INTENTIONALLY DELETED. SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR. (a) The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Loan Agreement, the Mortgages or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any Borrower, Guarantor or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Borrowers under the Note, the Loan Agreement, the Mortgages or any other Loan Documents or Guarantor under this Guaranty, or any setoff, counterclaim, and irrespective of any other circumstances which might otherwise limit recourse against Guarantor by Lender or constitute a legal or equitable discharge or defense of a guarantor or surety. Lender may enforce the obligations of Guarantor under this Guaranty by a proceeding at law, in equity or otherwise, independent of any loan foreclosure or similar proceeding or any deficiency action against Borrowers or any other Person at any time, either before or after an action against the Properties or any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION. Guarantor waives diligence, notice of acceptance of this Guaranty, filing of claims with any court, any proceeding to enforce any provision of the Note, the Loan Agreement, the Mortgages or any other Loan Documents, against Guarantor, Borrowers or any other Person, any right to require a proceeding first against Borrowers or any other Person, or to exhaust any security (including, without limitation, the Properties or any of them or any part thereof) for the performance of the Guaranteed Obligations or any other obligations of Borrowers or any other Person, or any protest, presentment, notice of default (except as may be expressly required under the Loan Documents) or other notice or demand whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not be discharged of its obligations hereunder. (b) The obligations of Guarantor under this Guaranty, and the rights of Lender to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: 3 (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower, any Property or any part thereof, Guarantor or any other Person; (ii) any failure by Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Loan Agreement, or any other Loan Documents, or any document or instrument relating thereto; (iii) except (A) with respect to activities occurring after the date of a Permitted Assumption or, (B) activities relating to a Released Property after the date of a Release with respect thereto, the sale, transfer or conveyance of any Property or any interest therein to any Person, whether now or hereafter having or acquiring an interest in any Property or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against any Borrower or any Property or any interest therein; (iv) the conveyance to Lender, any Affiliate of Lender or Lender's nominee of any Property or any interest therein by a deed-in-lieu of foreclosure; (v) the release of any Borrower or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise; (vi) the release in whole or in part of any collateral for any or all Guaranteed Obligations or for the Loan or any portion thereof; or (vii) the exercise by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan Documents, including, without limitation, foreclosure or similar remedies under any pledge agreement encumbering Mezzanine Borrower's interest in any General Partner, any Member, and/or any Borrower except with respect to actions taken by the Mezzanine Lender following the Mezzanine Lender succeeding to the interests of the Mezzanine Borrowers in and to the Borrowers. (c) Except as otherwise specifically provided in this Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an action brought by Lender to enforce this Guaranty based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise. (d) Lender may deal with Borrowers and Affiliates of Borrowers in the same manner and as freely as if this Guaranty did not exist and shall be entitled, among other things, to grant Borrowers or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Lender, at any time and from time to time, without terminating, affecting or impairing the validity of this Guaranty or the obligations of Guarantor hereunder. (e) No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with 4 respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Loan Agreement, the Mortgages or the other Loan Documents or any amendment, modification or other change of any legal requirement shall in any way alter, impair or affect any of the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan Documents are modified with Lender's consent, the Guaranteed Obligations shall automatically be deemed modified to include such modifications. (f) Lender may proceed to protect and enforce any or all of its rights under this Guaranty by suit in equity or action at law, whether for the specific performance of any covenants or agreements contained in this Guaranty or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Guarantor. Each and every remedy of Lender shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. (g) No waiver shall be deemed to have been made by Lender of any rights hereunder unless the same shall be in writing and signed by Lender, and any such waiver shall be a waiver only with respect to the specific matter involved and shall in no way impair the rights of Lender or the obligations of Guarantor to Lender in any other respect or at any other time. (h) At the option of Lender, Guarantor may be joined in any action or proceeding commenced by Lender against Borrowers in connection with or based upon the Note, the Loan Agreement, the Mortgages or any other Loan Documents and recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor to the extent of Guarantor's liability hereunder, without any requirement that Lender first assert, prosecute or exhaust any remedy or claim against Borrowers or any other Person, or any security for the obligations of Borrowers or any other Person. (i) Guarantor agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Borrowers or Guarantor to Lender and such payment is rescinded or must otherwise be returned by Lender (as determined by Lender in its sole and absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Borrower or Guarantor, all as though such payment had not been made. (j) In the event that Guarantor shall advance or become obligated to pay any sums under this Guaranty or in connection with the Guaranteed Obligations or in the event that for any reason whatsoever any Borrower or any subsequent owner of any Property or any part thereof is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to the lien, the time of payment and in all other respects to all sums, including principal and interest and other amounts, at any time owed to Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive payment thereof until all principal, interest and other sums due pursuant to the Loan Documents have been paid in full. Nothing herein contained is intended or shall be construed to give Guarantor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Lender 5 in or to any collateral for the Loan, notwithstanding any payments made by Guarantor under this Guaranty, until the actual and irrevocable receipt by Lender of payment in full of all principal, interest and other sums due with respect to the Loan or otherwise payable under the Loan Documents. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when any such sums due and owing to Lender shall not have been fully paid, such amount shall be paid by Guarantor to Lender for credit and application against such sums due and owing to Lender. The foregoing shall not prohibit Borrowers from using the proceeds of the Loan for any permitted use under the Loan Agreement, including, without limitation, the making of distributions to Guarantor. (k) Guarantor's obligations hereunder shall survive a foreclosure, delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or similar proceeding involving any Property or any part thereof and the exercise by Lender of any of all of its remedies pursuant to the Loan Documents. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Guarantor under this Guaranty shall survive for a period of two (2) years following payment in full of the Obligations in accordance with the terms of the Loan Documents, provided, however, in the event that any Guaranteed Obligations or liabilities of the Guarantor under this Guaranty shall have arisen prior to the expiration of such period, then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Guarantor hereunder shall survive. SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED, AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN INSTRUMENT SIGNED BY LENDER AND GUARANTOR. SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor, and its successors and assigns, may not be assigned or delegated by Guarantor and shall inure to the benefit of Lender and its successors and assigns. Lender shall have the right to assign this Guaranty and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. All references to "Lender" hereunder shall be deemed to include the successors and assigns of Lender and the parties hereto acknowledge that actions taken by Lender hereunder may be taken by Lender's agents and by the agents of the successors and assigns of Lender. SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the City and County of New York or in the Courts of the United States of America located in the Southern District of New York, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Guarantor at its address set forth on the first page hereof. Nothing in this Section 9, however, shall affect the right of 6 Lender to serve legal process in any other manner permitted by law or affect the right of Lender to bring any suit, action or proceeding against Guarantor or its property in the courts of any other jurisdictions. SECTION 10. SECTION HEADINGS. The headings of the sections and paragraphs of this Guaranty have been inserted for convenience of reference only and shall in no way define, modify, limit or amplify any of the terms or provisions hereof. SECTION 11. SEVERABILITY. Any provision of this Guaranty which may be determined by any competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Guarantor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH. SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL LIABILITY. (a) The obligations of Guarantor hereunder are separate and distinct from, and in addition to, the obligations of Guarantor now or hereafter arising under the other guaranties pursuant to which Guarantor has guaranteed the payment and performance of certain other obligations of Borrowers described therein. (b) If there is more than one entity comprising Guarantor, all references to Guarantor herein shall be to Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) or any one or more of them. All obligations and liabilities of Guarantor hereunder are in addition to, not in lieu of and are independent of: (i) all obligations of Borrowers under any other Loan Document, including the Note and the Loan Agreement; and (ii) any obligation of Guarantor under any other Loan Document to which Guarantor is a party. (c) If there is more than one entity comprising Guarantor, all obligations of Guarantor hereunder shall be joint and several. SECTION 14. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder to Lender or Guarantor or which are given to Lender or Guarantor with respect to this Guaranty shall be in writing and shall be delivered to Lender at the address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the address set forth on the first page hereof, each in the manner provided in Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less than ten (10) days' prior written notice of any change in the location of Guarantor's principal place of business. SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its execution hereof acknowledges receipt of true copies of all of the Loan Documents, the terms and conditions of which are hereby incorporated herein by reference. 7 SECTION 16. INTEREST; EXPENSES. (a) If Guarantor fails to pay all or any sums due hereunder within ten (10) days of demand by Lender, the amount of such sums payable by Guarantor to Lender shall bear interest from the date of demand until paid at the Default Rate in effect from time to time. (b) Guarantor hereby agrees to pay all reasonable out of pocket costs, charges and expenses, including, without limitation, reasonable attorneys' fees and disbursements, that may be incurred by Lender in enforcing the covenants, agreements, obligations and liabilities of Guarantor under this Guaranty. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written. GUARANTOR: LODGIAN, INC., a Delaware corporation By: ____________________________ Name: Daniel E. Ellis Title: Senior Vice-President EX-10.28 25 g87458a3exv10w28.txt EX-10.28 FORM OF CROSS-GUARANTY EXHIBIT 10.28 FORM OF CROSS-GUARANTY THIS CROSS-GUARANTY (this "Agreement" or "Guaranty"), made as of June ___, 2004, from the parties listed as Guarantors on the signature pages hereto (collectively, the "Guarantors"), each having an address at c/o Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 to MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World Financial Center, 16th Floor, 250 Vesey Street, New York, New York 10080 (together with its successors and assigns, "Lender"). WITNESSETH: WHEREAS, Lender has agreed to make three (3) loans (respectively, the "Pool 2 Loan," "Pool 3 Loan," and "Pool 4 Loan," and collectively, the "Loans") to the respective borrowers described on Exhibit A (respectively, the "Pool 2 Borrowers," "Pool 3 Borrowers," and "Pool 4 Borrowers," and collectively, the "Borrowers"), in the amounts set forth on Exhibit A; and WHEREAS, to evidence the respective Loans, the respective Borrowers have executed and delivered those certain Promissory Notes, each dated as of the date hereof, in the principal amounts of the respective Loans (respectively, "Note 2," "Note 3" and "Note 4," and collectively, the "Notes"), pursuant to those certain Loan and Security Agreements, each dated as of the date hereof, among the respective Borrowers and Lender as more particularly described on Exhibit A (respectively, "Loan Agreement 2," "Loan Agreement 3" and "Loan Agreement 4," and collectively, the "Loan Agreements"); and WHEREAS, capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the respective Loan Agreements or Guarantor Loan Agreement (hereinafter defined), as applicable; and WHEREAS, the Notes shall be secured by, among other things, the Mortgages encumbering the Properties; and WHEREAS, simultaneously with the making of the Loans, Guarantors are obtaining a loan in the amount of $63,801,000 (the "Guarantor Loan") from Lender pursuant to that certain Loan and Security Agreement, dated as of the date hereof, by and between the Guarantors and Lender (the "Guarantor Loan Agreement"; and together with the other documents and agreements evidencing and/or securing the Guarantor Loan, collectively, the "Guarantor Loan Documents"); and WHEREAS, it is a condition precedent to Lender making the Guarantor Loan to Guarantors that Guarantors, among other things, guaranty the Loans pursuant to this Guaranty and grant to Lender Mortgages on the Properties (as defined in the Guarantor Loan Agreement, and hereinafter referred to as the "Guarantor Properties") as security for their obligations hereunder; and WHEREAS, Guarantors shall derive substantial economic benefits from the simultaneous making of the Guarantor Loan and Loans by Lender to Guarantors and Borrowers, respectively; and WHEREAS, as a condition precedent to the making of the Loans, Borrowers have agreed to procure and deliver to Lender this Agreement; and WHEREAS, Lender has declined to make the Loans or the Guarantor Loan unless this Agreement is duly executed by Guarantors and delivered to Lender. NOW, THEREFORE, in consideration for, and as an inducement to, Lender's making the Loans and the Guarantor Loan, and for other good and valuable consideration the legal sufficiency of which and receipt thereof are hereby acknowledged, and notwithstanding any provision to the contrary contained in the Guarantor Loan Agreement, the Guarantor Loan Documents, the Loan Agreements, the Notes, the Mortgages or any of the other Loan Documents, but subject to the provisions of Article XII of the Guarantor Loan Agreement, Lender and Guarantors do hereby agree as follows: 1. Guarantors, on behalf of themselves and their successors and assigns (collectively, "Successors") do hereby absolutely, unconditionally, irrevocably and personally: (i) guaranty to Lender the full and prompt payment and performance when due of the Loans and all other Obligations of the Borrowers under the Loan Agreements and (ii) agree to reimburse Lender for, and hold Lender harmless from and against, any and all losses, damages, claims, expenses, deficiencies, liabilities and costs (including, without limitation, reasonable attorneys' fees and disbursements) incurred, suffered or sustained by Lender and/or its successors and assigns as a result of or arising out of, in connection with or resulting from, the enforcement of this Agreement against Guarantors (the obligations of Guarantors under clauses (i) and (ii) above being referred to hereinafter, collectively, as "Guarantors' Obligations"). Notwithstanding the foregoing, or anything else to the contrary contained herein, in the event that any of the Guarantors shall become an Excluded Borrower and the Guarantor Loan shall become an Excluded Loan pursuant to Lender's election under Section 2.12(G) of the Guarantor Loan Agreement to cause any of the Loans to no longer be secured by the Guarantor Properties, this Guaranty shall automatically terminate and shall be of no further force or effect. 2. It is agreed that the obligations of Guarantors hereunder shall be primary and this Agreement shall be enforceable against Guarantors and their Successors without the necessity for any suit or proceeding of any kind or nature whatsoever brought by Lender against Borrowers or their respective successors or assigns or any other party or against any security for the payment of the Guarantors' Obligations and without the necessity of any notice of non-payment or non-observance or of any notice of acceptance of this Agreement or of any notice of demand to which Guarantors might otherwise be entitled (including, without limitation, diligence, presentment, notice of maturity, extension of time, protest, notice of dishonor or default, change in nature or form of the Guarantors' Obligations, acceptance of further security, release of further security, imposition or agreement arrived at as to the amount of or the terms of the Guarantors' Obligations, notice of adverse change in Borrowers' financial condition and any other fact that might materially increase the risk to Guarantors), all of which Guarantors hereby expressly waive. Guarantors hereby expressly agree that the validity of this Agreement and the obligations of Guarantors hereunder shall in no way be terminated, affected, diminished, modified or impaired by reason of the assertion of or the failure to assert by Lender against Borrowers, or their successors or assigns, any of the rights or remedies reserved to Lender pursuant to the provisions of the Guarantor Loan Agreement, the Loan Agreements, the Notes, the Mortgages or any other Loan Documents. 3. Guarantors waive, and covenant and agree that they will not at any time insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any and all appraisal, valuation, stay, extension, marshaling-of-assets or redemption laws, or right of homestead or exemption, whether now or at any time hereafter in force, that may delay, prevent or otherwise affect the performance by Guarantors of their obligations under, or the enforcement by Lender of, this Agreement. Guarantors further covenant and agree not to set up or claim any defense, counterclaim, cross-claim, offset, set-off, right of recoupment, or other objection of any kind to any action, suit or proceeding in law, equity or otherwise, or to any demand or claim that may be instituted or made by Lender hereunder other than the 2 defense of the actual timely performance of Guarantors' Obligations hereunder. Guarantors represent, warrant and agree that, as of the date hereof, their obligations under this Agreement are not subject to any counterclaims, cross-claims, rights of recoupment, offsets or affirmative or other defenses of any kind against Lender. 4. Guarantors agree that any notice or directive given at any time by Guarantors to Lender that is inconsistent with any waiver contained in this Agreement shall be void and may be ignored by Lender, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Agreement for the reason that such pleading or introduction would be at variance with the written terms of this Agreement, unless Lender has specifically agreed otherwise in a writing, signed by a duly authorized officer. Guarantors specifically acknowledge and agree that the foregoing waivers are of the essence of the Loan transaction and that, but for this Agreement and such waivers, Lender would not make the Loans to Borrowers. 5. The provisions of this Agreement are for the benefit of Lender and its successors and assigns, and nothing herein contained shall impair, as between Borrowers and Lender, the obligations of Borrowers under the Loan Agreements, the Notes, the Mortgages or any of the other Loan Documents. 6. This Agreement shall be a continuing guaranty and the liability of Guarantors hereunder shall in no way be terminated, affected, modified, impaired or diminished (to the extent permitted by law) by reason of the happening, from time to time, of any of the following, although without notice or the further consent of Guarantors: (a) any assignment, amendment, modification or waiver of or change in any of the terms, covenants, conditions or provisions of the Guarantor Loan Agreement, the Loan Agreements, the Notes, the Mortgages or any of the other Loan Documents or the invalidity or unenforceability of any of the foregoing; or (b) any extension of time that may be granted by Lender to Borrowers, Guarantors or Guarantors' Successors; or (c) any action that Lender or Borrowers may take or fail to take under or in respect of any of the Loan Documents or by reason of any waiver of, or failure to enforce any of the rights, remedies, powers or privileges available to Lender under this Agreement or available to Lender at law, equity or otherwise, or any action on the part of Lender or Borrowers granting indulgence or extension in any form whatsoever; or (d) any dealing, transaction, matter or thing occurring between Lender, Borrowers, Guarantors or Guarantors' Successors; or (e) any sale, exchange, release, or other disposition of any property pledged, Mortgaged or conveyed, or any property in which Lender has been granted a lien or security interest to secure any indebtedness of Borrowers to Lender; or (f) any release of any person or entity who may be liable in any manner for the payment and collection of any amounts owed by Borrowers to Lender (including the other Guarantors); or (g) the application of any sums by whomsoever paid or however realized to any amounts owing by Borrowers to Lender in such manner as Lender shall determine in its sole discretion; or 3 (h) any Event of Default (as such term is defined in the Guarantor Loan Agreement and the Loan Agreements), whether or not Lender has exercised any of its rights and remedies as set forth in the Guarantor Loan Agreement or the Mortgages upon the happening of any such Event of Default; or (i) Borrowers' and/or Guarantors' voluntary or involuntary liquidation, dissolution, sale of all or substantially all of their respective assets and liabilities, appointment of a trustee, receiver, liquidator, sequestrator or conservator for all or any part of Borrowers' or Guarantors' assets, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment, or the commencement of other similar proceedings affecting Borrowers or Guarantors or any of the assets of either of them, including, without limitation, (A) the release or discharge of Borrowers from the payment and performance of their obligations under any of the Loan Documents by operation of law, or (B) the impairment, limitation or modification of the liability of Borrowers, their partners or Guarantors in bankruptcy, or of any remedy for the enforcement of the Guarantors' Obligations, under any of the Loan Documents, or Guarantors' liability under this Agreement, resulting from the operation of any present or future provisions of the Federal Bankruptcy Code or other present or future federal, state or applicable statute of law or from the decision in any court; or (j) any change in or termination of the ownership interest of Guarantors in Borrowers (whether direct or indirect); or (k) any conveyance of the Mortgaged Properties, whether or not pursuant to a foreclosure sale, a deed in lieu of foreclosure, a transfer through bankruptcy, or otherwise. 7. Guarantors acknowledge that this Guaranty and Guarantors' Obligations are and shall at all times continue to be absolute, unconditional and irrevocable in all respects, and shall at all times be valid and enforceable irrespective of any other agreement or circumstances of any nature whatsoever that might otherwise constitute a defense to this Guaranty or the obligations of any other person or party (including, without limitation, Borrower or any other guarantor) relating to this Guaranty or the obligations of Guarantors hereunder. 8. Guarantors agree that if at any time all or any part of any payment at any time received by Lender from Borrowers or Guarantors under or with respect to this Agreement is or must be rescinded or returned by Lender for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Borrowers or Guarantors), then Guarantors' Obligations hereunder shall, to the extent of the payment rescinded or returned, be deemed to have continued in existence notwithstanding such previous receipt by Lender, and Guarantors' Obligations hereunder shall continue to be effective or reinstated, as the case may be, as to such payment, as though such previous payment to Lender had never been made. 9. Until repayment of the Indebtedness (as such term is defined in the Guarantor Loan Agreement and the Loan Agreements) and satisfaction of all of the obligations under the Guarantor Loan Agreement, Guarantors and each of them (a) shall have no right of subrogation against Borrowers, general partner of any Borrower that is a limited partnership or any other Guarantor by reason of any payments or acts of performance by a Guarantor in compliance with the obligations of a Guarantor hereunder; (b) shall have no right of indemnity, contribution, or any other right or cause of action whatsoever under law or equity against any other Guarantor by reason of any payments or acts of performance by a Guarantor in compliance with the obligations of a Guarantor hereunder; (c) hereby waive any right to enforce any remedy that any Guarantors now or hereafter shall have against Borrowers, general partner of any Borrower that is a limited partnership or any other Guarantor by reason of any one 4 or more payments or acts of performance in compliance with the obligations of a Guarantor hereunder; (d) shall subordinate any liability or indebtedness of Borrowers, general partner of any Borrower that is a limited partnership or any Guarantor now or hereafter held by any Guarantor or any affiliate of a Guarantor to the obligations of Borrowers, general partner of any Borrower that is a limited partnership or Guarantor to Lender under the Loan Documents; and (e) shall not file, assert or receive payment on any claim, whether now existing or hereafter arising, against Borrowers, general partner of any Borrower that is a limited partnership or any Guarantor in the event of the commencement of a case by or against Borrowers, general partner of any Borrower that is a limited partnership or any Guarantor under federal or state insolvency laws. 10. Guarantors represent and warrant to Lender, with the knowledge that Lender is relying upon the same, as follows: (a) Guarantors are solvent and have the legal right to enter into this Agreement and to perform their obligations under the terms hereof; (b) to the best of Guarantors' knowledge, there is no action, suit, proceeding or investigation pending or threatened against or affecting Guarantors at law, in equity, in admiralty or before any arbitrator or any governmental department, commission, board, bureau, agency or instrumentality (domestic or foreign) that is likely to result in any material adverse change in the property, assets or condition (financial or otherwise) of Guarantors or that is likely to impair materially the ability of Guarantors to perform their obligations under this Agreement; and (c) all financial statements that have heretofore been furnished by Guarantors to Lender in connection with this Agreement, are true, correct and complete; and fairly present the financial condition of Guarantors, all as of the respective dates thereof. 11. Guarantors and Lender acknowledge and agree that this Agreement is a guaranty of payment and performance and not of collection and enforcement in respect of any of the Guarantors' Obligations. 12. Lender may freely assign any or all of its rights under this Agreement, but any such assignment shall be made only to the subsequent holder of any of the Notes and no such assignment shall increase Guarantors' Obligations or diminish its rights hereunder. In the event of any such assignment, the consent of Guarantors shall not be required for any such assignment and failure to give notice of such assignment shall not affect the validity or enforceability of any such assignment or subject Lender to any liability and Guarantors shall continue to remain bound by and obligated to perform under and with respect to this Agreement. Guarantors shall not assign any of their obligations under this Agreement without the prior consent of the Lender. 13. The representations, warranties and obligations of Guarantor set forth in this Agreement shall survive until this Agreement shall terminate in accordance with the terms hereof. 14. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements relating to such subject matter and may not be modified, amended, supplemented or discharged except by a written agreement signed by Guarantors and Lender. This Agreement also may be discharged by full performance of the Guarantors' Obligations in accordance with the terms hereof, or as otherwise provided herein. 15. If all or any portion of any provision contained in this Agreement shall be determined to be invalid, illegal or unenforceable in any respect for any reason, such provision or portion 5 thereof shall be deemed stricken and severed from this Agreement and the remaining provision and portions thereof shall continue in full force and effect. 16. All notices, requests, demands and other communications under or in connection with this Agreement shall be in writing and shall be deemed to have been given or made (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise the next Business Day). Notices shall be addressed as follows: If to Guarantors: The address listed above With a copy to: Morris Manning & Martin, LLP 3343 Peachtree Rd., NE 1600 Atlanta Financial Center Atlanta, Georgia 30326 Attn.: Thomas Gryboski, Esq. Facsimile: (404) 365-9532 If to Lender: The address listed above With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn.: Robert L. Boyd, Esq. Facsimile: (212) 839-5599 The above addresses may be changed on written notice given as hereinabove provided. Notices may be sent by a party hereto or on its behalf by its attorney. 17. This Agreement shall be binding upon Guarantors and their Successors and shall inure to the benefit of Lender and its successors and assigns. 18. The failure of Lender to enforce any right or remedy hereunder, or promptly to enforce any such right or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel against Lender, nor excuse Guarantors from their obligations hereunder. Any waiver of any such right or remedy to be enforceable against Lender must be expressly set forth in writing signed by Lender. 19. (a) Any suit initiated by Lender against Guarantors or in connection with or arising, directly or indirectly, out of or relating to, this Agreement (an "Action") may, at Lender's option, be brought in any state or federal court in the State of New York, or any state or federal court in which the property is located, having jurisdiction over the subject matter hereof. Guarantors hereby submit themselves to the jurisdiction of any such court and agree that service of process against Guarantors in any such action may be effected by any means permissible under federal law or under the laws of the state in which such Action is brought. Guarantors hereby agree that insofar as is permitted under applicable law, this consent to personal jurisdiction shall be self-operative and no further instrument or action, other than service of process in one of the manners specified in this Guaranty, or as otherwise permitted by law, shall be necessary in order to confer jurisdiction upon Guarantors. 6 (b)Guarantors agree that, provided that service of process is effected upon Guarantors in any manner permitted by law, Guarantors irrevocably waive, to the fullest extent permitted by law, and agree not to assert, by way of motion, as a defense or otherwise, (i) any objection that Guarantors may have or may hereafter have to the laying of the venue of any Action brought in any court as provided for by this Agreement, (ii) any claim that any Action brought in any such court has been brought in an inconvenient forum, or (iii) any claim that Guarantors are not personally subject to the jurisdiction of such court. Guarantors agree that, provided that service of process is effected upon Guarantors in one of the manners specified in this Guaranty or as otherwise permitted by law, a final judgment from which Guarantors have not appealed or may not appeal in any Action brought in any such court shall be conclusive and binding upon Guarantors and may, so far as permitted under applicable law, be enforced in the courts of any state or any federal court or in any other courts to the jurisdiction of which it is subject, by a suit upon such judgment and that Guarantors shall not assert any defense, counterclaim or set-off in any such suit upon such judgment. (c)To the extent that Guarantors have or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment before judgment, attachment in aid of execution, execution or otherwise) with respect to Guarantors or Guarantors' property, Guarantors hereby irrevocably waive such immunity in respect of its obligations under this Agreement. (d)As a further inducement to Lender's making of the Loans to Borrowers, and in consideration thereof, Lender and Guarantors each covenant and agree that in any action or proceeding brought on, under or by virtue of this Agreement, Lender and Guarantors each shall and do hereby unconditionally and irrevocably waive trial by jury. (e)Guarantors hereby further covenant and agree to and with Lender that Guarantors may be joined in any action against Borrowers in connection with the Guarantor Loan Agreement, the Loan Agreements, the Notes, the Mortgages, or any of the other Loan Documents, solely with respect to the subject matter of this Agreement. (f)Guarantors covenant and agree to indemnify and save Lender harmless of and from, and defend it against, all losses, costs, liabilities, expenses, damages or claims suffered by reason of Guarantors' failure to perform its obligations hereunder. 20. All of Lender's rights and remedies under the Guarantor Loan Agreement, the Loan Agreements, the Notes, the Mortgages or any of the other Loan Documents or under this Agreement are intended to be distinct, separate and cumulative and no such right or remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any other right or remedy available to Lender. 21. Guarantors hereby consent that from time to time, before or after any default by Borrower, with or without further notice to or assent from Guarantors, any security at any time held by or available to Lender for any obligation of Borrowers, or any security at any time held by or available to Lender for any obligation of any other person or party secondarily or otherwise liable for all or any portion of the Loans, may be exchanged, surrendered or released and any obligation of Borrowers, or of any such other person or party, may be changed, altered, renewed, extended, continued, surrendered, compromised, waived or released in whole or in part, or any default with respect thereto waived, and Lender may fail to set off and may release, in whole or in part, any balance of any deposit account or credit on its books in favor of Borrowers, or of any such other person or party, and may extend further credit in any manner whatsoever to Borrowers, and generally deal with Borrowers or any such security or other person or party as Lender may see fit; and Guarantors shall remain bound under this Agreement 7 notwithstanding any such exchange, surrender, release, change, alteration, renewal, extension, continuance, compromise, waiver, action, inaction, extension of further credit or other dealing. This Agreement is independent of, and in addition to, all collateral granted, pledged or assigned under the Loan Documents. 22. The terms of this Agreement have been negotiated, and this Agreement has been executed and delivered in the State of New York, and it is the intention of the parties hereto that this Agreement be construed and enforced in accordance with the laws of such State. 23. This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. 24. This Agreement may be executed in counterparts, which together shall constitute the same instrument. 25. All representations, warranties, covenants (both affirmative and negative) and all other obligations under this Guaranty shall be the joint and several obligation of each of the Guarantors and any default under this Guaranty by any Guarantor shall be deemed a default by all such Guarantors. [NO FURTHER TEXT ON THIS PAGE] 8 IN WITNESS WHEREOF, Guarantor has executed and delivered this Agreement as of the date and year first above written. GUARANTORS: IMPAC HOTELS I, L.L.C. LODGIAN DENVER LLC LODGIAN HOTELS FIXED I, LLC MACON HOTEL ASSOCIATES, L.L.C. SERVICO NORTHWOODS, INC. By: _________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above EXHIBIT A 1. Pool 2 Loan: Pursuant to a Loan and Security Agreement, dated as of the date hereof ("Loan Agreement 2"), between Albany Hotel, Inc., AMI Operating Partners, L.P., Apico Inns of GreenTree, Inc., Dedham Lodging Associates I, Limited Partnership, Lodgian Hotels Fixed II, Inc., Lodgian Augusta LLC, Lodgian Lafayette LLC and Lodgian Tulsa LLC (collectively, the "Pool 2 Borrowers") and Lender, Lender has made a loan in the amount of $67,864,000 ("Pool 2 Loan"), which Loan is evidenced by a Promissory Note dated as of the date hereof ("Note 2"), made by the Pool 2 Borrowers to Lender; 2. Pool 3 Loan: Pursuant to a Loan and Security Agreement, dated as of the date hereof ("Loan Agreement 3"), between Lodgian Hotels Fixed III, LLC, Lodgian AMI, Inc., Minneapolis Motel Enterprises, Inc. and Servico Centre Associates, Ltd. (collectively, the "Pool 3 Borrowers") and Lender, Lender has made a loan in the amount of $66,818,500 ("Pool 3 Loan"), which Loan is evidenced by a Promissory Note, dated as of the date hereof ("Note 3"), made by the Pool 3 Borrowers to Lender; and 3. Pool 4 Loan: Pursuant to a Loan and Security Agreement, dated as of the date hereof ("Loan Agreement 4"), between Lodgian Hotels Fixed IV, L.P., Little Rock Lodging Associates I, Limited Partnership, Lodgian Fairmont LLC, NH Motel Enterprises, Inc., Servico Columbia, Inc. and Servico Houston, Inc. (collectively, the "Pool 4 Borrowers") and Lender, Lender has made a loan in the amount of $61,516,400 ("Pool 4 Loan") which Loan is evidenced by a Promissory Note, dated as of the date hereof ("Note 4"), made by the Pool 4 Borrowers to Lender. EX-10.29 26 g87458a3exv10w29.txt EX-10.29 FORM OF CONDITIONAL ASSIGNMENT EXHIBIT 10.29 FORM OF CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT, dated as of June __, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP., a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World Financial Center, New York, New York 10080, its successors, transferees and assigns ("LENDER"). A. Hotel Manager has entered into a certain Management Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each Borrower, a true, correct and complete copy of which has been delivered to Lender on or prior to the date hereof and the form of which is attached hereto as EXHIBIT A, providing for the performance by Hotel Manager of certain management obligations more particularly described therein with respect to the management and operation of the property as more particularly described therein (each, a "PROPERTY" and collectively, the "PROPERTIES"). B. This Agreement is being executed in order to amend each Contract, to conditionally assign each Borrower's interest therein to Lender, and to subordinate Hotel Manager's rights to payment under the Contracts to Lender's lien on the Properties in connection with Lender's making a loan to Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS") in the original principal amount of up to ________________________ (the "LOAN") pursuant to that certain Loan and Security Agreement, dated as of even date herewith (as amended, modified or restated, the "LOAN AGREEMENT"), among Mortgage Borrowers and Lender. The Loan is evidenced by those certain Promissory Notes, each of even date herewith (as amended, modified or restated, and any replacements or substitutes therefor (by means of multiple notes or otherwise), collectively, the "NOTE"), made by Mortgage Borrowers in favor of Lender and is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as of even date herewith (as amended, modified, restated, spread or consolidated, collectively, the "SECURITY INSTRUMENT"), in favor of Lender (the Note, the Security Instrument, the Loan Agreement, this Agreement and all other documents executed in connection with the Loan are collectively referred to as the "LOAN DOCUMENTS"). All capitalized terms used and not defined herein shall have the respective meanings given to such terms in the Loan Agreement, a copy of which Hotel Manager hereby acknowledges having received. NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent, warrant and covenant to Lender as follows: 1. As additional collateral security for the Loan, each Borrower hereby conditionally transfers, sets over and assigns to Lender all of such Borrower's right, title and interest in and to its Contract, said transfer and assignment to automatically become a present, unconditional assignment, at Lender's option, upon the occurrence and during the continuance of an Event of Default by Borrowers under any of the Loan Documents. 2. Hotel Manager hereby agrees that each Contract, all rights, interests and privileges of Hotel Manager thereunder, and all management fees and other payment obligations of each Borrower to Hotel Manager for services rendered by Hotel Manager for the management and operation of its Property, as such services are more particularly described in such Contract, are hereby subordinated to the Loan Documents and the liens in favor of Lender provided for therein, and to all rights of Lender to receive payment from Borrowers under the Note and all other amounts which may be due Lender under the Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is being paid in strict accordance with its terms and no Event of Default has occurred and is continuing or will by virtue of payments to Hotel Manager occur, Hotel Manager shall, subject to the requirements of the Loan Documents, including any such requirements governing management and application of the Properties and Borrower revenues and cash flow, be entitled to receive payments provided for under such Contract in accordance with the terms thereof. Hotel Manager hereby releases, discharges and waives any and all liens, claims, demands of any kind or nature, against each Property, either now or in the future, arising from the services provided by Hotel Manager for the management and operation of such Property. 3. In the event that such Borrower defaults under the terms of its Contract, Hotel Manager agrees that before exercising any rights or remedies with respect thereto, it will notify Lender of such default. Upon Lender's request, Hotel Manager will continue to perform under such Contract until such time as Lender may elect to terminate such Contract, provided that Hotel Manager shall continue to receive all fees payable to it under such Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be entitled to receive any management fee or other fee, commission or other amount payable under the Contract or otherwise for and during any period of time that any Event of Default has occurred and is continuing, provided that Hotel Manager shall not be obligated to return or refund to Lender any management fee or other fee, commission or other amount already received by Hotel Manager prior to the occurrence of the Event of Default, and to which Hotel Manager was entitled under paragraph 2 above. In all events, Hotel Manager recognizes that the maximum amount that shall be due and payable under each Contract is the amount stated therein (such amount being adequate to complete the services called for in such Contract), and that Hotel Manager will not claim any incidental, consequential, or exemplary damages of any nature as a condition to completing its performance under the Contract. 4. In the event that (a) Hotel Manager becomes insolvent, or (b) an Event of Default occurs and is continuing, or (c) any default occurs by Hotel Manager under the Management Agreement beyond the expiration of any notice and cure periods, or (d) any other event occurs which, under the terms of the Loan Documents, entitles Lender to direct Borrower to replace Hotel Manager, Lender may exercise its rights under the Loan Documents and direct any Borrower to terminate its Contract and/or to replace Hotel Manager with a management 2 company chosen by such Borrower and reasonably acceptable to Lender. Upon receiving notice of any such election, Hotel Manager shall abide by such direction to terminate and cooperate with any replacement manager approved or designated by Lender. No termination fee or other compensation shall be due or owing under such Contract as a result of any such termination other than accrued unpaid fees. 5. Without limiting the foregoing, subject to the second sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise succeeds to the rights of any Borrower with respect to any Property, Lender shall have the option upon written notice to Hotel Manager delivered within thirty (30) days following foreclosure by Lender or other acquisition of such Property by Lender, either to (a) terminate the applicable Contract without any obligation or liability of Lender to pay the termination fees, if any; or (b) continue such Contract in effect upon all of the terms and provisions provided in such Contract, except that Lender shall have no obligation to pay any sums due and owing under the Contract as of the date of foreclosure or other acquisition of such Property, and Lender shall have the right after it elects to continue such Contract under subparagraph (b) hereof to terminate such Contract without cause upon thirty (30) days written notice to Hotel Manager without any obligation or liability of Lender to pay the termination fees, if any other than accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that Lender has not assumed any obligations or liabilities of such Borrower to Hotel Manager under such Contract. If Lender chooses not to continue any Contract following a foreclosure or other acquisition of any Property, the only compensation from Lender for which Hotel Manager shall be entitled under such Contract shall be for the period commencing with the date of such foreclosure or other acquisition and ending upon the subsequent termination by Lender of such Contract. Notwithstanding the foregoing to the contrary, in the event Lender forecloses or otherwise succeeds to the rights of any Borrower with respect to its Property, upon Lender's request, Hotel Manager agrees to transfer and assign to Lender, or its designee, to the extent possible, all applicable licenses (including, without limitation, each liquor license and beer permit), permits and approvals required for the use, occupancy, operation and maintenance of each of the Property and held by or in the name of Hotel Manager, and, if requested by Lender and permitted by applicable law, enter into such reasonable concession or use agreements with Lender or its designee (subject to appropriate indemnification) as are reasonably necessary to allow Lender or its designee to offer, or cause to be offered, liquor and beer for sale at such Property. For this purpose, Hotel Manager constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete or undertake the assignment of each of the items referenced in the preceding sentence in the name of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. 6. Hotel Manager agrees (a) not to resign as Hotel Manager without ninety (90) days prior written notice to Lender, and (b) not to amend any Contract in any material respect without Lender's prior written approval, which approval shall not be unreasonably withheld or delayed. 7. Hotel Manager acknowledges and agrees that any and all rents, room rents, credit card receipts, other receipts, profits or other sums, including any management fees in excess of the management fees to which Hotel Manager is entitled pursuant to paragraph 2 3 hereof, and receipts derived from the sale of alcoholic beverages, to the extent permitted by law (collectively herein called "PROPERTY PROCEEDS"), collected or received by Hotel Manager from the Properties are subject to a security interest of Lender pursuant to the Loan Documents, and shall be collected and held by Hotel Manager in trust for the benefit of the applicable Borrower and Lender. Any such Property Proceeds shall be deposited by Hotel Manager within two (2) Business Days of receipt into a deposit account (the "DEPOSIT ACCOUNT") in the name of the Lender and identified in that certain Deposit Account Agreement or other similar agreement dated as of the date hereof (as amended, restated, modified, replaced or supplemented from time to time, each, a "DEPOSIT ACCOUNT AGREEMENT") among the applicable Borrower, Lender, Hotel Manager and the bank named therein. Upon transfer of any such Property Proceeds to Hotel Manager from the Lock Box Account (as defined in that certain Cash Management Agreement dated as of even date herewith (as amended, restated, modified, replaced or supplemented from time to time, the "CASH MANAGEMENT AGREEMENT"), among Mortgage Borrowers, Lender, Hotel Manager and Wachovia Bank, National Association) as directed by the applicable Borrower pursuant to Section 3.3 of the Cash Management Agreement, such Property Proceeds shall be used by Hotel Manager for proper expenses and costs of managing and operating the applicable Property as permitted under the applicable Contract, subject, in all instances, to compliance with the Operating Budget and FF&E Budget then in effect and limitations on distributions to Borrowers, each as more fully described in the Loan Agreement. Hotel Manager hereby disclaims any and all interests in the Deposit Account, the Lock Box Account (and any Sub-Accounts thereof), the Property Operating Account and in any of the Property Proceeds. Upon written notice from Lender that an Event of Default has occurred under the Loan Agreement and/or other Loan Documents, Hotel Manager agrees to apply Property Proceeds as instructed by Lender. 8. Hotel Manager represents and warrants that (a) a true, correct and complete copy of each Contract has been delivered to Lender on or prior to the date hereof, the form of which is attached hereto as EXHIBIT A, (b) each Contract is in full force and effect and has not been modified, amended or assigned, except in favor of Lender or its predecessor-in-interest (c) neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in default under any of the terms, covenants or provisions of its Contract, and Hotel Manager knows of no event which, with the giving of notice or the passage of time, or both, would constitute a default under any Contract, (d) Hotel Manager has no knowledge of and has not commenced any action or given or received any notice for the purpose of terminating any Contract, and (e) all management fees, commissions and other sums due and payable to the Hotel Manager under each Contract as of the date hereof have been paid in full. 9. This Agreement shall be deemed to be a contract entered into pursuant to the laws of the State of New York and shall in all respects be governed, construed, applied and enforced in accordance with the laws of the State of New York. 10. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder shall be in writing and shall be delivered to Lender and Borrowers at the addresses set forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address set forth on the first page hereof, with a copy to 4 Morris Manning & Martin LLP, Attention: Tom Gryboski, Esq., Fax: (404) 365-9532, each in the manner provided in Section 14.5 of the Loan Agreement. 11. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Lender or any other party, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 12. If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision. If any conflict exists between the terms of this Agreement and the terms of the Loan Agreement, the terms of the Loan Agreement shall prevail. 13. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original and all of which together shall constitute a single agreement. The failure of any party hereto to execute this Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. 14. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. 15. This Agreement shall be binding upon Hotel Manager and its heirs, devisees, representatives, successors and assigns, and shall inure to the benefit of and may be enforced by and binding upon Lender and its heirs, successors, legal representatives, substitutes and assigns. Except as permitted under the Loan Agreement, Hotel Manager shall not assign any of its rights or obligations under this Agreement. Subject to the terms of the Loan Agreement, Lender shall have the right to assign this Agreement and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. The parties hereto acknowledge that following the execution and delivery of this Agreement, Lender may sell, transfer and assign this Agreement and certain other Loan Documents. All references to "Lender" hereunder shall be deemed to include the successors and assigns of Lender and the parties hereto acknowledge that actions taken by Lender hereunder may be taken by Lender's agents and by the agents of the successors and assigns of Lender. 16. This Agreement is intended solely for the benefit of Lender and its heirs, successors, legal representatives, substitutes and assigns, and no third party shall have any right or interest in this Agreement, nor any right to enforce this Agreement against any party hereto. 17. Hotel Manager acknowledges and agrees that pursuant to the Loan Agreement, each Deposit Account Agreement and the Cash Management Agreement (for purposes of this paragraph 17, collectively, the "AGREEMENTS") (the terms, conditions and agreements of the Agreements being hereby incorporated herein with the same force as is fully set forth herein), certain requirements are specified with respect to the Property Proceeds and 5 other payments due under any Lease (as defined in the Security Instrument) or otherwise with respect to the Properties, and Hotel Manager covenants and agrees to observe and, as and to the extent applicable to Hotel Manager, perform all such requirements, including, without limitation, ensuring that all Property Proceeds received by Hotel Manager are properly deposited into the applicable Deposit Account. 18. The obligations of Borrowers and Hotel Manager hereunder are subject to limitations on recourse as provided in Article XII of the Loan Agreement. 6 EXECUTED as of the day and year first above written. BORROWERS: [LODGIAN ENTITIES] By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above HOTEL MANAGER: LODGIAN MANAGEMENT CORP., a Delaware corporation By:______________________________ Name: Title: EXHIBIT A COPY OF FORM OF MANAGEMENT AGREEMENT EX-10.30 27 g87458a3exv10w30.txt EX-10.30 FORM OF ASSIGNMENT OF AGREEMENTS EXHIBIT 10.30 FORM OF ASSIGNMENT OF AGREEMENTS, LICENSES, PERMITS AND CONTRACTS This ASSIGNMENT OF AGREEMENTS, LICENSES, PERMITS AND CONTRACTS, dated as of June __, 2004 (this "ASSIGNMENT"), made by the undersigned, each having an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (collectively, "BORROWER"), to MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an address at 4 World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "LENDER"). W I T N E S S E T H: WHEREAS: A. Borrower is the owner of a fee simple and leasehold interest, as the case may be, in those certain parcels of real property (collectively, the "PREMISES") described in EXHIBIT A attached hereto, and the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and other improvements now or hereafter located thereon (the "IMPROVEMENTS"; together with the Premises, collectively, the "PROPERTY"); B. Borrower and Lender have entered into a certain Loan and Security Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has agreed to make a loan to Borrower as more particularly described below. Capitalized terms used herein and not herein defined shall have the meanings assigned to such terms in the Loan Agreement. C. Pursuant to the Loan Agreement, Lender is making a Loan to Borrower in the aggregate original principal amount of ___________________ Dollars ($___________) (the "LOAN"). The Loan is evidenced by those certain Promissory Notes, each dated as of the date hereof (as amended, modified or restated from time to time, collectively, the "NOTE") and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as of the date hereof (as amended, modified or restated from time to time, collectively, the "SECURITY INSTRUMENT"), with respect to the Property and Improvements. D. To induce Lender to make the Loan and to secure payment of the Note, together with interest thereon, Borrower has agreed to the execution and delivery of this Assignment. NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10) and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Borrower hereby absolutely grants a first lien on and security interest in, and hereby assigns, transfers and sets over to Lender as additional security for the payment of the Loan and the observance and performance by the Borrower of the terms, covenants and conditions of the Loan Documents on the part of the Borrower to be observed or performed, all of the Borrower's right, title and interest in and to the following: (a)to the extent assignable, all of Borrower's right, title and interest in, to and under the documents, contracts, instruments, plans, permits, licenses (including, without limitation, all liquor licenses and other beverage permits), approvals, applications, trade names and trademarks (including, without limitation, any licenses of, or agreements to license, trade names or trademarks now or hereafter entered into by or on behalf of Borrower or Manager in connection with the operation of the Property), insurance policies, equipment leases, purchase and sale agreements, and other instruments described or existing with respect to the Property or any portion thereof, and any amendments or modifications thereto, any replacements thereof executed during the term of the Note and any other similar documents or instruments with respect to the Property or any portion thereof, now in existence or hereafter executed by Borrower or now in the possession of Borrower or hereafter obtained by Borrower (collectively, the "DOCUMENTS"); (b)to the extent assignable, all rights, powers, privileges, claims, remedies and causes of action of every kind which Borrower now has or may in the future have with respect to or by reason of its interest in the Documents; and (c)to the extent assignable, any and all proceeds (including non-cash proceeds) of any of the foregoing (the items enumerated in the preceding subparagraphs (a) and (b) and in this subparagraph (c) being hereinafter collectively referred to as the "COLLATERAL"). 1. This Assignment is given to secure the obligations of Borrower under and in respect of (a) the Note and (b) the other Loan Documents. The parties intend that this Assignment shall be a present, actual, absolute and unconditional assignment and shall, immediately upon execution, give Lender the right to assume Borrower's interest in the Collateral; provided, however, that unless an Event of Default under any of the Loan Documents shall have occurred and be continuing, Borrower shall have a license to utilize the Collateral in accordance with the terms thereof. If an Event of Default shall have occurred and be continuing under any of the Loan Documents, Borrower's license mentioned in the immediately preceding sentence shall cease and terminate, without the execution of any further instrument or document or the taking of any other act on the part of Lender, and in such event, subject to the terms of the Loan Agreement and the other Loan Documents, Lender shall be entitled to utilize the Collateral in Borrower's place and stead, in the name of Borrower or otherwise, and in furtherance thereof, subject to the terms of the Loan Agreement and the other Loan Documents, Lender may enter upon the Property and take possession of the Property by its officers, agents or employees, or by a court-appointed receiver, and for the operation, protection, repair and maintenance of the Property, and in connection therewith, Lender shall be entitled to take possession of and use all books of account and financial records of Borrower and its property managers or representatives relating to the Property. 2. Neither this Assignment nor any action or inaction on the part of Lender shall constitute an assumption on the part of Lender of any duty or obligation with respect to the Collateral, nor shall Lender have any duty or obligation to make any payment to be made by Borrower under the Collateral, or to present or file any claim, or to take any other action to -2- collect or enforce the payment of any amounts or the performance of any obligations which have been assigned to Lender or to which it may be entitled hereunder at any time or times. No action or inaction on the part of Lender shall adversely affect or limit in any way the rights of Lender hereunder or under the Collateral, and Lender shall not incur any liability on account of any action taken (or not taken) by it or on its behalf in connection with the Collateral in good faith, whether or not the same shall prove to be improper, inadequate or invalid, in whole or in part. 3. Borrower shall indemnify and hold Lender harmless from and against any and all liabilities, losses and damages which Lender may incur by reason of this Assignment and any actions of Lender taken (or not taken) in connection with the Collateral, and from and against any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations to be performed or discharged by Lender by reason of this Assignment, and the amount thereof, including reasonable costs, expenses and reasonable attorneys' fees and disbursements, together with interest on such amount, at the Default Rate under the Note from the date such costs, expenses and fees were incurred by Lender to the date of payment thereof to Lender by Borrower, shall be secured hereby and by the other Loan Documents, and Borrower shall reimburse Lender therefor within twenty (20) days after demand, and upon the failure of Borrower to do so, the same shall be deemed an Event of Default under the Loan Agreement for which Lender shall be entitled to exercise any and all rights and remedies provided therein or at law or in equity; provided, however, that in no event shall Borrower be required to indemnify or hold harmless Lender for any liabilities, losses or damages resulting from Lender's bad faith, gross negligence or willful misconduct. It is further understood that this Assignment shall not operate to constitute Lender as a lender in possession of the Property, or to place responsibility for the control, care, management or repair of the Improvements upon Lender, nor shall it operate to make Lender responsible or liable (as to Borrower) for any waste committed with respect to the Property by any party, or for any Hazardous Material placed upon or found at the Property, or for any dangerous or defective condition of the Improvements or for any negligence in the management, up-keep, repair or control of the Improvements resulting in loss, injury, death or damage to any contractor, sub-contractor, licensee, invitee, employee, or other party, or for any other thing or matter whatsoever. 4. Borrower shall remain liable to, and shall, perform all of its obligations under and with respect to the Collateral and shall, at its sole cost and expense, enforce the Collateral in the ordinary course of business and comply in all material respects with all of its obligations under the Collateral and all the terms thereof. Borrower shall give Lender prompt notice of any material default by any party under the Collateral. So long as (a) Borrower is acting in the ordinary course of business, and (b) no Event of Default has occurred and is continuing under any of the Loan Documents, except as otherwise provided in the Loan Agreement, Borrower may alter, amend, extend, modify, change, cancel or terminate any of the Collateral, provided that such alterations, amendments, extensions, modifications, changes, cancellations and terminations, taken as a whole, are not likely to result in a Material Adverse Effect, and, except as otherwise provided in the Loan Agreement, Borrower may enter into new Collateral on commercially reasonable terms without Lender's prior written consent in each instance; provided, however, that Borrower shall provide Lender with copies of any such alterations, amendments, extensions, modifications, changes, cancellations, and terminations of -3- the Collateral upon request of Lender unless otherwise required to be provided pursuant to the Loan Agreement. 5. Upon the occurrence and during the continuance of an Event of Default under any of the Loan Documents, Lender shall be entitled to all of the rights, remedies, powers and privileges available to a secured party under the Uniform Commercial Code in any jurisdiction whose laws may apply and this Assignment shall constitute a direction to and full authority to any person or entity which has contracted with or is a party to any of the Documents (collectively, the "CONTRACTING PARTIES", and individually, a "CONTRACTING PARTY") to perform its obligations under the Documents for the benefit of Lender without proof to any Contracting Party of the default of Borrower. In addition, Borrower agrees that it shall, promptly upon request of Lender following such Event of Default, execute and deliver notices to the Contracting Parties directing that future performance of such Contracting Parties' obligations be made at the direction of Lender. Borrower hereby irrevocably authorizes each of the Contracting Parties to rely upon and comply with any notice or demand by Lender for the performance by any such Contracting Party of its obligations under any Document for the benefit of Lender, and no Contracting Party shall have any right or duty to inquire whether an Event of Default has actually occurred, and Borrower shall have no right to countermand its authorization herein to the Contracting Parties to perform for the benefit of Lender. 6. Borrower represents and warrants that it has full right, power and authority, pursuant to its certificate of limited partnership and limited partnership agreement, certificate of formation and limited liability company agreement, or certification of incorporation and by-laws, as the case may be, to assign the Collateral assigned hereby and that (a) to Borrower's knowledge, the Documents in existence on the date hereof, are in full force and effect in accordance with their respective terms, (b) Borrower has delivered to Lender true and complete copies of the material Documents in existence as of the date hereof, (c) neither the Collateral nor any part thereof has been assigned, pledged or encumbered by Borrower except pursuant to this Assignment and the other Loan Documents, (d) to Borrower's knowledge, no default or event of default which remains uncured beyond the expiration of any applicable grace or notice period which could reasonably be expected to have a Material Adverse Effect has occurred and is continuing hereunder and no Event of Default or Default has occurred, (e) to Borrower's knowledge, none of the Contracting Parties has any defense, set-off or counterclaim against Borrower to the performance of any obligations of such respective Contracting Party, and (f) its principal place of business is its address for notices as set forth in the Loan Agreement 7. Borrower, at its expense, shall execute and deliver all such instruments and take all such action as Lender, from time to time, may reasonably request in order to obtain the full benefits of this Assignment and of the rights and powers herein created and to maintain and perfect the security interest granted in this Assignment. To the extent permitted by law, Borrower irrevocably authorizes Lender, at the expense of Borrower, to file financing statements and continuation statements with respect to the Collateral that Lender deems appropriate or desirable without the signature of Borrower. 8. Wherever there is any conflict or inconsistency between any terms or provisions of this Assignment and the Loan Agreement, the terms and provisions of the Loan Agreement shall control. -4- 9. All rights and remedies herein conferred may be exercised whether or not sale proceedings are pending under the Security Instrument or any other action or proceeding has been commenced under any of the other Loan Documents. Lender shall not be required to resort first to the security of this Assignment before resorting to the security of the Security Instrument or any of the other Loan Documents and Lender may exercise the security hereof or thereof concurrently or independently and in any order of preference. 10. This Assignment shall automatically terminate upon payment in full of all sums due Lender under the Note, the Loan Agreement, and the other Loan Documents, and any other indebtedness secured by the Security Instrument. 11. All notices, demands, consents, or requests which are either required or desired to be given or furnished hereunder shall be sent and shall be effective in the manner set forth in Section 14.5 of the Loan Agreement. 12. The provisions of this Assignment shall be binding upon Borrower, its successors and assigns, and all persons claiming under or through Borrower or any such successor or assign, and shall inure to the benefit of and be enforceable by Lender and its successors and assigns. Subject to the terms of the Loan Agreement, Lender shall have the right to assign this Assignment and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. The parties hereto acknowledge that following the execution and delivery of this Assignment, Lender may sell, transfer and assign this Assignment and certain other Loan Documents. All references to "Lender" hereunder shall be deemed to include the assigns of Lender and the parties hereto acknowledge that actions taken by Lender hereunder may be taken by Lender's agents and by the agents of the assigns of Lender. 13. This Assignment shall constitute a security agreement for all purposes under the Uniform Commercial Code as in effect in the State where the applicable Property is located. 14. This Assignment and the obligations arising hereunder shall be governed by and construed in accordance with the laws of the State of New York and any applicable laws of the United States of America, except that at all times the provisions for the creation, perfection, attachment and enforcement of the liens and the security interests created pursuant to this Assignment shall be governed by the laws of the State where the applicable Property is located. 15. Neither this Assignment nor any provision hereof may be changed, waived or terminated orally, but only by an instrument in writing signed by Lender and Borrower. 16. If any of the provisions of this Assignment, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Assignment, or the application of such provision or provisions to persons or circumstances other than those to whom or which it is held invalid or unenforceable, shall not be affected thereby and every provision of this Assignment shall be valid and enforceable to the fullest extent permitted by law. -5- 17. The obligations of Borrower hereunder are subject to limitations on recourse as provided in Article XII of the Loan Agreement. IN WITNESS WHEREOF, the Borrower has duly executed this instrument as of the day and year first above written. BORROWERS: [LODGIAN ENTITIES] By:____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above EXHIBITS A PROPERTIES CHAIN/NAME CITY ST EX-10.31 28 g87458a3exv10w31.txt EX-10.31 FORM OF COOPERATION AGREEMENT EXHIBIT 10.31 FORM OF COOPERATION AGREEMENT THIS COOPERATION AGREEMENT (this "AGREEMENT") is made as of the _____ day of June, 2004, by and between the Mortgage Borrowers listed on the signature page hereof (collectively, the "MORTGAGE BORROWERS"), LODGIAN MEZZANINE FLOATING, LLC (the "MEZZANINE BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., in its capacity as both mortgage lender and mezzanine lender ("LENDER"). RECITALS: A. The Mortgage Borrowers, by those certain Promissory Notes of even date herewith given to Lender (the "MORTGAGE NOTE"), are indebted to Lender in the original principal sum of __________________ (the "MORTGAGE LOAN") as governed by that certain Loan and Security Agreement of even date herewith between the Mortgage Borrowers and Lender (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "MORTGAGE LOAN AGREEMENT"). B. The Mezzanine Borrower, by that certain Mezzanine Note of even date herewith given to Lender (the "MEZZANINE NOTE"), is indebted to Lender in the aggregate principal sum of ___________________ (the "MEZZANINE LOAN") as governed by that certain Mezzanine Loan Agreement of even date herewith between the Mezzanine Borrower and Lender (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "MEZZANINE LOAN AGREEMENT"). C. Lender has required as a condition to making the Mortgage Loan and the Mezzanine Loan that the Mortgage Borrowers and the Mezzanine Borrower enter into this Agreement with Lender. AGREEMENT For ten ($10) dollars and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Adjustment of Mortgage Loan and Mezzanine Loan/Loan Modification. Lender shall have the right in its sole discretion, at any time prior to the final Securitization of the Mortgage Loan, to separately adjust the principal amount and applicable interest rates of the Mortgage Loan and the Mezzanine Loan (each, a "LOAN MODIFICATION") provided that: (i) the aggregate principal amount of the Mortgage Loan and the Mezzanine Loan immediately after such adjustment shall equal the aggregate outstanding principal balance of the Mortgage Loan and the Mezzanine Loan immediately prior to such adjustment, (ii) the weighted average spread used in calculating the interest rate of the Mortgage Loan and the Mezzanine Loan immediately after such adjustment shall equal the weighted average spread used in calculating the interest rate which was applicable to the Mortgage Loan and the Mezzanine Loan immediately prior to such adjustment, (iii) the aggregate debt service payments on the Mortgage Loan and the Mezzanine Loan immediately after such adjustment shall equal the aggregate debt service payments which were due under the Mortgage Loan and the Mezzanine Loan immediately prior to such adjustment, and (iv) the other material terms and provisions of each of the Mortgage Loan and the Mezzanine Loan shall remain unchanged and none of the foregoing adjustments shall increase the obligations or reduce the rights of the Mortgage Borrowers, the Mezzanine Borrower or Guarantor in any material respect. Any Loan Modification shall be subject to the following: (a) If Lender elects to increase the principal amount of the Mezzanine Loan, the Mezzanine Borrower shall contribute to the Mortgage Borrowers such additional loan proceeds to be applied to repay, dollar for dollar, the Mortgage Note (in an amount and as designated by Lender), and the Lender under the Mortgage Note will accept such prepayment without penalty, premium or additional costs to the Mortgage Borrowers (except as provided herein). If Lender elects to increase the principal amount of the Mortgage Loan and reduce the principal amount of the Mezzanine Loan, the Mortgage Borrowers shall distribute to the Mezzanine Borrower such additional loan proceeds to be applied to repay, dollar for dollar, the Mezzanine Note (in an amount and as designated by Lender), and the Lender under the Mezzanine Note will accept such prepayment without penalty, premium or additional costs to the Mezzanine Borrower (except as provided herein); (b) The Mortgage Borrowers and the Mezzanine Borrower shall cooperate, and shall cause Guarantor and any Affiliates thereof (the "LODGIAN PARTIES") to cooperate, with all reasonable requests of Lender in connection with any Loan Modification including, without limitation (x) execution and delivery of such documents as shall reasonably be required by Lender in connection therewith (including amended and restated notes, amended and restated loan agreements, replacement Mortgages, replacement Assignments of Leases, and ratifications by Guarantor of any of its obligations under any guaranties or indemnities provided under the Mortgage Loan or the Mezzanine Loan), and (y) adjustment of each Cap (as such term is defined in the Mortgage Loan Agreement and the Mezzanine Loan Agreement) such that, following adjustment of the principal amount of the Mortgage Loan and the Mezzanine Loan pursuant to the terms hereof, (i) the Cap delivered in connection with the Mortgage Loan shall have a notional amount equal to the then outstanding principal balance of the Mortgage Loan, and (ii) the Cap delivered (or, if none is required by Lender at Closing, to be delivered) in connection with the Mezzanine Loan shall have a notional amount equal to the then outstanding principal balance of the Mezzanine Loan; (c) The Mortgage Borrowers and the Mezzanine Borrower hereby absolutely and irrevocably appoint Lender their true and lawful attorney coupled with an interest, in their name and stead to make and execute all documents necessary to effect the Loan Modification, provided, however, that Lender shall not make or execute any such documents under such power until ten (10) days after notice by Lender to Mortgage Borrowers and Mezzanine Borrower of such intent to exercise its right under such power; (d) At Lender's request, in connection with any Loan Modification the Mortgage Borrowers and the Mezzanine Borrower shall deliver to Lender, at the Mortgage Borrowers' and the Mezzanine Borrower's expense, replacement opinion letters in form and 2 substance similar to the opinion letters delivered on the Closing Date addressed to any subsequent holders of the Mortgage Loan or the Mezzanine Loan or any interest therein (including, without limitation, each trustee holding the Mortgage Loan or the Mezzanine Loan) with respect to any opinion letter delivered in connection with the Mortgage Loan and the Mezzanine Loan; (e) Lender shall pay all reasonable out-of-pocket costs and expenses incurred by the Mortgage Borrowers and the Mezzanine Borrower in connection with a Loan Modification (other than the Mortgage Borrowers', Mezzanine Borrower's and Guarantor's internal costs and expenses, and the costs and expenses of their respective counsel, mortgage recording fees and taxes, required endorsements, if any, to the Title Policies (as such term is defined in the Mortgage Loan Agreement and the Mezzanine Loan Agreement), and costs incurred in adjusting each Cap). Section 2. Capitalized Terms; Notices. Capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Mortgage Loan Agreement. Any notices, requests, demands or other communications required or permitted hereunder shall be delivered as specified in the Mortgage Loan Agreement and the Mezzanine Loan Agreement. Section 3. Event of Default. It shall be an Event of Default under the Mortgage Loan and the Mezzanine Loan if any of the Mortgage Borrowers, the Mezzanine Borrower, or the Lodgian Parties fail to comply with any of the terms, covenants or conditions of this Agreement within ten (10) Business Days after receipt of written request from Lender. Section 4. Governing Law. This Agreement shall be governed, construed, applied and enforced in accordance with the laws of the State of New York and the applicable laws of the United States of America. Section 5. No Oral Change. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of the Mortgage Borrowers, the Mezzanine Borrower, Guarantor, or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. Section 6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Mortgage Borrowers, the Mezzanine Borrower, Guarantor, and Lender and their respective successors and assigns forever. Section 7. Inapplicable Provisions. If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision. Section 8. Headings, etc. The headings and captions of various paragraphs of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. Section 9. Duplicate Originals, Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be 3 an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. The failure of any party hereto to execute this Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. [NO FURTHER TEXT ON THIS PAGE] 4 IN WITNESS WHEREOF the undersigned have executed this Cooperation Agreement as of the date and year first written above. LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: ____________________________________ Name: Title: [signatures continue on next page] MEZZANINE BORROWER: [LODGIAN MEZZANINE ENTITY, LLC] By: ____________________________ Name: Title: MORTGAGE BORROWERS: [LODGIAN ENTITIES] By: _____________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above GUARANTOR: LODGIAN, INC. By: ____________________________ Name: Title: EX-10.32 29 g87458a3exv10w32.txt EX-10.32 FORM OF COLLATERAL ASSIGNMENT OF INTEREST EXHIBIT 10.32 FORM OF COLLATERAL ASSIGNMENT OF INTEREST RATE PROTECTION AGREEMENT This COLLATERAL ASSIGNMENT OF INTEREST RATE PROTECTION AGREEMENT, dated as of June __, 2004 (this "ASSIGNMENT"), made by the undersigned, having an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 ("ASSIGNOR"), in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an address at Four World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "ASSIGNEE"). Capitalized terms used but not defined herein shall have the meanings assigned such terms in that certain Mezzanine Loan Agreement, dated as of the date hereof (as amended, modified or restated, the "MEZZANINE LOAN AGREEMENT"), between Assignor and Assignee. 1. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor hereby pledges, assigns, transfers and grants a security interest to Assignee in and to all its right, title and interest in, to and under (a) the interest rate hedge or protection agreement and any related confirmation described on EXHIBIT A attached hereto and made a part hereof (such agreement(s) and confirmation(s), as same may be amended or modified, and any renewals or replacements thereof, or successor agreements thereto, collectively, the "RATE PROTECTION AGREEMENT"), with the counterparty indicated on the signature page hereof (the "COUNTERPARTY"), and (b) all amounts received or receivable under the Rate Protection Agreement and all "proceeds" (as defined in the Uniform Commercial Code adopted in the State of New York (the "UCC")) thereof, to have and to hold the same, unto Assignee, its successors and assigns. This Assignment constitutes additional security for payment by Assignor of that certain loan in the original principal amount of **[$_________]** from Lender to Assignor evidenced by or arising pursuant to the Mezzanine Loan Agreement and pursuant to the other Loan Documents. 2. Counterparty hereby consents to the above collateral assignment by Assignor of the Rate Protection Agreement and agrees that Counterparty will make any payments to become payable under or pursuant to the Rate Protection Agreement to, or at the direction of, Assignee from time to time, until such time as this Assignment is terminated or otherwise canceled, at which time Counterparty will be instructed to make payments to, or at the direction of, Assignor. Assignor hereby irrevocably instructs and authorizes Counterparty to make any payments payable pursuant to the Rate Protection Agreement to Assignee by wire transfer to the Lock Box Account at the following address: Wachovia Bank, National Association ABA #: 053-000-219 Account #: **[_______________________]** Account Name: Mezzanine Lock Box Account for the benefit of Merrill Lynch Mortgage Lending, Inc., as secured party 3. Upon the occurrence and during the continuance of an Event of Default, Assignee shall be entitled to exercise all remedies provided under the UCC with respect to the Rate Protection Agreement and the other related collateral pledged hereunder. 4. Assignor hereby covenants and agrees that Assignor shall not, without first obtaining Assignee's written consent, which consent shall not be unreasonably withheld, conditioned or delayed, convey, assign, sell, mortgage, encumber, pledge, hypothecate, grant a security interest in, grant an option or options with respect to, or otherwise dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration) the Rate Protection Agreement or any interest therein, provided, however, Assignor shall be permitted to assign or otherwise transfer the Rate Protection Agreement in connection with a Permitted Assumption pursuant to Section 11.3 of the Mezzanine Loan Agreement. Assignor and Counterparty hereby covenant and agree that Assignor and Counterparty shall not, without first obtaining Assignee's written consent, which consent shall not be unreasonably withheld, conditioned or delayed, amend, modify, cancel or terminate the Rate Protection Agreement. 5. This Assignment shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of law principles. 6. This Assignment shall terminate upon payment in full of the Obligations of Assignor under the Loan Documents. 7. This Assignment shall be binding upon Assignor and its successors and assigns and shall inure to the benefit of Assignee and its successors and assigns. 8. Subject to the terms of the Mezzanine Loan Agreement, Assignee shall have the right to assign this Assignment and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. The parties hereto acknowledge that following the execution and delivery of this Assignment, Assignee may sell, transfer and assign this Assignment and certain other Loan Documents. All references to "Assignee" hereunder shall be deemed to include the successors and assigns of Assignee and the parties hereto acknowledge that actions taken by Assignee hereunder may be taken by Assignee's agents and by the agents of the successors and assigns of Assignee. 9. In consideration of the foregoing agreement by Counterparty, Borrower agrees that (a) Counterparty shall be entitled to conclusively rely (without any independent investigation) on any notice or instructions from Lender in respect of the Rate Protection Agreement, and (b) Counterparty shall be held harmless and shall be fully indemnified by Borrower, from and against any and all claims, other than those ultimately determined to be founded on gross negligence or willful misconduct of Counterparty, and from and against any damages, penalties, judgments, liabilities, losses or expenses (including reasonable attorney's fees and disbursements) incurred by Counterparty as a result of the assertion of any claim, by any person or entity, arising out of, or otherwise related to, any actions taken or omitted to be taken by Counterparty in reliance upon any such instructions or notice provided by Lender in accordance herewith and the Mezzanine Loan Agreement. 2 10.This Assignment may be executed in any number of counterparts each of which shall be an original, but all of which shall constitute one instrument. 11.The obligations of Assignor hereunder are subject to limitations on recourse as provided in Article XII of the Mezzanine Loan Agreement. [SIGNATURE PAGES FOLLOW] 3 ASSIGNOR: [LODGIAN ENTITY] [__________________________________] By:________________________________ Name: Daniel E. Ellis Title: Vice President ACKNOWLEDGED AND AGREED BY COUNTERPARTY: [__________________________________] By:________________________________ Name: Title: EXHIBIT A (Description of Rate Cap Agreement) Confirmation dated as of _____________, 2004 and effective as of _____________, 2004, by and between _____________________________, as Party A, and Assignor, as Party B, and any replacements thereof confirming the Transactions (as defined therein), together with _________________, Guaranty of ____________________, dated as of ____________, 2004 and effective as of ____________, 2004 and made in connection with the Rate Protection Agreement. Mezzanine Collateral Assignment of Interest Rate Protection Agreement EX-10.33 30 g87458a3exv10w33.txt EX-10.33 FORM OF PLEDGE AND SECURITY AGREEMENT EXHIBIT 10.33 FORM OF PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this "AGREEMENT") dated as of June __, 2004, made by [LODGIAN MEZZANINE BORROWING ENTITY], LLC, a Delaware limited liability company (together with its successors and permitted assigns, the "PLEDGOR"), in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, as mezzanine lender (together with its successors and assigns, "MEZZANINE LENDER"). R E C I T A L S : WHEREAS, pursuant to a certain Mezzanine Loan Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the "MEZZANINE LOAN AGREEMENT") between Mezzanine Lender and Pledgor, as mezzanine borrower, Mezzanine Lender has agreed to make a loan (the "MEZZANINE LOAN") to Pledgor in the original principal amount of ______, such Mezzanine Loan being evidenced by a promissory note dated the date hereof (as amended, restated, renewed, modified, supplemented, extended or consolidated from time to time, collectively, the "MEZZANINE NOTE"), made by Pledgor, as maker, in favor of Mezzanine Lender, as payee, in the original principal amount of ______; WHEREAS, Pledgor holds beneficial ownership interests in certain corporations (collectively, the "CORPORATIONS"), limited liability companies (collectively, the "LLCS") and/or partnerships (collectively, the "PARTNERSHIPS") as more particularly described on SCHEDULE 1 attached hereto (the Corporations, LLCs and Partnerships are hereinafter collectively referred to as the "PLEDGED SUBSIDIARIES"); and WHEREAS, it is a condition precedent to the obligation of Mezzanine Lender to make the Mezzanine Loan to Pledgor that Pledgor shall have executed and delivered this Agreement to Mezzanine Lender. NOW, THEREFORE, to induce Mezzanine Lender to make the Mezzanine Loan, Pledgor hereby agrees with Mezzanine Lender as follows: ARTICLE I CERTAIN DEFINITIONS (a) Unless otherwise specified in this Agreement, certain capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings given to such terms in the Mezzanine Loan Agreement. In addition, as used in this Agreement, the following terms have the meanings set forth in or incorporated by reference below: "ACCOUNTS" means, as to Pledgor, all "accounts" (as defined in the UCC as in effect in the State of New York) now owned or hereafter acquired by Pledgor relating to the Collateral, including all accounts receivable, contract rights, book debts, notes, drafts and other obligations or indebtedness owing to Pledgor relating to the Collateral, whether or not arising from the sale, lease or exchange of goods or other property by Pledgor and/or the performance of services by Pledgor (including any such obligation which might be characterized as an account, contract right or general intangible relating to the Collateral under the UCC as in effect in the State of New York), and all of Pledgor's rights to any goods, services or other property represented by any of the foregoing. "BYLAWS" means the bylaws of the Corporations, in the form delivered to Mezzanine Lender on the Closing Date, as may be amended from time to time in accordance with the Mortgage Loan Agreements and the Mezzanine Loan Agreement. "CERTIFICATE OF FORMATION" means the certificate of formation of each LLC, as same has been amended through the date hereof and as same may be amended from time to time in accordance with the Mortgage Loan Agreements and the Mezzanine Loan Agreement. "CERTIFICATE OF INCORPORATION" means the certificate or articles of incorporation of each Corporation, as same has been amended through the date hereof and as same may be amended from time to time in accordance with the Mortgage Loan Agreements and the Mezzanine Loan Agreement. "CERTIFICATE OF LIMITED PARTNERSHIP" means the certificate of limited partnership of each Partnership, as same has been amended through the date hereof and as same may be amended from time to time in accordance with the Mortgage Loan Agreement and the Mezzanine Loan Agreement. "COLLATERAL" has the meaning specified in Section 2.01. "DOCUMENTS" means all "documents" (as defined in the UCC) or other receipts covering, evidencing or representing any of the Collateral now owned or hereafter acquired by Pledgor. "GENERAL INTANGIBLES" means all "general intangibles" (as defined in the UCC) now owned or hereafter acquired by Pledgor relating to the Collateral, including (i) all obligations or indebtedness owing to Pledgor (other than Accounts) with respect to the Collateral from whatever source arising and (ii) all rights or claims in respect of refunds for taxes paid with respect to the Collateral. "INSTRUMENTS" means all "instruments," "chattel paper" or "letters of credit" (each as defined in the UCC) evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including promissory notes, drafts, bills of exchange and trade acceptances, now owned or hereafter acquired by Pledgor with respect to the Collateral. "INVESTMENT PROPERTY" has the meaning assigned to such term in the UCC. "LIMITED PARTNERSHIP AGREEMENT" means the agreement of limited partnership of each Partnership, as same has been amended through the date hereof and as same may be 2 amended from time to time in accordance with the Mortgage Loan Agreements and the Mezzanine Loan Agreement. "LLC INTERESTS" has the meaning specified in Section 2.01(a)(ii). "LP INTERESTS" has the meaning specified in Section 2.01(a)(iii). "MEZZANINE LOAN DOCUMENTS" means the Mezzanine Note, the Mezzanine Loan Agreement, this Agreement and the other documents and instruments entered into in connection with the Mezzanine Loan. "MEZZANINE LOAN OBLIGATIONS" means all obligations of Pledgor, as mezzanine borrower, including the unpaid principal of and interest on the Mezzanine Note and all other obligations and liabilities of Pledgor to Mezzanine Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Mezzanine Loan Agreement, the Mezzanine Note, this Agreement or any other Mezzanine Loan Document, whether on account of principal, interest, prepayment consideration or premium, reimbursement obligations, fees, indemnities, costs, expenses (including all reasonable out-of-pocket fees and disbursements of counsel to Mezzanine Lender) or otherwise. "MONIES" means all cash, checks, notes, drafts or similar items of payment. "OPERATING AGREEMENT" means the limited liability company operating agreement of each LLC, as same has been amended through the date hereof and as same may be amended from time to time in accordance with the Mortgage Loan Agreements and the Mezzanine Loan Agreement. "ORGANIZATIONAL DOCUMENTS" means the Certificate of Formation, the Certificate of Incorporation, the Certificate of Limited Partnership, the Bylaws, the Operating Agreement, the Limited Partnership Agreement, and any other agreements affecting the rights, limitations, preferences or obligations of Pledgor with respect to any of the foregoing or with respect to the Stock Interests, LLC Interests, LP Interests or otherwise, in each case, as the same may be amended or modified from time to time in accordance with this Agreement. "PLEDGED INTERESTS" means, collectively, the LLC Interests, the LP Interests and the Stock Interests, together with all economic or voting rights with respect to any of the foregoing. "PLEDGED SUBSIDIARIES" has the meaning specified in the recitals to this Agreement. "PLEDGOR" has the meaning specified in the first paragraph hereof. "PROCEEDS" means all "proceeds" as such term is defined in Section 9-102 of the UCC and shall include, in any event, without limitation, all dividends and other income from the Pledged Interests, collections thereon or distributions with respect thereto. 3 "STOCK INTERESTS" has the meaning specified in Section 2.01(a)(i). "UCC" means at any time the Uniform Commercial Code as in effect in the State of New York; provided, however, that if, by reason of mandatory provisions of law, the validity or perfection of Mezzanine Lender's security interest in the Collateral or any part thereof is governed by the Uniform Commercial Code or other similar law as in effect in a jurisdiction other than New York, "UCC" means the Uniform Commercial Code or such similar law as in effect in such other jurisdiction for purposes of the provisions hereof relating to such validity or perfection. (b) (i) The words "hereby", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement and section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. (ii) The word "including" when used in this Agreement shall be deemed to be followed by the words "but not limited to". ARTICLE II COLLATERAL: GENERAL TERMS SECTION 2.01. SECURITY INTEREST. As security for the Mezzanine Loan Obligations, Pledgor hereby grants Mezzanine Lender a continuing first-priority security interest in, Lien on and right of set-off against, and hereby assigns to Mezzanine Lender as security, all of Pledgor's right, title and interest, if any, in, to and under the following property and interests in property (save insofar as otherwise expressly excluded by the terms of this Agreement), whether now owned or hereafter acquired or existing and wherever located (collectively, the "COLLATERAL"): (a) (i) all of Pledgor's right, title and interest in and to all of the issued and outstanding shares of the Corporations and Pledgor's equity interests in the Corporations, including, for the avoidance of doubt, all voting rights connected therewith or related thereto, and the certificates, if any, representing any of the foregoing (collectively, the "STOCK INTERESTS") together with all instruments of transfer in respect of such interests in the form of EXHIBIT A attached hereto, executed in blank, all cash, securities, dividends, Proceeds and other property whether constituting Investment Property, Accounts, Documents, General Intangibles and/or Instruments or otherwise at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of the Stock Interests; (ii) all of Pledgor's right, title and interest in and to all of the issued and outstanding limited liability company interests of the LLCs and Pledgor's equity interests in the LLCs, including, for the avoidance of doubt, all voting rights connected therewith or related thereto, and the certificates, if any, representing any of the foregoing (collectively, the "LLC INTERESTS") together with all instruments of transfer in respect of such interests, executed in blank, all cash, securities, dividends, Proceeds and other property whether constituting Investment Property, Accounts, Documents, General Intangibles and/or Instruments or otherwise 4 at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of the LLC Interests; (iii) all of Pledgor's right, title and interest in and to all of the outstanding limited and general partnership interests of the Partnerships and Pledgor's equity interests in the Partnerships, including, for the avoidance of doubt, all voting rights connected therewith or related thereto, and the certificates, if any, representing any of the foregoing (collectively, the "LP INTERESTS") together with all instruments of transfer in respect of such interests, executed in blank, all cash, securities, dividends, Proceeds and other property whether constituting Investment Property, Accounts, Documents, General Intangibles and/or Instruments or otherwise at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of the LP Interests; (b) to the extent not included in clause (a) above, any and all rights and remedies of Pledgor under any of the Organizational Documents of the Corporations, the LLCs or the Limited Partnerships, as applicable, including the right to enforce any and all representations, warranties, covenants, obligations, agreements and indemnities of any party thereto made to or for the benefit of, or that otherwise inure to the benefit of, Pledgor; (c) all securities hereafter delivered to Mezzanine Lender in substitution for or in addition to any and all of the Collateral, and all certificates and instruments representing or evidencing such securities and all cash, securities, dividends, Proceeds and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Collateral; (d) all additional shares of the Corporations, all additional limited liability company interests of the LLCs and all additional limited and general partnership interests of the Partnerships or other equity interest of any issuer, as applicable, from time to time acquired by Pledgor in any manner, and the certificates (if any) representing such additional shares of the Corporations, additional limited and general liability company interest of the LLCs or additional limited and general partnership interest of the Partnerships or other equity interest, as applicable (all of which shall constitute part of the Pledged Interests), and all options, warrants, dividends, cash instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares of the Corporations, limited liability company interests of the LLCs and/or limited and general partnership interest in the Partnerships or other equity interest, as applicable; (e) all books and records (including credit files, computer programs, printouts and other computer materials and records) of Pledgor pertaining to any of the Collateral; (f) all of Pledgor's right, title and interest in and to the profits and losses of the Corporations, the LLCs and the Partnerships, and Pledgor's right (i) as a shareholder of the Corporations, (ii) as a limited partner of the Partnerships, and (iii) as a member of the LLCs, in each case, to receive distributions of the assets of the Corporations, the LLCs, and the Partnerships, as the case may be, upon complete or partial liquidation or otherwise; 5 (g) all cash and non-cash Proceeds and products of the Collateral, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed when Collateral or Proceeds are sold, leased, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, all rights to payment, including return premiums, with respect to any insurance relating thereto; (h) all of Pledgor's right, title and interest in and to any loans made by Pledgor to the Corporations, the LLCs or the Partnerships, including the right to receive repayment of such loans; and (i) all Accounts, Investment Property relating to the Collateral, Documents, General Intangibles, and Instruments of Pledgor, and all Proceeds of the foregoing. SECTION 2.02. DELIVERY OF CERTIFICATES, INSTRUMENTS, ETC. Pledgor shall deliver to Mezzanine Lender concurrently with the execution and delivery of this Agreement all original certificates, instruments and other documents, if any, evidencing or representing the Collateral or any part thereof, together with copies of the respective Organizational Documents in each case accompanied by, if applicable, a duly executed instrument of transfer executed in blank in respect of each of the respective Pledged Interests and shall deliver to Mezzanine Lender such UCC financing statements as Mezzanine Lender shall reasonably require to ensure Mezzanine Lender the benefits of the first priority Lien (as defined below) on and to the Collateral. SECTION 2.03. RELEASE OF SECURITY INTEREST. At such time as (a) all Mezzanine Loan Obligations shall have been paid and performed in full and (b) the Mezzanine Loan Agreement, the Mezzanine Note, and other Mezzanine Loan Documents shall have been terminated, Mezzanine Lender shall take all reasonable steps necessary to release the security interest in the Collateral granted hereunder and to promptly return the original stock certificate(s) then being held by Mezzanine Lender, together with any original instruments of transfer and other similar documents then being held by Mezzanine Lender, if any; provided, however, that Mezzanine Lender may retain copies of any of the foregoing documents. When so released, the Collateral shall be free and clear of any Lien created hereunder or under the other Mezzanine Loan Documents in favor of Mezzanine Lender. Upon such termination and at the written request of Pledgor, and at the reasonable cost and expense of Pledgor, Mezzanine Lender shall promptly execute a satisfaction of this Agreement and such instruments, documents or agreements as are reasonably necessary or desirable to terminate, discharge and remove of record any documents constituting public notice of this Agreement and the security interests and assignment granted hereunder and shall deliver or cause to be delivered to Pledgor all property (if any), including Monies, of Pledgor then held by Mezzanine Lender. SECTION 2.04. PLEDGOR REMAINS LIABLE. Anything herein to the contrary notwithstanding, (a) Pledgor shall remain liable under the respective Organizational Documents to the extent set forth therein and shall perform all of its respective duties and obligations thereunder to the same extent as if this Agreement had not been executed; (b) the exercise by Mezzanine Lender of any of the rights hereunder shall not release Pledgor from any of its respective duties or obligations under any of the Organizational Documents; and (c) Mezzanine Lender shall not have any obligation or liability under any of the Organizational Documents by 6 reason of this Agreement, nor shall Mezzanine Lender be obligated to perform any of the obligations or duties of Pledgor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder; provided, however, that, upon foreclosure thereof, Mezzanine Lender and any other transferee of the Collateral shall take the same subject to the Organizational Documents. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR SECTION 3.01. REPRESENTATIONS AND WARRANTIES. Pledgor makes the representations and warranties set forth below to Mezzanine Lender: (a) GENERAL REPRESENTATIONS AND WARRANTIES. (i) INCORPORATION OF REPRESENTATIONS. The representations and warranties of Pledgor made in the Mezzanine Loan Agreement are hereby incorporated by reference and shall have the same effect as if fully set forth herein, except that the term "Mezzanine Borrower", as used in such representations and warranties, shall, for the purposes of this Agreement, refer instead to the Pledgor. In addition, the statements set forth in the recitals to this Agreement are true and correct. (ii) NO CONSENTS. Except as required for perfection of the security interest in the Collateral as described in Section 3.01(c), no permits, licenses, franchises, approvals, authorizations, qualifications or consents of, or registrations or filings with, governmental authorities are required in connection with the execution or delivery by Pledgor of, or the performance by Pledgor of its obligations under, this Agreement, except such as have been obtained or made and are in full force and effect; (iii) NO CONFLICT. The execution and delivery of, and the performance by Pledgor of its obligations under this Agreement do not and will not: (A) result in a breach or constitute a violation of, conflict with, or constitute a default under, (1) the Mortgage Loan Agreements, or any other Mortgage Loan Document, or (2) any of the Organizational Documents or the certificate of formation or the operating agreement of Pledgor; (B) violate any law, regulation, order or judgment of any Governmental Authority applicable to Pledgor, the Partnerships, the Corporations or the LLCs; or (C) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation to which Pledgor, any Partnership, Corporation or LLC, is a party or by which Pledgor, any Partnership, Corporation or LLC, or any of its property is bound (except where such breach would not cause a Material Adverse Effect); (iv) NO MATERIAL LITIGATION. Except as set forth on SCHEDULE 4.16 of the Mezzanine Loan Agreement, to Pledgor's Knowledge after due inquiry, there are no judgments outstanding against Pledgor, or affecting any of the Collateral or any property of the Pledgor, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or to Pledgor's Knowledge, threatened against Pledgor, that could reasonably be expected to result in a Material Adverse Effect. To Pledgor's 7 Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.16 of the Mezzanine Loan Agreement are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. (b) TITLE TO COLLATERAL. (i) Pledgor is the sole owner of all of the Collateral, beneficially and of record, free and clear of any Liens other than the Liens created hereunder and under the other Mezzanine Loan Documents. The Collateral is not subject to any option to purchase or similar rights of any kind. (ii) Pledgor has full power and authority to enter this Agreement. (iii) There are no restrictions upon the voting rights connected with or relating to, or upon the transfer of, the Pledged Interests other than as arising pursuant to this Agreement and the other Mezzanine Loan Documents. (iv) Pledgor has the right to vote, pledge and grant a security interest in or otherwise transfer the Pledged Interests free of any Liens other than Liens created under this Agreement and the other Mezzanine Loan Documents. (c) PERFECTION. (i) Upon (x) the execution and delivery of this Agreement, (y) the delivery to Mezzanine Lender of the certificates representing the Collateral and the instruments of transfer relating thereto, and (z) the filing of UCC financing statements naming the Pledgor as debtor and Mezzanine Lender as secured party in the office of the Secretary of State of Delaware, or such other jurisdictions as Mezzanine Lender shall reasonably request and require, Mezzanine Lender will have a valid, perfected, continuing, first-priority security interest in or lien on, respectively, the Collateral, perfected by either delivery or filing a financing statement under the UCC, as the case may be. (ii) All instruments of transfer referred to in Sections 2.01 (a) and 2.02 are duly executed and give the Mezzanine Lender the authority they purport to confer. (iii) The grant and perfection of the security interests in the Pledged Interests and other Collateral for the benefit of Mezzanine Lender, in accordance with the terms hereof are not made in violation of the registration requirements of the Securities Act 1933 (the "SECURITIES ACT"), any applicable provisions of other federal securities laws, state securities or "Blue Sky" laws, foreign securities law, or applicable general corporation law or any other applicable law. (d) PRINCIPAL PLACE OF BUSINESS. The sole chief executive office and sole principal place of business of Pledgor is located at c/o Lodgian, Inc., 3445 Peachtree Road, Suite 700, Atlanta, Georgia 30326. 8 SECTION 3.02. COVENANTS. Pledgor covenants and agrees with Mezzanine Lender as set forth below: (a) DEFENSE OF TITLE. Pledgor shall defend its title to the Collateral against all claims of all Persons whomsoever, except with respect to (i) Liens created hereby or under the other Mezzanine Loan Documents or as are expressly permitted by the Mezzanine Loan Documents or (ii) other Liens expressly permitted by Mezzanine Lender. (b) ADDITIONAL LIENS. Pledgor shall not (i) permit any Lien except such Liens as are permitted by the Mezzanine Loan Documents to be created or exist with respect to the Collateral, or (ii) agree to amend, modify or supplement any Organizational Document, except as expressly permitted under the Mezzanine Loan Agreement. (c) CHANGE IN LOCATION OF PRINCIPAL PLACE OF BUSINESS. Pledgor shall not relocate its chief executive office and/or principal place of business to a new location except in accordance with the Mezzanine Loan Agreement. (d) PAYMENT OF TAXES. Pledgor shall pay, and save Mezzanine Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, all stamp, excise, sale or other taxes which may be due and payable or determined to be due and payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement (excluding Mezzanine Lender's income or franchise taxes). (e) Pledgor agrees to execute and deliver to each Pledged Subsidiary a control acknowledgment ("CONTROL ACKNOWLEDGMENT") substantially in the form of EXHIBIT B hereto. Pledgor shall cause each such Pledged Subsidiary to acknowledge in writing its receipt and acceptance thereof. Such Control Acknowledgment shall instruct such Pledged Subsidiary to follow instructions from Mezzanine Lender without Pledgor's consultation or consent after the occurrence and during the continuance of an Event of Default. SECTION 3.03. PROTECTION OF COLLATERAL. Pledgor will not create, permit or suffer to exist, and will defend the respective Collateral against and take such other action as is necessary to remove, any Lien on such Collateral other than as permitted by the Mezzanine Loan Documents, and if Pledgor fails to do so, Mezzanine Lender may, without waiving or releasing any obligation or liability of Pledgor hereunder or any Event of Default, at any time thereafter (but shall be under no obligation to), make such payment or any part thereof, obtain such discharge or otherwise defend Pledgor's title to the respective Collateral. All sums so paid by Mezzanine Lender and any reasonable expenses incurred by Mezzanine Lender in connection therewith, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be payable, by Pledgor to Mezzanine Lender within five (5) Business Days after written notice therefor is given by Mezzanine Lender to Pledgor, and shall be deemed additional Mezzanine Loan Obligations secured by the Collateral. SECTION 3.04. SALE OR PLEDGE OF RELATED COLLATERAL. Pledgor shall not sell, assign, Transfer or otherwise dispose of, or pledge, hypothecate or otherwise encumber, directly or indirectly, whether by operation of law or otherwise (except to the extent expressly permitted 9 by this Agreement or the other Mezzanine Loan Documents), any of the Collateral or any interest therein. SECTION 3.05. FURTHER ASSURANCE, PRESERVATION AND PERFECTION OF SECURITY INTEREST. (a) At its own expense, Pledgor shall do all such acts, and shall execute and deliver to Mezzanine Lender all such certificates, instruments and other documents and shall do and perform or cause to be done all matters and such other things necessary or advisable to be done as Mezzanine Lender may reasonably request from time to time in order to give full effect to this Agreement, and for the purpose of effectively perfecting, maintaining and preserving Mezzanine Lender's security interest and the benefits intended to be granted to Mezzanine Lender hereunder. To the extent permitted by applicable law, Pledgor hereby authorizes Mezzanine Lender, so long as any of the Mezzanine Loan Obligations remain outstanding, to execute and file, in the name of Pledgor or otherwise, UCC financing statements, including continuation statements, which Mezzanine Lender in its reasonable discretion may deem necessary or appropriate for the purpose specified above. (b) If Pledgor fails to perform any act required by this Agreement, Mezzanine Lender may, but shall not be obligated to, perform or cause the performance of such act, and the reasonable expenses of Mezzanine Lender incurred in connection therewith shall be governed by Section 5.07 hereof. SECTION 3.06. RIGHTS OF PLEDGOR. Unless an Event of Default shall have occurred and be continuing, notwithstanding any other provision of this Agreement to the contrary, Pledgor shall be entitled to (a) exercise any and all voting and other consensual rights pertaining to the related Pledged Interests or any part thereof for any purpose not inconsistent with the terms of this Agreement or the other Mezzanine Loan Documents, (b) receive and use, free and clear of any Lien created hereby or any security interest granted by Pledgor to Mezzanine Lender hereunder, for any purpose, any distributions actually made, and any allocations actually made, with respect to the Pledged Interests (whether as a distribution of net cash flow or otherwise), (c) retain its books and records pertaining to the respective Collateral and (d) all rights and benefits of a member, partner or shareholder, as applicable, in the related Pledged Subsidiary, subject to the limitations set forth in this Agreement. SECTION 3.07. PRESERVATION OF RELATED COLLATERAL. Pledgor will not allow any Event of Default for which it is responsible to occur under and in respect of the Collateral, and shall fully perform or cause to be performed when due all of its respective obligations under and in respect of the Collateral. SECTION 3.08. PAPERS, RECORDS AND FILES. (a) Maintenance. Pledgor shall acquire and shall assemble, maintain and have available a complete file relating to the Pledged Interests, including all material statements and other information delivered to Pledgor pursuant to the Organizational Documents. Pledgor shall maintain all such papers, records and files not in the possession of Mezzanine Lender in good and complete condition and shall preserve them against loss. 10 (b) Pledgor to Hold Records for Mezzanine Lender. For so long as Mezzanine Lender has a security interest in any Collateral, Pledgor will hold or cause to be held any paper, record or file related to such Collateral for Mezzanine Lender. (c) Mezzanine Lender's Rights of Inspection. Upon reasonable advance notice from Mezzanine Lender, and during regular business hours, Pledgor shall make any or all such papers, records or files available to Mezzanine Lender in order that Mezzanine Lender may examine any such papers, records and files, either by its employees or by agents or contractors, or both, and make copies of all or any portion thereof. The representations and warranties set forth in this Article III shall survive the execution and delivery of this Agreement, but, subject to Section 6.12 of this Agreement, shall terminate upon payment in full of the Mezzanine Loan Obligations. ARTICLE IV NEGATIVE PLEDGE AGREEMENT SECTION 4.01. NEGATIVE COVENANTS. Pledgor covenants and agrees that until such time as (a) all Mezzanine Loan Obligations shall have been paid and performed in full or (b) the Mezzanine Loan Agreement and other Mezzanine Loan Documents shall have been terminated, Pledgor will not, without the prior written consent of Mezzanine Lender or except as expressly set forth in the Mezzanine Loan Agreement: (i) sell, assign, pledge, grant any Lien on, other than Liens expressly permitted under the Mezzanine Loan Documents, Transfer, dispose of or otherwise encumber the Collateral or any part thereof, including entering into any lock-up or any other arrangement with respect to the Collateral; or (ii) vote to enable, or take any other action to permit, or fail to take any available action to prevent the Corporations, the LLCs, or the Partnerships to issue any shares of the Corporations, limited liability company membership interests of the LLCs, or limited or general partnership interests of the Partnerships, as applicable, or to issue any other securities convertible into or granting the right to purchase or exchange for any shares of the Corporations, limited liability company membership interests of the LLCs, or limited or general partnership interests of the Partnerships, as applicable. ARTICLE V MEZZANINE LENDER RIGHTS AND REMEDIES SECTION 5.01. REMEDIES. (a) Should any Event of Default occur and be continuing, Mezzanine Lender is hereby authorized and empowered, at its election, to do any of the following without liability (except to the extent liability results from the gross negligence or willful misconduct of Mezzanine Lender) except to account for money and other property actually received by it, but Mezzanine Lender shall have no duty to exercise any such right, privilege or options and shall not be responsible for any failure to so or delay in so doing: 11 (i) to transfer and register in its or its nominee's name the whole or any part of the Collateral, including by means of the completion of the instruments of transfer referred to in Sections 2.01, 2.02 or 3.02(e); (ii) to exercise all voting rights with respect to the Collateral; (iii) to demand, sue for, collect, receive and give acquittance for any and all cash distributions (including distributions to which Pledgor would otherwise be entitled pursuant to Section 3.06 of this Agreement) or monies due or to become due upon or by virtue thereof, and to settle, prosecute or defend any action or proceeding with respect thereto; (iv) to sell in one or more sales (public or private) the whole or any part of the Collateral or otherwise to transfer or assign the same, in each case, however, to the extent permitted and in the manner provided in the UCC; (v) to receive and retain all distributions on the Collateral; (vi) to otherwise enforce and act with respect to the Collateral or the Proceeds as though Mezzanine Lender were the outright owner thereof; (vii) to exercise all other rights and remedies available under law or in equity; and (viii) upon the exercise by Mezzanine Lender of any right, privilege or option pertaining to the Pledged Interests, and in connection therewith, the right to deposit and deliver any and all of the Pledged Interests with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine. Mezzanine Lender is hereby granted a power of attorney to effect the aforesaid registration in the name of the Mezzanine Lender or its nominee of the Pledged Interests. (b) In the event of any disposition of the Collateral as provided in Section 5.01(a)(iv), Mezzanine Lender shall give to Pledgor at least ten (10) Business Days prior written notice of the time and place of any public sale of the Collateral or of the time after which any private sale (to the extent permitted by applicable law) or any other intended disposition is to be made, unless a longer period is required by applicable law. Pledgor hereby acknowledges that ten (10) Business Days prior written notice of such sale or sales shall be reasonable notice. Except as otherwise expressly provided in the Mezzanine Loan Documents or the UCC, Mezzanine Lender may enforce its rights hereunder without any other notice and without compliance with any other condition precedent now or hereunder imposed by statute, rule of law or otherwise (all of which are hereby expressly waived by Pledgor, to the fullest extent permitted by law). Mezzanine Lender may buy any part or all of the Collateral at any public sale conducted in accordance with the UCC and as set forth herein. (c) Pledgor recognizes that Mezzanine Lender may be unable to effect a public sale of the Collateral, or any part thereof by reason of certain prohibitions contained in the Securities Act, and other applicable laws, but may be compelled to resort to one or more private sales thereof (to the extent permitted by applicable law) to a restricted group of purchasers and may otherwise be required to impose additional limitations on sales as a result thereof. Pledgor 12 agrees that any such private sales may be at prices and other terms less favorable to the seller than if sold at public sales and that such private sales shall not by reason thereof be deemed not to have been made in a commercially reasonable manner. Pledgor agrees to use its best efforts to cause the respective Corporations, the LLCs and the Partnerships to execute and deliver all such instruments and documents and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of Mezzanine Lender, advisable (i) to cause the Collateral, or any part thereof, to be exempt from registration under the provisions of the Securities Act, (ii) to amend such instruments and documents which, in the opinion of Mezzanine Lender, are necessary or advisable to meet the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto, and (iii) to make any sales of any portion or all of the Collateral pursuant to this Section 5.01 valid and binding and in compliance with any and all applicable laws, provided that nothing herein shall require or imply that the Pledged Interests are to be registered under the Securities Act or other similar laws. Pledgor further agrees to use its best efforts to cause the Corporations to comply with the provisions of the state securities or "Blue Sky" laws of any jurisdiction which the Mezzanine Lender shall designate, to the extent that any such laws apply under circumstances under which the Collateral is exempt from registration under the provisions of the Securities Act. SECTION 5.02. LIMITATION ON DUTIES REGARDING COLLATERAL. Mezzanine Lender's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, if any, under Section 9-207 of the Code or otherwise, shall be to deal with it in a commercially reasonable manner as Mezzanine Lender deals with similar shares of a company, limited liability company membership interests and partnership interests, certificates, securities and other similar property for its own account. Neither Mezzanine Lender nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of Pledgor or otherwise except to the extent that liability results from the gross negligence or willful misconduct of Mezzanine Lender. SECTION 5.03. PREJUDGMENT REMEDY PROVISION. After the occurrence and during the continuance of an Event of Default, in the event of any legal action between Pledgor and Mezzanine Lender hereunder, Pledgor expressly waives, to the extent permitted by law, any and all rights Pledgor may have under the law as now constituted or hereafter amended that may constitute a limitation on prejudgment remedies, and Mezzanine Lender may invoke any prejudgment remedy available to it, including garnishment, attachment, foreign attachments and replevin, with respect to the Collateral, to enforce the provisions of this Agreement. SECTION 5.04. APPLICATION OF PROCEEDS. Except as otherwise provided herein or in the other Mezzanine Loan Documents, Mezzanine Lender shall apply any Proceeds from time to time held by it and the net proceeds of any collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable out-of-pocket costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of Mezzanine Lender hereunder, including reasonable attorney's fees and disbursements, to the payment in whole or in part of the Mezzanine Loan Obligations, in such order as Mezzanine Lender may elect, and only after such application and after the payment by Mezzanine Lender of any other amount required by any provision of law, 13 including Section 9-615 of the UCC, need Mezzanine Lender account for the surplus, if any, to Pledgor. SECTION 5.05. NON-RECOURSE. Except as otherwise provided in this Agreement or in any other of the Mezzanine Loan Documents, no recourse shall be had against Pledgor or any incorporator, affiliate, shareholder, stockholder, member, officer, employee or director of Pledgor by the enforcement of any assessment or by any legal or equitable proceeding, in respect of any of the Mezzanine Loan Obligations, it being expressly agreed and understood that the Mezzanine Loan Obligations, will be satisfied solely out of the Collateral and any other property in which Pledgor has any right, title or interest and in respect of which Pledgor grants a security interest for the satisfaction of the Mezzanine Loan Obligations under any Mezzanine Loan Document. SECTION 5.06. APPOINTMENT OF MEZZANINE LENDER AS PLEDGOR'S LAWFUL ATTORNEY. Pledgor irrevocably designates, makes, constitutes and appoints Mezzanine Lender (and all Persons designated by Mezzanine Lender) as its true and lawful proxy and attorney-in-fact (coupled with an interest) upon the occurrence and continuance of an Event of Default to take the following actions: (a) TO ENDORSE PLEDGOR'S NAME. At such time or times hereafter as Mezzanine Lender or its agent in its sole discretion may determine, in Pledgor's or Mezzanine Lender's name, to endorse Pledgor's name on any checks, notes, drafts, instruments, documents or any other payment relating to the Collateral and/or Proceeds which come into the possession of Mezzanine Lender or come under Mezzanine Lender's control; (b) TO SIGN PLEDGOR'S NAME TO PERFECTION DOCUMENTS. To the extent permitted by law, to sign Pledgor's name on any documents necessary or desirable for the purpose of maintaining or achieving the perfection of a security interest in the Collateral; and (c) TO SIGN PLEDGOR'S NAME ON OTHER DOCUMENTS. To the extent permitted by law, to sign Pledgor's name to any document necessary or appropriate in order to permit Mezzanine Lender to fully exercise its rights under Section 5.01. SECTION 5.07. REIMBURSEMENT. All reasonable sums expended by Mezzanine Lender in connection with the exercise of any right or remedy provided for herein shall be and shall remain the obligation of Pledgor. At the option of Mezzanine Lender, all such reasonable sums may be paid from the Collateral or may be advanced by Mezzanine Lender, in which event they shall be deemed to have been advanced to Pledgor and shall be reimbursed by Pledgor to Mezzanine Lender within five (5) Business Days after Mezzanine Lender's written notice to Pledgor therefor. Such sums shall constitute part of the Mezzanine Loan Obligations. SECTION 5.08. EXONERATION OF MEZZANINE LENDER; CERTAIN REIMBURSEMENTS. (a) MEZZANINE LENDER'S POWERS FOR MEZZANINE LENDER'S SOLE BENEFIT. The powers conferred on Mezzanine Lender hereunder are solely for Mezzanine Lender's benefit, and do not impose any duty on Mezzanine Lender to exercise any such powers. Pledgor waives, to the fullest extent permitted by law, all rights whatsoever against Mezzanine Lender for any loss, expense, liability or damage suffered by Pledgor as a result of actions taken 14 pursuant to this Agreement, including those arising under any "mortgagee in possession" doctrine or the like, except to the extent such losses, expenses, liabilities or damages result from the gross negligence or willful misconduct of Mezzanine Lender, or to the extent otherwise expressly provided herein. (b) PLEDGOR TO REIMBURSE MEZZANINE LENDER FOR COLLATERAL-PRESERVATION FEES AND TAXES. Without limiting the application of Section 5.08(a), Pledgor shall pay or reimburse Mezzanine Lender for all (i) reasonable out-of-pocket fees and (ii) all taxes (but excluding any income or other similar tax imposed on Mezzanine Lender) in connection with preserving the Collateral and Mezzanine Lender's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral, except to the extent such fees and taxes result from the fraud, gross negligence or willful misconduct of Mezzanine Lender. Such fees and taxes will constitute part of the Mezzanine Loan Obligations. SECTION 5.09. WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS. Pledgor hereby waives, to the fullest extent permitted by law, every statute of limitation, any right of redemption, any moratorium or redemption period, and any right which Pledgor may have to direct the order in which any of the Collateral shall be disposed of in the event of any disposition thereof pursuant hereto, except as otherwise expressly provided herein or in the other Mezzanine Loan Documents. ARTICLE VI MISCELLANEOUS SECTION 6.01. SECURITY AGREEMENT. This Agreement is intended to be a security agreement pursuant to the Code for any and all of the Collateral purported to be covered by this Agreement, and, prior to the occurrence of and continuation of an Event of Default hereunder, any assignment of the Collateral by the Pledgor pursuant to this Agreement is an assignment for security purposes only. SECTION 6.02. REMEDIES CUMULATIVE. The rights, remedies and benefits of Mezzanine Lender herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which Mezzanine Lender may have under this Agreement or any other Mezzanine Loan Document, at law, in equity, by statute or otherwise. Without limiting the generality of the foregoing, Mezzanine Lender shall have all rights and remedies of a secured party under Article 9 of the UCC in each applicable jurisdiction with respect to the Collateral. SECTION 6.03. SECURITY INTEREST ABSOLUTE. All rights of Mezzanine Lender hereunder, the grant of a security interest in the Collateral and all obligations of Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Organizational Documents or the Mezzanine Loan Documents, (b) any change in time, manner or place of payment of, or in any other term of, all or any of the Mezzanine Loan Obligations, or any release, amendment or waiver of or any consent to any departure from the Mezzanine Loan Agreement or any other of the Mezzanine Loan Documents, (c) any exchange, release or nonperfection of any other collateral, or any release, amendment or 15 waiver of or consent to or departure from any guarantee, for all or any of the Mezzanine Loan Obligations, or (d) any other similar circumstance which might otherwise constitute a defense available to, or a discharge of, Pledgor in respect of the Mezzanine Loan Obligations or in respect of this Agreement. SECTION 6.04. NO DELAY; WAIVERS. No delay on the part of Mezzanine Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any power or right hereunder preclude other or further exercise thereof or the exercise of any other power or right. Mezzanine Lender shall not be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by Mezzanine Lender. SECTION 6.05. FURTHER ASSURANCES. Each party to this Agreement shall execute such assignments, endorsements and other instruments and documents and shall give such further assurances as shall be necessary to perform its obligations hereunder. SECTION 6.06. WAIVERS AND AMENDMENTS. This Agreement may be amended, superseded or canceled; and the terms hereof may be waived, only by a written instrument signed by authorized representatives of the parties hereto or, in the case of a waiver, by an authorized representative of the party waiving compliance. No such written instrument shall be effective unless it recites that it is intended to amend, supersede or cancel this Agreement or to waive compliance with one or more of the terms hereof, as the case may be. SECTION 6.07. NOTICES. All notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be delivered in accordance with Section 14.5 of the Mezzanine Loan Agreement, except the term "Mezzanine Borrower" shall instead be read to refer to Pledgor. SECTION 6.08. GOVERNING LAW. This Agreement and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and intended to be performed in such State, without giving effect to principles of conflicts of laws, and any applicable law of the United States of America. To the fullest extent permitted by law, Pledgor and Mezzanine Lender hereby unconditionally and irrevocably waive any claim to assert that the law of any other jurisdiction governs this Agreement and this Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of laws. Each party agrees that any legal suit, action or proceeding against Pledgor and Mezzanine Lender arising out of or relating to this agreement shall be instituted in any federal or state court in New York, and Pledgor and Mezzanine Lender each waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and Pledgor and Mezzanine Lender each hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. Pledgor does hereby designate and appoint National Corporate Research, Ltd., having an address at 615 South Dupont Highway, Dover, Delaware 19901, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court and agrees that service of process upon said agent at said address (or at such other office as may be designated by Pledgor from time to time in accordance with the terms hereof) with copies to Morris, Manning & Martin, LLP, 3343 Peachtree Road, NE, Atlanta, GA 30326, Attn: Tom Gryboski, 16 Esq., Fax: (404) 365-9532, and written notice of said service of Pledgor mailed or delivered to the undersigned in the manner provided herein shall be deemed in every respect effective service of process upon Pledgor, in any such suit, action or proceeding. SECTION 6.09. WAIVER OF JURY TRIAL. PLEDGOR AND MEZZANINE LENDER TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING INCLUDING WITHOUT LIMITATION, ANY TORT ACTION BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT. SECTION 6.10. BINDING AGREEMENT; ASSIGNMENTS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Pledgor shall not assign this Agreement or any interest herein or in the Collateral, or any part thereof, or any cash or property held by Mezzanine Lender as Collateral under this Agreement, except (a) with the prior written consent of Mezzanine Lender, if applicable, or (b) as expressly permitted under the Mezzanine Loan Agreement. Any purported assignment in violation of this Section shall be null and void. SECTION 6.11. ADDITIONAL COVENANTS OF PLEDGOR. Pledgor covenants and agrees with Mezzanine Lender that, from and after the date of this Agreement until the Mezzanine Loan Obligations are paid and performed in full, Pledgor shall use its best efforts in accordance with the respective Organizational Documents to cause the Corporations, the LLCs and the Partnerships (in such entities' individual capacity or in their capacity as the managing member of any LLC or general partner of any Partnership, as applicable) to take the actions and achieve the objectives listed in this Agreement (and Pledgor agrees that Pledgor will not take any action, or refuse to grant any consents, which would interfere with or impede the ability of the Corporations, the LLCs or the Partnerships to take such actions or achieve such objectives). (a) CORPORATIONS, PARTNERSHIPS AND LLCS AS SPECIAL PURPOSE BANKRUPTCY REMOTE ENTITY. Each of Pledgor, the Corporations, the Partnerships and the LLCs shall do all things necessary as required under the Mezzanine Loan Agreement (including Sections 9.1 and 9.2 thereof) to preserve the existence of each of the foregoing entities as a Special Purpose Bankruptcy Remote Entity. (b) Inspection of Property; Books and Records; Discussion; Consents. (i) Each of Pledgor, the Corporations, the Partnerships and the LLCs shall, and each of the foregoing shall, insofar as it is able, cause each other to, keep and maintain on a fiscal year basis proper books and records in accordance with the requirements set forth in the Mezzanine Loan Agreement. Mezzanine Lender and its authorized representatives shall have the right during normal business hours and upon reasonable notice to examine the foregoing books and records and to make such copies or extracts thereof as Mezzanine Lender may require. (ii) Each of Pledgor, the Corporations, the Partnerships and the LLCs shall permit Mezzanine Lender and any Person authorized by it, at all reasonable times and upon reasonable notice to enter and examine the respective Property and inspect all work done, labor performed and materials furnished in and about the respective Property. Mezzanine Lender shall 17 have no duty to make any such inspection and shall have no liability or obligation for making (except for its willful misconduct) or not making any such inspection. (iii) Each of Pledgor, the Corporations, the Partnerships and the LLCs shall, promptly after written request by Mezzanine Lender, furnish or cause to be furnished to Mezzanine Lender, in such manner and in such detail as may be requested by Mezzanine Lender, such additional information as may be reasonably requested by Mezzanine Lender with respect to each of Pledgor, the Corporations, the LLCs and the Partnerships and their respective Property. (c) NOTICES. Each of Pledgor, the Corporations, the Partnerships and the LLCs shall, as appropriate, promptly give, or, insofar as it is able, cause each other to give, Mezzanine Lender written notice of: (i) the occurrence of any Event of Default; (ii) any (x) default or event of default under any contractual obligation of the Partnerships, the LLCs or the Corporations that could be reasonably expected to result in a Material Adverse Effect, or (y) litigation, investigation or proceeding which may exist at any time between the Partnerships, the LLCs or the Corporations and any Governmental Authority or any other Person, which, if not cured or if adversely determined, as the case may be, could reasonably be expected to result in a Material Adverse Effect; and (iii) of a change in the business, operations, property or financial or other condition or prospects of Pledgor, the Corporations, the LLCs or the Partnerships which could result in a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of an Authorized Officer setting forth details of the occurrence referred to therein and stating what action the applicable Person proposes to take, if any, with respect thereto. (d) COMPLIANCE WITH MORTGAGE LOAN DOCUMENTS. Each of Pledgor, the Corporations, the LLCs and the Partnerships shall take all actions as are required by or to comply with the terms of the Mortgage Loan Documents, and shall not take, or cause to be taken, any actions that violate or will violate any such documents. (e) DISTRIBUTIONS. Each of Pledgor, the Corporations, the LLCs and the Partnerships shall, insofar as it is able and to the extent that such amounts are not otherwise being deposited in the lock box required to be maintained under the Mezzanine Loan Agreement, distribute all amounts which are necessary to enable Pledgor to pay all amounts owed and perform all obligations under the Mezzanine Loan Documents as and when due and payable (including reserves), but no less frequently than monthly. (f) APPLICATION OF DISBURSEMENTS. No amounts received by or disbursed to Pledgor, the LLCs, the Partnerships or the Corporations shall in any manner violate the requirements of the Mortgage Loan Agreements or the Mezzanine Loan Agreement. 18 (g) CURING. Mezzanine Lender shall have the right, but shall not have the obligation, to cure an Event of Default (as defined in the Mortgage Loan Agreements) by any Corporation, LLC or Partnership under the Mortgage Loan Agreement. (h) FURTHER ASSURANCES. Each of Pledgor, the Corporations, the Partnerships and the LLCs shall, insofar as it is able at any time and from time to time, and at no cost or expense to Mezzanine Lender, promptly and duly execute and deliver such further instruments and documents and take such further actions as Mezzanine Lender may reasonably request to carry out and obtain and preserve the full benefits of this Agreement and the other Mezzanine Loan Documents and of the rights and powers granted herein and therein. (i) ADDITIONAL COVENANTS OF PLEDGOR RELATING TO NEGATIVE COVENANTS OF MORTGAGE LOAN BORROWERS. From and after the date of this Agreement and until the Mezzanine Loan Obligations are paid and performed in full (exclusive of any indemnification or other obligations which are expressly stated in any of the Mezzanine Loan Documents to survive satisfaction of the Mezzanine Note), Pledgor shall cause the Corporations, the Partnerships and the LLCs (in each such entity's individual capacity and its capacity as the managing member of any LLC and as general partner of any Partnership, as applicable) to take (or not take, as the case may be) the actions or achieve the objectives listed in this Subsection (i): (i) SPECIAL PURPOSE EXISTENCE AND SEPARATENESS OF MEZZANINE LOAN PARTIES AND SUBSIDIARY ENTITIES. To ensure that Pledgor, the Corporations, the Partnerships and the LLCs shall comply with the covenants set forth in the Mezzanine Loan Agreement. (ii) LIENS. To ensure that none of Pledgor, the Corporations, the Partnerships or the LLCs, shall take any action that would impair the Lien (or its priority) created under this Agreement or any of the other Mezzanine Loan Documents. (iii) OTHER LIMITATIONS. To ensure that none of the Corporations, the LLCs, Pledgor or the Partnerships shall Transfer the Property or any portion thereof, except as expressly permitted under the Mezzanine Loan Documents. SECTION 6.12. RESTORATION OR SET ASIDE. If, for any reason, any portion of Pledgor's payments to Mezzanine Lender pursuant to the Mezzanine Loan Obligations is set aside or restored, whether voluntarily or involuntarily, after the making thereof, then the obligation intended to be satisfied thereby shall be revived and shall continue in full force and effect as if said payment or payments had not been made (and Pledgor's obligations and liabilities to Mezzanine Lender under this Agreement shall be reinstated to such extent and this Agreement and any Collateral for this Agreement shall remain in full force and effect (or shall be reinstated) to such extent), and the full amount Mezzanine Lender is required to repay, plus any and all reasonable costs and expenses (including (i) reasonable attorneys' fees and expenses and (ii) reasonable attorneys' fees and expenses incurred pursuant to the United States Bankruptcy Code) paid by Mezzanine Lender in connection therewith, shall constitute additional Mezzanine Loan Obligations. 19 SECTION 6.13. SEVERABILITY. If any provision of this Agreement shall be invalid, illegal or unenforceable, then, to the extent permitted by law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 6.14. SECTION HEADINGS. Section headings used herein are for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 6.15. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. SECTION 6.16. NO THIRD PARTY BENEFICIARIES. This Agreement is entered into for the benefit of the parties hereto, and no third parties shall have any direct rights hereunder. SECTION 6.17. ENTIRE AGREEMENT. This Agreement, taken together with the other Mezzanine Loan Documents, supersedes all prior written agreements and understandings between the parties hereto with respect to the subject matter hereof, whether express or implied, written or oral. SECTION 6.18. ADDITIONAL CONSENTS. By executing the Control Acknowledgement, each of Pledgor, the Corporations the LLCs and the Partnerships shall, (i) consent to (A) the pledge by Pledgor to Mezzanine Lender of the Pledged Interests, (B) (i) the transfer of the Pledged Interests and (ii) the right to exercise all voting and management rights appurtenant or relating to that Pledged Interest in each case, by or in lieu of, foreclosure of the pledge (it being agreed that Mezzanine Lender may, in its sole discretion foreclose solely on the voting or management rights) and (C) upon the aforesaid transfer of the Pledged Interests, the change in control of the Corporations, the LLCs and the Partnerships and (ii) acknowledges and agrees that the foreclosure of the Pledged Interests by Mezzanine Lender or other transfer of the Pledged Interests in lieu of foreclosure, shall not constitute an unpermitted transfer under any of the Organizational Documents. [SIGNATURE PAGES FOLLOW] 20 IN WITNESS WHEREOF, the parties hereto have caused this Pledge and Security Agreement to be duly executed as of the date first above written. PLEDGOR: [LODGIAN MEZZANINE BORROWING ENTITY, LLC, a Delaware limited liability company By:______________________________ Name: Daniel E. Ellis Title: Vice President and Secretary [SIGNATURE PAGES CONTINUE] MEZZANINE LENDER: MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation By:________________________________ Name: Title: [SIGNATURE PAGES CONTINUE] EXHIBIT A STOCK POWER FOR VALUE RECEIVED, the undersigned does hereby sell, assign and transfer to _______________________ ____ shares of Common Stock of ____________, a __________ corporation, represented by Certificate No. __ (the "STOCK"), standing in the name of the undersigned on the books of said corporation and does hereby irrevocably constitute and appoint ___________________________________ as the undersigned's true and lawful attorney, for it and in its name and stead, to sell, assign and transfer all or any of the Stock, and for that purpose to make and execute all necessary acts of assignment and transfer thereof; and to substitute one or more persons with like full power, hereby ratifying and confirming all that said attorney or substitute or substitutes shall lawfully do by virtue hereof. Dated:_______________ By:_____________________________ Name: Title: A-1 EXHIBIT B CONTROL ACKNOWLEDGMENT "PLEDGED SUBSIDIARY": INTEREST OWNER: [Name of Pledged Subsidiary] ________________________ Reference is hereby made to that certain Pledge and Security Agreement, dated as of June __, 2004 (the "PLEDGE AGREEMENT"), between [LODGIAN MEZZANINE BORROWING ENTITY, LLC], a Delaware limited liability company ("PLEDGOR"), a direct or indirect (through one or more wholly owned subsidiaries) [member][partner] [shareholder] of Pledged Subsidiary, and Merrill Lynch Mortgage Lending, Inc., a Delaware corporation ("LENDER"). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Pledge and Security Agreement. Pledged Subsidiary is hereby instructed by Pledgor that all of Pledgor's right, title and interest in and to all of Pledgor's rights in connection with any interests in Pledged Subsidiary now and hereafter owned by Pledgor (directly, or indirectly through one or more wholly owned subsidiaries) are subject to a pledge and security interest in favor of Lender. Pledgor hereby instructs the Pledged Subsidiary to act upon any instruction delivered to it by the Lender with respect to the Collateral without seeking further instruction from Pledgor, and, by its execution hereof, the Pledged Subsidiary agrees to do so. Pledged Subsidiary, by its written acknowledgement and acceptance hereof, hereby acknowledges receipt of a copy of the aforementioned Pledge and Security Agreement and agrees promptly to note on its books the security interest granted under such Pledge and Security Agreement. Each Pledged Subsidiary also waives any rights or requirements at any time hereafter to receive a copy of such Pledge and Security Agreement in connection with the registration of any Collateral in the name of the Lender or its nominee or the exercise of voting rights by the Lender or its nominee. [The remainder of this page is intentionally blank.] B-1 IN WITNESS WHEREOF, Pledgor has caused this Control Acknowledgment to be duly signed and delivered by its officer duly authorized as of this ____ day of June, 2004. By:__________________________ Name: Title: Acknowledged and accepted this ____ day of June, 2004. [PLEDGED SUBSIDIARY] By: ______________________ Name: Title: B-2 SCHEDULE 1 PLEDGED SUBSIDIARIES Stock Certificates Pledged By Mezzanine Borrower
Percentage of Shares Outstanding Subject Common Stock Pledged to Subject to Certificate Subsidiary Pledge Pledge Number - ---------- ------- ------------- -----------
Schedule 1-1 Membership Interests Pledged by Mezzanine Borrower
Percentage of Total Membership Interest owned by Pledgor Certificate Pledged Subsidiary and being Pledged Number - ------------------ ------------------------------ -----------
Partnership Interests Pledged by Mezzanine Borrower
Percentage of Total Partnership Interest owned by Pledgor Certificate Pledged Subsidiary and being Pledged Number - ------------------ ------------------------------- -----------
EX-10.34 31 g87458a3exv10w34.txt EX-10.34 FORM OF ASSIGNMENT OF LEASES AND RENTS ================================================================================ EXHIBIT 10.34 FORM OF ASSIGNMENT OF LEASES AND RENTS Dated: As of June __, 2004 from [LODGIAN ENTITY] (Assignor) to MERRILL LYNCH MORTGAGE LENDING, INC. (Assignee) PROPERTY LOCATION: DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attention: Mark A. Poole, Esq. ================================================================================ This FORM OF ASSIGNMENT OF LEASES AND RENTS, made as of June __, 2004 (this "ASSIGNMENT"), by [LODGIAN ENTITY], having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 ("ASSIGNOR") to MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having a mailing address at 4 World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "ASSIGNEE"). WITNESSETH: THAT Assignor for good and valuable consideration, receipt whereof is hereby acknowledged, hereby grants, transfers and absolutely and unconditionally assigns to Assignee, subject to the terms of this Assignment, Assignor's entire interest in and to all current and future leases and other agreements affecting the use, enjoyment, or occupancy of all or any part of the real property more particularly described in EXHIBIT A annexed hereto and made a part hereof, together with the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located thereon (hereinafter collectively referred to as the "MORTGAGED PROPERTY"), together with any extensions or renewals of the same, this Assignment of current and future leases and current and future agreements being effective without further or supplemental assignment; The leases and other agreements described above, as same may be modified or amended, and any extension or renewal of the same are hereinafter collectively referred to as the "LEASES"; TOGETHER WITH all deposits, rents, rent equivalents, income, receivables, issues, revenues, receipts, insurance proceeds and profits arising from the Leases and renewals thereof and together with all rents, rent equivalents, income, fees, receivables, issues, accounts, profits (including, but not limited to, all oil and gas or other mineral royalties and bonuses), charges for services rendered and any and all payment and consideration of whatever form or nature received by Assignor or its agents or employees from any and all sources relating to the use, enjoyment and occupancy of the Mortgaged Property including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants, bars (including, without limitation, service charges for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, health club membership fees, food and beverage wholesale and retail sales, service charges, convention services, special events, audio-visual services, boat cruises, travel agency fees, telephone charges, laundry services, vending machines and otherwise, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of possession, use and occupancy of all or any portion of the Mortgaged Property or personalty located thereon, or rendering of services by Assignor or, to the extent of Assignor's interest therein, any operator or manager of the hotel or the commercial space located in the Mortgaged Property or acquired from others (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores, and offices, and deposits securing reservations of such space, and charges for services such as room service, telecommunication and video, electronic mail, internet connection and other communication and entertainment services), license, lease, sublease and concession fees and rentals, proceeds, if any, from rental or business interruption or other loss of income insurance and any other items of revenue which would be included in operating revenues under the Uniform System (as defined in the Loan Agreement described below) (all of the foregoing hereinafter collectively referred to as the "RENTS"). Notwithstanding the foregoing, any Rents in connection with the sale of alcohol or alcoholic beverages shall be assigned by Assignor pursuant to this Assignment only to the extent permitted by applicable law. THIS ASSIGNMENT is made in consideration of that certain loan made by Assignee to Assignor and the other Borrowers (as defined in the Loan Agreement) pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as amended, modified or restated, the "LOAN AGREEMENT"), among Assignor, the other Borrowers and Assignee, as evidenced by that certain Promissory Note, dated as of the date hereof (as amended, modified, renewed or restated, and together with any substitutes or replacements (by means of multiple notes or otherwise) therefor, collectively, the "Note"), made by Borrowers to Assignee, in the principal sum of _____________________________________ and secured by, among other things, that certain Mortgage, Deed of Trust, or Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated as of the date hereof (as amended, modified, or restated from time to time, the "SECURITY INSTRUMENT"), given by Assignor to Assignee, covering the Mortgaged Property and intended to be duly recorded herewith. The principal sum, interest and all other sums due and payable under the Loan Agreement, the Note and the Security Instrument are hereinafter collectively referred to as the "DEBT". This Assignment, the Loan Agreement, the Note, the Security Instrument and any other documents now or hereafter executed by Assignor and/or others and by or in favor of Assignee which evidences, secure and/or guarantees all or any portion of the Debt are hereinafter referred to collectively as the "LOAN DOCUMENTS." Capitalized terms used herein and not herein defined shall have the meanings assigned to such terms in the Loan Agreement. ASSIGNOR WARRANTS that (A) except for the Material Leases (as defined in the Loan Agreement) described in the Rent Roll (as defined in the Loan Agreement), none of the Mortgaged Property is subject to any Material Leases; (B) except only as specified in the Rent Roll, or as otherwise disclosed to Assignee in the estoppel certificates delivered to Assignee at Closing, to Assignor's Knowledge, (i) the Material Leases are in full force and effect; (ii) Assignor has not given any notice of default to any tenant under any Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) Assignor has completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll; and (vii) there exist no offsets or defenses to the payment of any portion of the Rents except as otherwise set forth in any Credit Card Receivables Payment Direction Letter; (C) there are no legal proceedings commenced (or, to the Knowledge of Assignor, threatened) against Assignor by any tenant or former tenant; (D) no rental in excess of one month's rent has been prepaid under any of the Material Leases; (E) to Assignor's Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms; (F) Assignor is the sole 2 owner of the entire lessor's interest in the Leases; (G) none of the Rents have been assigned or otherwise pledged or hypothecated; and (H) Assignor has full power and authority to execute and deliver this Assignment and the execution and delivery of this Assignment has been duly authorized and to Assignor's Knowledge does not conflict with or constitute a default under any law, judicial order or other agreement affecting Assignor or the Mortgaged Property. ASSIGNOR COVENANTS with Assignee that Assignor (A) shall observe and perform, in all material respects, all the obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to impair the value of the Leases as security for the Debt; (B) shall promptly send copies to Assignee of all notices of default which Assignor shall send or receive thereunder; (C) shall enforce all of the material terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed and performed, short of termination thereof; (D) shall not collect any of the Rents more than one (1) month in advance with respect to Material Leases; (E) shall not execute any other assignment of the lessor's interest in the Leases or the Rents; (F) shall use good faith efforts to deliver to Assignee, upon request, tenant estoppel certificates from each commercial tenant under a Material Lease at the Mortgaged Property (but only to the extent such tenant is required to deliver an estoppel certificate pursuant to its Material Lease) in form and substance reasonably satisfactory to Assignee or in such other form required by the Material Leases, provided that Assignor shall not be required to deliver such certificates more frequently than two (2) times in any calendar year; (G) shall execute and deliver at the request of Assignee all such further assurances, confirmations and assignments with respect to the Leases and Rents or in connection with the Mortgaged Property as Assignee shall from time to time reasonably require; and (H) to the extent required by applicable law, shall hold, in trust, all security deposits in a segregated account and shall not commingle such funds with any other funds of Assignor and within ten (10) days after written request by Assignee furnish a statement of all tenant security deposits to Assignee. ASSIGNOR FURTHER COVENANTS with Assignee that, except as otherwise set forth in the Loan Agreement, Assignor shall not, without the prior written consent of Assignee in each instance (which consent shall not be unreasonably withheld, conditioned or delayed), (A) alter, modify or change the terms of the Leases or any guarantee of any of the Leases in any material respect; (B) convey or transfer or suffer or permit a conveyance or transfer of the Mortgaged Property or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, tenants under the Leases; (C) consent to any assignment of or subletting under the Leases not in accordance with their terms; and (D) cancel or terminate the Leases or accept a surrender thereof. ASSIGNOR FURTHER COVENANTS with Assignee that, except as otherwise set forth in the Loan Agreement (A) all Leases executed after the date hereof shall provide (either in the Lease or by separate agreement) that they are subordinate to the Security Instrument and that the tenant agrees to attorn to Assignee; (B) unless otherwise approved by Assignee, each Material Lease executed after the date hereof shall contain a provision requiring continuous operations of tenant's business on the premises, to the extent commercially practicable; (C) none of the Leases shall contain any option to purchase, any right of first refusal to lease or purchase, any right to terminate the lease term (except in the event of the destruction of all or substantially all of the Mortgaged Property); (D) each tenant shall conduct business only in that portion of the Mortgaged Property covered by its Lease; and (E) all Leases executed after the date hereof shall 3 otherwise comply with Section 5.12 of the Loan Agreement. Upon request, Assignor shall furnish Assignee with executed copies of all Leases. ASSIGNOR FURTHER COVENANTS with Assignee that, except as otherwise set forth in Section 5.12 of the Loan Agreement, Assignor shall not enter into new Leases or renewals or extensions of existing Leases without the prior written consent of Assignee. Assignor expressly understands that any and all new or proposed Leases are included in the definition of "LEASE" or "LEASES" as such terms may be used throughout this Assignment. THIS ASSIGNMENT is made on the following terms, covenants and conditions: 1. PRESENT ASSIGNMENT. Assignor does hereby absolutely and unconditionally assign to Assignee Assignor's right, title and interest in all current and future Leases and Rents, it being intended by Assignor that this assignment constitutes a present, absolute and unconditional assignment and not an assignment for additional security only. Such assignment to Assignee shall not be construed to bind Assignee to the performance of any of the covenants, conditions, or provisions contained in any such Lease or otherwise to impose any obligation upon Assignee. Assignor agrees to execute and deliver to Assignee such additional instruments, in form and substance reasonably satisfactory to Assignee, as may hereinafter be reasonably requested by Assignee to further evidence and confirm said assignment. Notwithstanding the provisions of this Section 1, so long as no Event of Default (as defined in the Security Instrument) shall have occurred and be continuing under the Loan Documents, Assignor shall have the sole but revocable right and license to act as landlord under the Leases and to enforce the covenants of the Leases, provided, however, Assignor acknowledges it has no right to collect or use Rents except in accordance with the terms and conditions of Article VII of the Loan Agreement and the Cash Management Agreement. Upon the occurrence during the continuance of an Event of Default, the license granted to Assignor herein shall automatically be revoked by Assignee. Assignee and, if applicable, Trustee (as defined in the Security Instrument) are hereby granted and assigned by Assignor the right, at its option, upon the revocation of the license granted herein to enter upon the Mortgaged Property in person, by agent or by court-appointed receiver to collect the Rents. Except as otherwise provided in the Loan Agreement, any Rents collected after the revocation of the license herein granted may be applied toward payment of the Debt in such priority and proportion as Assignee, in its discretion, shall deem proper. 2. REMEDIES OF ASSIGNEE. Upon the occurrence and during the continuance of an Event of Default, and to the extent permitted by applicable law, Assignee may, at its option, without waiving such Event of Default, without notice and without regard to the adequacy of the security for the Debt, either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, take possession of the Mortgaged Property and have, hold, manage, lease and operate the Mortgaged Property on such terms and for such period of time as Assignee may deem proper and either with or without taking possession of the Mortgaged Property in its own name, demand, sue for or otherwise collect and receive all Rents, including those past due and unpaid, with full power to make from time to time all alterations, renovations, repairs or replacements thereto or thereof as may seem proper to Assignee and may apply the Rents to the payment of the following in such order and proportion as Assignee in its sole discretion may determine, any law, custom or use to the contrary notwithstanding: (a) all expenses of managing and securing the Mortgaged Property, including, without being limited 4 thereto, the salaries, fees and wages of a managing agent and such other employees or agents as Assignee may deem reasonably necessary or desirable and all reasonable expenses of operating and maintaining the Mortgaged Property, including, without being limited thereto, all taxes, charges, claims, assessments, water charges, sewer rents and any other liens, and premiums for all insurance which Assignee may deem reasonably necessary or desirable, and the cost of all alterations, renovations, repairs or replacements, and all reasonable expenses incident to taking and retaining possession of the Mortgaged Property; and (b) the Debt, together with all costs and reasonable attorneys' fees. In addition to the rights which Assignee may have herein, upon the occurrence and during the continuance of an Event of Default, Assignee, at its option, may either require Assignor to pay monthly in advance to Assignee, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Mortgaged Property as may be in possession of Assignor or require Assignor to vacate and surrender possession of the Mortgaged Property to Assignee or to such receiver and, in default thereof, Assignor may be evicted by summary proceedings or otherwise. Additionally, Assignee shall have the right to establish a lock box for the deposit of all Rents and other receivables of Assignor relating to the Mortgaged Property. For purposes of paragraphs 1 and 2 hereof, Assignor grants to Assignee its irrevocable power of attorney, coupled with an interest, to take any and all of the aforementioned actions and any or all other actions designated by Assignee for the proper management and preservation of the Mortgaged Property. The exercise by Assignee of the option granted it in this paragraph and the collection of the Rents and the application thereof as herein provided shall not be considered a waiver of any default by Assignor under the Note, the Security Instrument, the Leases, this Assignment or the other Loan Documents. 3. NO LIABILITY OF ASSIGNEE. Assignee shall not be liable for any loss sustained by Assignor resulting from Assignee's failure to let the Mortgaged Property after an Event of Default or from any other act or omission of Assignee in managing the Mortgaged Property after an Event of Default. Assignee shall not be obligated to perform or discharge any obligation, duty or liability under the Leases or under or by reason of this Assignment and Assignor shall, and hereby agrees, to indemnify Assignee for, and to hold Assignee harmless from, any and all liability, loss or damage which may or might be incurred under the Leases or under or by reason of this Assignment and from any and all claims and demands whatsoever, including the defense of any such claims or demands which may be asserted against Assignee by reason of any alleged obligations and undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in the Leases. Should Assignee incur any such liability, the amount thereof, including reasonable costs, expenses and attorneys' fees, shall be secured hereby and by the Security Instrument and the other Loan Documents and Assignor shall reimburse Assignee therefor immediately upon demand and upon the failure of Assignor to do so Assignee may, at its option, declare all sums secured hereby, the Note, the Security Instrument and the other Loan Documents immediately due and payable. This Assignment shall not operate to place any obligation or liability for the control, care, management or repair of the Mortgaged Property upon Assignee, nor for the carrying out of any of the terms and conditions of the Leases; nor shall it operate to make Assignee responsible or liable for any waste committed on the Mortgaged Property by the tenants or any other parties, or for any dangerous or defective condition of the Mortgaged Property, including, without limitation, the presence of any Hazardous Material, or for any negligence in the management, upkeep, repair or control of the Mortgaged Property resulting in loss or injury or death to any tenant, licensee, employee or stranger. 5 4. NOTICE TO TENANTS. After the occurrence and during the continuance of an Event of Default, Assignor hereby authorizes and directs the tenants named in the Leases or any other or future tenants or occupants of the Mortgaged Property, upon demand and notice from Assignee of Assignee's right to receive the rents and other amounts due under such Leases (and to the extent any such tenants are not already paying such rents and other amounts to the Lock Box Account and the Deposit Account in accordance with the Cash Management Agreement or the Deposit Account Agreement), to pay to Assignee the rents and other amounts due or to become due under the Leases, and said tenants shall have the right to rely upon such demand and notice from Assignee and shall pay such rents and other amounts to Assignee without any obligation or right to determine the actual existence of any default or event claimed by Assignee as the basis for Assignee's right to receive such rents and other amounts and notwithstanding any notice from or claim of Assignor to the contrary, and Assignor shall have no right to any claim against said tenants for any such rents and other amounts so paid by said tenants to Assignee. The foregoing shall not modify or affect Assignor's obligation to cause all tenants to pay all rents and other amounts due under the Leases directly to the Lock Box and the Clearing Account in accordance with the Cash Management Agreement from and after the date hereof. 5. OTHER SECURITY. Assignee may take or release other security for the payment of the Debt, may release any party primarily or secondarily liable therefor and may apply any other security held by it to the reduction or satisfaction of the Debt without prejudice to any of its rights under this Assignment. 6. OTHER REMEDIES. Nothing contained in this Assignment and no act done or omitted by Assignee pursuant to the power and rights granted to Assignee hereunder shall be deemed to be a waiver by Assignee of its rights and remedies under the Note, the Security Instrument or the other Loan Documents and this Assignment is made and accepted without prejudice to any of the rights and remedies possessed by Assignee under the terms thereof. The right of Assignee to collect the Debt and to enforce any other security therefor held by it may be exercised by Assignee either prior to, simultaneously with, or subsequent to any action taken by it hereunder. 7. NO MORTGAGEE IN POSSESSION. Nothing herein contained shall be construed as constituting Assignee a "mortgagee in possession" in the absence of the taking of actual possession of the Mortgaged Property by Assignee. In the exercise of the powers herein granted Assignee, no liability shall be asserted or enforced against Assignee, all such liability being expressly waived and released by Assignor. 8. CONFLICT OF TERMS. In case of any conflict between the terms of this Assignment and the terms of the Security Instrument, the terms of the Security Instrument shall prevail. 9. NO ORAL CHANGE. This Assignment and any provisions hereof may not be modified, amended, waived, extended, changed, discharged or terminated orally, or by any act or failure to act on the part of Assignor or Assignee, but only by an agreement in writing signed by Assignor and Assignee. 10. CERTAIN DEFINITIONS. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Assignment may be used 6 interchangeable in singular or plural form and the word "ASSIGNOR" shall mean each Assignor and any subsequent owner or owners of the Mortgaged Property or any part thereof or any interest therein, the word "ASSIGNEE" shall mean Assignee and any subsequent holder of the Note, the word "NOTE" shall mean the Note and any other evidence of indebtedness secured by the Security Instrument, the word "PERSON" shall include an individual, corporation, partnership, trust, unincorporated association, government, governmental authority, and any other entity, the words "MORTGAGED PROPERTY" shall include any portion of the Mortgaged Property and any interest therein; whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms; and the singular form of nouns and pronouns shall include the plural and vice versa. Assignor acknowledges that the Rents associated with ancillary services, such as room service, telecommunication and video services, hotel restaurants and gift shops, and laundry, are predominantly attributable to use or occupancy of rooms or other public facilities in the Mortgaged Property. Accordingly, for the sole purposes of establishing and perfecting Assignee's lien in any bankruptcy proceeding, Assignor agrees that, without limiting the other rights of Assignee hereunder, 90% of the revenues from such ancillary services in excess of the direct costs of providing such services shall be deemed charges for the use or occupancy of rooms or other public facilities in the Mortgaged Property for purposes of 11 U.S.C. ss.552(b)(2). 11. NON-WAIVER. The failure of Assignee to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Assignment. Assignor shall not be relieved of Assignor's obligations hereunder by reason of (a) failure of Assignee to comply with any request of Assignor or any other party to take any action to enforce any of the provisions hereof or of the Security Instrument, the Note or the other Loan Documents, (b) the release regardless of consideration, of the whole or any part of the Mortgaged Property, or (c) any agreement or stipulation by Assignee extending the time of payment or otherwise modifying or supplementing the terms of this Assignment, the Note, the Security Instrument or the other Loan Documents. Assignee may resort for the payment of the Debt to any other security held by Assignee in such order and manner as Assignee, in its discretion, may elect. Assignee may take any action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Assignee thereafter to enforce its rights under this Assignment. The rights of Assignee under this Assignment shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Assignee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. 12. INAPPLICABLE PROVISIONS. If any term, covenant or condition of this Assignment is held to be invalid, illegal or unenforceable in any respect, this Assignment shall be construed without such provision. 13. DUPLICATE ORIGINALS. This Assignment may be executed in any number of duplicate originals and each such duplicate original shall be deemed to be an original. 14. GOVERNING LAW. This Assignment and the obligations arising hereunder shall be governed by and construed in accordance with the laws of the State of New York and any applicable laws of the United States of America, except that at all times the provisions for the creation, perfection and enforcement of the liens and the security interests created pursuant to 7 this Assignment shall be governed by the laws of the State where the Mortgaged Property is located. 15. TERMINATION OF ASSIGNMENT. Upon payment in full of the Debt and the delivery and recording of a satisfaction, release, reconveyance or discharge of the Security Instrument duly executed by Assignee, this Assignment shall become and be void and of no effect. 16. WAIVER OF JURY TRIAL. EACH OF ASSIGNOR AND ASSIGNEE HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS ASSIGNMENT, THE SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY ASSIGNOR AND ASSIGNEE, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH OF ASSIGNOR AND ASSIGNEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER PARTY. 17. SUCCESSORS AND ASSIGNS. This Assignment shall inure to the benefit of Assignee and any subsequent holder of the Note and shall be binding upon Assignor, and Assignor's heirs, executors, administrators, successors and assigns and any subsequent owner of the Mortgaged Property. Subject to the terms of the Loan Agreement, Assignee shall have the right to assign this Assignment and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Debt or any interest therein. The parties hereto acknowledge that following the execution and delivery of this Assignment, Assignee may sell, transfer and assign this Assignment and certain other Loan Documents. All references to "ASSIGNEE" hereunder shall be deemed to include the successors and assigns of Assignee and the parties hereto acknowledge that actions taken by Assignee hereunder may be taken by Assignee's agents and by the agents of the successors and assigns of Assignee. 18. LIMITATION ON RECOURSE. The obligations of Assignor hereunder are subject to limitations on recourse as provided in Article XII of the Loan Agreement. 8 Assignor has executed this instrument the day and year first above written. ASSIGNOR: [LODGIAN ENTITY] By: __________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary ACKNOWLEDGMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of June in the year 2004 before me, the undersigned, personally appeared Daniel E. Ellis, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. _________________________________ Notary Public EXHIBIT A LEGAL DESCRIPTION A-1 EX-10.35 32 g87458a3exv10w35.txt EX-10.35 FORM OF SUBSTITUTE MORTGAGE EXHIBIT 10.35 ================================================================================ FORM OF SUBSTITUTE MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT BY [LODGIAN ENTITY] (MORTGAGOR) TO AND FOR THE BENEFIT OF MERRILL LYNCH MORTGAGE LENDING, INC. (MORTGAGEE) Dated: As of June __, 2004 Property Location: ================================================================================ DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attention: Mark A. Poole, Esq. THIS FORM OF SUBSTITUTE MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (this "MORTGAGE"), made as of June __, 2004, by [LODGIAN ENTITY], a ________ corporation, having its principal place of business at c/o Lodgian, Inc. 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 ("MORTGAGOR"), to and for the benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having its principal place of business at 4 World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "Mortgagee"). Capitalized terms used herein but not otherwise defined shall have the respective meanings assigned to such terms in the Loan Agreement (hereinafter defined). WITNESSETH: To secure the payment of a loan (the "LOAN") in the original principal sum of _________________________________________________, lawful money of the United States of America, being made from Mortgagee to Mortgagor and the other Borrowers (together with Mortgagor, "BORROWERS"), pursuant to the terms and conditions of a certain Loan and Security Agreement, dated as of the date hereof (as amended or modified, the "LOAN AGREEMENT"), among Borrowers and Mortgagee, which is evidenced by and is to be paid with interest according to a certain Promissory Note, dated as of the date hereof (as amended, modified, renewed or restated, and together with any substitutes or replacements (by means of multiple notes or otherwise) therefor, collectively, the "NOTE"), made by Borrowers to Mortgagee and all other sums due hereunder, under the other Loan Documents and under the Note (said indebtedness and interest due under the Note and all other sums due hereunder, under the Note and the other Loan Documents being hereinafter collectively referred to as the "DEBT"), Mortgagor has deeded, mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted, pledged, assigned, and hypothecated and by these presents does hereby deed, mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, warrant, pledge, assign and hypothecate unto Mortgagee, the real property described in EXHIBIT A attached hereto (the "PREMISES") and the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located thereon (the "IMPROVEMENTS"); TOGETHER WITH: all right, title, interest and estate of Mortgagor now owned, or hereafter acquired, in and to the following property, rights, interests and estates (the Premises, the Improvements, and the property, rights, interests and estates hereinafter described are collectively referred to herein as the "MORTGAGED Property"): (a) all easements, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, all rights to oil, gas, minerals, coal and other substances of any kind or character, and all estates, rights, titles, interests, privileges, liberties, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises and the Improvements and the reversion and reversions, remainder and remainders, and all land lying in the bed of any street, road, highway, alley or avenue, opened, vacated or proposed, in front of or adjoining the Premises, to the center line thereof and all the estates, rights, titles, interests, dower and rights of dower, curtsey and rights of curtsey, property, possession, claim and demand whatsoever, both at law and in equity, of Mortgagor of, in and to the Premises and the Improvements and every part and parcel thereof, with the appurtenances thereto; (b) all machinery, furniture, furnishings, equipment, computer software and hardware, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures, inventory and articles of personal property and accessions thereof and renewals, replacements thereof and substitutions therefor, if any (including, but not limited to, beds, bureaus, chiffoniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, ash and fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washers and dryers), other customary hotel equipment) and other property of every kind and nature, whether tangible or intangible, whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Premises and the Improvements, or appurtenant thereto, and usable in connection with the present or future operation and occupancy of the Premises and the Improvements and all building equipment, materials and supplies of any nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Premises and the Improvements, or appurtenant thereto, and usable in connection with the present or future operation, enjoyment and occupancy of the Premises and the Improvements (hereinafter collectively referred to as the "EQUIPMENT"), including any leases of any of the foregoing, any deposits existing at any time in connection with any of the foregoing, and the proceeds of any sale or transfer of the foregoing, and the right, title and interest of Mortgagor in and to any of the Equipment that may be subject to any "security interests" as defined in the Uniform Commercial Code, as adopted and enacted by the State or States where any of the Mortgaged Property is located (the "UNIFORM COMMERCIAL CODE"), superior in lien to the lien of this Mortgage; (c) all awards or payments, including interest thereon, that may heretofore and hereafter be made with respect to the Premises and the Improvements, whether from the exercise of the right of eminent domain or condemnation (including, without limitation, any transfer made in lieu of or in anticipation of the exercise of said rights), or for a change of grade, or for any other injury to or decrease in the value of the Premises and Improvements; (d) all leases, tenancies, licenses, subleases, assignments and/or rental or occupancy agreements and other agreements or arrangements (including, without limitation, any and all guarantees of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Premises and the Improvements, including any extensions, renewals, modifications or amendments thereof 2 (collectively, the "LEASES") and all rents, rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, fees, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other payment and consideration of whatever form or nature received by or paid to or for the account of or benefit of Mortgagor or its agents or employees from any and all sources arising from or attributable to the Premises and the Improvements, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants, bars (including, without limitation, service charges for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments, parking, and recreational facilities, health club membership fees, food and beverage wholesale and retail sales, service charges, convention services, special events, audio-visual services, boat cruises, travel agency fees, telephone charges, laundry services, vending machines and otherwise, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the possession, use and occupancy of all or any portion of the Premises and the Improvements or personalty located thereon, or rendering of services by Mortgagor or any operator or manager of the hotel or the commercial space located in the Improvements or acquired from others (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores, and offices, and deposits securing reservations of such space, and charges for services such as room service, telecommunication and video, electronic mail, internet connection and other communications and entertainment services), license, lease, sublease and concession fees and rentals, and proceeds, if any, from business interruption or other loss of income insurance and any other items of revenue which would be included in operating revenues under the Uniform System (as defined in the Loan Agreement) (the "RENTS"), together with all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt; (e) all proceeds of and any unearned premiums on any insurance policies covering the Mortgaged Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Mortgaged Property; (f) all accounts, escrows, documents, instruments, chattel paper, claims, deposits and general intangibles, as the foregoing terms are defined in the Uniform Commercial Code, and all franchises, trade names (including, without limitation, the right to operate the Mortgaged Property under the name and/or hotel system known as Holiday Inn), trademarks, symbols, service marks, books, records, plans, specifications, designs, drawings, permits, consents, licenses, management agreements (including, without limitation, the Management Agreement), franchise agreements, contract rights (including, without limitation, any contract with any architect or engineer or with any other provider of goods or services for or in connection with any construction, repair, or other work upon the Mortgaged Property), approvals, actions, refunds of real estate taxes and assessments (and any other governmental impositions related to the Mortgaged Property), and causes of action that now or hereafter relate to, are derived from or are used in connection with the Mortgaged Property, or the use, operation, maintenance, occupancy or enjoyment thereof or the conduct of any business or activities thereon (hereinafter collectively referred to as the "INTANGIBLES"); and 3 any and all proceeds, products, offspring, rents and profits from any of the foregoing, including, without limitation, those from sale, exchange, transfer, collection, loss, damage, disposition, substitution or replacement of any of the foregoing and any and all other security and collateral of any nature whatsoever, now or hereafter given for the repayment of the Debt and the performance of Mortgagor's obligations under the Loan Documents including, without limitation, the Impositions and Insurance Reserve, the FF&E Reserve, the Loss Proceeds Account, the Deposit Account, the Lock Box Account and the Sub-Accounts thereof (each as defined in that certain Cash Management Agreement, dated as of the date hereof (as amended or modified the "CASH MANAGEMENT AGREEMENT"), by and among Borrowers, Mortgagee, Lodgian Management Corp. and Wachovia Bank, National Association), and any other escrows or reserves set forth in the Loan Documents. TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto and to the use and benefit of Mortgagee, forever; WITH POWER OF SALE, to secure the payment to Mortgagee of the Debt at the time and in the manner provided for its payment in the Note and in this Mortgage; PROVIDED, HOWEVER, these presents are upon the express condition that, if Mortgagor shall well and truly pay to Mortgagee the Debt at the time and in the manner provided in the Note and this Mortgage and shall well and truly abide by and comply with each and every covenant and condition set forth herein, in the Note and in the other Loan Documents in a timely manner, these presents and the estate hereby granted shall cease, terminate and be void; AND Mortgagor represents and warrants to and covenants and agrees with Mortgagee as follows: PART I GENERAL PROVISIONS 1. PAYMENT OF DEBT AND INCORPORATION OF COVENANTS, CONDITIONS AND AGREEMENTS. Mortgagor shall pay the Debt at the time and in the manner provided in the Note, in the Loan Agreement and in this Mortgage. All the covenants, conditions and agreements contained in (a) the Note, (b) the Loan Agreement and (c) the other Loan Documents are hereby made a part of this Mortgage to the same extent and with the same force as if fully set forth herein. 2. WARRANTY OF TITLE. Mortgagor warrants that Mortgagor has good and marketable title to the Mortgaged Property and has the full power, authority and right to execute, deliver and perform its obligations under this Mortgage and to deed, encumber, mortgage, give, grant, bargain, sell, alienate, enfeoff, convey, confirm, pledge, assign and hypothecate the same and that Mortgagor possesses a fee estate in the Premises and the Improvements and that it owns the Mortgaged Property free and clear of all liens, encumbrances and charges whatsoever except for the Permitted Encumbrances and that this Mortgage is and will remain a valid and enforceable first lien on and security interest in the Mortgaged Property, subject only to said exceptions. Mortgagor represents and warrants that none of the Permitted Encumbrances will, individually or 4 in the aggregate, materially and adversely affect (i) Mortgagor's ability to pay in full in a timely manner its obligations, including, without limitation, the Debt, (ii) the use of the Mortgaged Property for the use currently being made thereof, (iii) the operation of the Mortgaged Property for the operation currently being made thereof, or (iv) the value of the Mortgaged Property. Mortgagor shall forever warrant, defend and preserve such title and the validity and priority of the lien of this Mortgage and shall forever warrant and defend the same to Mortgagee against the claims of all persons whomsoever. 3. INSURANCE. Mortgagor, at its sole cost and expense, shall obtain and maintain during the entire term of this Mortgage (the "TERM") policies of insurance as required pursuant to Section 5.4 of the Loan Agreement, and pay all premiums thereon (the "INSURANCE PREMIUMS"). 4. PAYMENT OF IMPOSITIONS AND OTHER CHARGES. Subject to Mortgagor's right to contest set forth in Section 5.3(B) of the Loan Agreement and the provisions of Section 5 below, and pursuant to the provisions of the Cash Management Agreement, Mortgagor shall cause to be paid all Impositions now or hereafter levied or assessed or imposed against the Mortgaged Property or any part thereof prior to the date the same shall become delinquent. Mortgagor shall promptly pay for all utility services provided to the Mortgaged Property. Mortgagor shall furnish to Mortgagee or its designee receipts for the payment of the Impositions prior to the date the same shall become delinquent (provided, however, that Mortgagor shall not be required to furnish such receipts for payment of Impositions in the event that such Impositions have been paid by Mortgagee pursuant to Section 5 hereof). 5. IMPOSITIONS AND INSURANCE RESERVE. Mortgagor shall make monthly deposits into the Impositions and Insurance Reserve in accordance with, and to the extent required under, Section 6.3 of the Loan Agreement and under the Cash Management Agreement. 6. CONDEMNATION. To the extent the terms of this Section 6 are inconsistent with the terms of the Loan Agreement, the terms of the Loan Agreement shall control. (a) Mortgagor shall promptly give Mortgagee written notice of any known actual or threatened commencement of any condemnation or eminent domain proceeding affecting the Mortgaged Property or any portion thereof and shall deliver to Mortgagee copies of any and all papers served in connection with such proceedings. Subject to the terms of Section 6(b) below, Mortgagee is hereby irrevocably appointed as Mortgagor's attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any award or payment for said condemnation or eminent domain and to make any compromise or settlement in connection with such proceeding, subject to the provisions of this Mortgage and the Loan Agreement. Notwithstanding any taking by any public or quasi public authority through eminent domain or otherwise (including but not limited to any transfer made in lieu of or in anticipation of the exercise of such taking), Mortgagor shall continue to pay the Debt at the time and in the manner provided for its payment in the Note, in this Mortgage and the other Loan Documents and the Debt shall not be reduced until any award or payment therefor shall have been actually received after expenses of collection and applied by Mortgagee to the discharge of the Debt in accordance with the terms hereof. In accordance with the terms hereof, Mortgagor shall cause the award or payment made in any condemnation or eminent domain proceeding completed after the date 5 hereof, which is payable to Mortgagor, to be paid directly to Mortgagee. Mortgagee may apply any such award or payment to the reduction or discharge of the Debt whether or not then due and payable; such application to be made without any Prepayment Consideration (as defined in the Loan Agreement), provided that if Mortgagor receives any such award or payment, Mortgagor pays such award or payment to Mortgagee within one hundred twenty (120) days following the date of Mortgagor's receipt thereof, except that if an Event of Default has occurred and is continuing, then such application shall be subject to the Prepayment Consideration computed in accordance with the Note. If the Mortgaged Property is sold following an Event of Default, through foreclosure or otherwise, prior to the receipt by Mortgagee of such award or payment, Mortgagee shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive said award or payment, or a portion thereof sufficient to pay the Debt. (b) Notwithstanding the foregoing, Mortgagee shall not exercise the foregoing rights and Mortgagor may prosecute any condemnation proceeding and settle or compromise and collect any claim involving an award and/or claim for damages of not more than the Restoration Threshold provided that: (i) no Event of Default shall have occurred and be continuing, (ii) in Mortgagee's reasonable good faith judgment, such condemnation or taking does not and will not materially restrict access to the Mortgaged Property or otherwise have a Material Adverse Effect, and the Mortgaged Property remaining after such condemnation or taking is capable of being restored to an economically viable whole of substantially the same type which existed prior to the condemnation or taking or in substantial compliance with all applicable laws, (iii) Mortgagor applies the proceeds of such award to any reconstruction or repair of the Mortgaged Property necessary as a result of such condemnation or taking, (iv) Mortgagor promptly commences and diligently prosecutes such reconstruction or repair to completion in accordance with all applicable laws and (v) the plans and specifications for such work shall be subject to Mortgagee's reasonable approval. Subject to the terms hereof, Mortgagor authorizes Mortgagee to apply such awards, payments, proceeds or damages, after the deduction of Mortgagee's reasonable expenses incurred in the collection of such amounts, at Mortgagee's option, to restoration or repair of the Mortgaged Property or to payment of the sums secured by this Mortgage, whether or not then due, in the order determined by Mortgagee, with the balance, if any, to Mortgagor. Application of any such award or payment to payment of the sums secured by this Mortgage pursuant to the foregoing sentence shall be made without any Prepayment Consideration, provided that if Mortgagor receives any such award or payment, Mortgagor pays such award or payment to Mortgagee within one hundred twenty (120) days following Mortgagor's receipt thereof, except that if an Event of Default has occurred and is continuing, then such application shall be subject to the Prepayment Consideration computed in accordance with the Note. Subject to the provisions of clauses (i) through (v) of this Section 6(b), Mortgagee shall not exercise Mortgagee's option to apply such awards or damages to payment of the sums secured by this Mortgage provided that each of the conditions (as applicable) to the release of insurance proceeds for restoration or repair of the Mortgaged Property under Section 5.5 of the Loan Agreement have been satisfied with respect to such condemnation awards or damages. Any application of proceeds to principal shall not extend or postpone the due date of the monthly installments due hereunder, under the Note or under any of the Loan Documents or change the amount of such installments. Mortgagor agrees to execute such further evidence of assignment of any awards, proceeds, damages or claims arising in connection with such condemnation or taking as Mortgagee may reasonably require. 6 7. LEASES AND RENTS. To the extent the terms of this Section 7 are inconsistent with the terms of the Loan Agreement or the Assignment of Leases and Rents, the terms of the Loan Agreement and the Assignment of Leases and Rents shall control. Mortgagor does hereby absolutely and unconditionally assign to Mortgagee, all Mortgagor's right, title and interest in all current and future Leases and Rents, it being intended by Mortgagor that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Such assignment to Mortgagee shall not be construed to bind Mortgagee to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise impose any obligation upon Mortgagee. Mortgagor agrees to execute and deliver to Mortgagee such additional instruments, in form and substance reasonably satisfactory to Mortgagee, as may hereafter be reasonably requested by Mortgagee to further evidence and confirm such assignment. Notwithstanding the provisions of this Section 7, so long as no Event of Default shall have occurred and be continuing under the Loan Documents, Mortgagor shall have the sole but revocable right and license to act as landlord under the Leases and to enforce the covenants of the Leases, provided, however, Mortgagor acknowledges it has no right to collect or use Rents except in accordance with the terms and conditions of Article VII of the Loan Agreement and the Cash Management Agreement. Upon the occurrence and during the continuance of an Event of Default, without the need for notice or demand, the license granted to Mortgagor herein shall automatically be revoked. Mortgagee is hereby granted and assigned by Mortgagor the right, at its option, upon revocation of the license granted herein, to enter upon the Mortgaged Property in person, by agent or by court-appointed receiver to collect the Rents. Subject to the terms of the Loan Agreement, any Rents collected after the revocation of the license shall be applied by Mortgagee in accordance with the Loan Agreement. Mortgagor expressly understands that any and all proposed leases are included in the definition of "LEASE" or "LEASES" as such terms may be used throughout this Mortgage, the Note and the other Loan Documents. 8. OPERATION AND MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall cause the Mortgaged Property to be operated and maintained in accordance with Section 5.5 of the Loan Agreement. 9. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY. (a) Mortgagor acknowledges that Mortgagee has examined and relied on the creditworthiness and experience of Mortgagor in owning and operating properties such as the Mortgaged Property in agreeing to make the Loan, and that Mortgagee will continue to rely on Mortgagor's ownership of the Mortgaged Property as a means of maintaining the value of the Mortgaged Property as security for repayment of the Debt. Mortgagor acknowledges that Mortgagee has a valid interest in maintaining the value of the Mortgaged Property so as to ensure that, should Mortgagor default in the repayment of the Debt, Mortgagee can recover the Debt by a sale of the Mortgaged Property. Except as expressly permitted under this Mortgage, the Loan Agreement or under the other Loan Documents, Mortgagor shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, lien or encumbrance (other than Permitted Encumbrances) (collectively, "TRANSFERS") of (i) all or any part of the Mortgaged Property or (ii) any direct or indirect beneficial ownership interest (in whole or part) in Mortgagor, irrespective of the number of tiers of ownership, without the prior written consent of Mortgagee. 7 (b) The occurrence of any Transfer in violation of this Section 9 shall constitute an Event of Default hereunder, whereupon Mortgagee at its option, without being required to demonstrate any actual impairment of its security or any increased risk of default hereunder, may declare the Debt immediately due and payable. (c) Mortgagee's consent to one Transfer shall not be deemed to be a waiver of Mortgagee's right to require such consent to any future occurrence of same. Any Transfer made in contravention of this paragraph shall be null and void and of no force and effect. (d) Mortgagor agrees to bear and shall pay or reimburse Mortgagee on demand for all reasonable expenses (including, without limitation, reasonable attorneys' fees and disbursements. title search costs and title insurance endorsement premiums) incurred by Mortgagee in connection with the review, approval and documentation of any Transfer which requires the consent of Mortgagee. 10. CHANGES IN LAWS REGARDING TAXATION. If any law is enacted or adopted or amended after the date of this Mortgage which deducts the Debt from the value of the Mortgaged Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Debt or Mortgagee's interest in the Mortgaged Property, Mortgagor will pay such tax, with interest and penalties thereon, if any. In the event Mortgagee is advised by counsel chosen by it that the payment of such tax or interest and penalties by Mortgagor would be unlawful or taxable to Mortgagee or unenforceable or provide the basis for a defense of usury, then in any such event, Mortgagee shall have the option, by written notice of not less than ninety (90) days, to declare the Debt immediately due and payable and, provided no Event of Default exists, no Prepayment Consideration shall be due in connection therewith. 11. NO CREDITS ON ACCOUNT OF THE DEBT. Mortgagor will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against the Mortgaged Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Mortgaged Property, or any part thereof, for real estate tax purposes by reason of this Mortgage or the Debt. In the event such claim, credit or deduction shall be required by law, Mortgagee shall have the option, by written notice of not less than ninety (90) days, to declare the Debt immediately due and payable and, provided no Event of Default exists, no Prepayment Consideration shall be due in connection therewith. 12. DOCUMENTARY STAMPS. If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note or this Mortgage, or impose any other tax or charge on the same, Mortgagor will pay for the same, with interest and penalties thereon, if any. 13. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and perform each and every material term to be observed or performed by Mortgagor pursuant to the terms of any agreement or recorded instrument (including all instruments comprising the Permitted Encumbrances) affecting or pertaining to the Mortgaged Property, and will not suffer or permit any default or event of default (after giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing. 8 14. FURTHER ACTS; SECONDARY MARKET TRANSACTIONS. (a) Mortgagor will, at the sole cost and expense of Mortgagor, and without expense to Mortgagee, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, Uniform Commercial Code financing statements or continuation statements, transfers and assurances as Mortgagee shall, from time to time, reasonably require, for the better assuring, conveying, assigning, transferring, and confirming unto Mortgagee the property and rights hereby deeded, mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated or intended now or hereafter so to be, or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage or for filing, registering or recording this Mortgage or for facilitating the sale of the Loan and the Loan Documents as described in subparagraph (b) below. Mortgagor, on demand, will deliver and hereby authorizes Mortgagee to file in the name of Mortgagor, one or more financing statements, chattel mortgages or other instruments, to evidence more effectively the security interest of Mortgagee in the Mortgaged Property. Upon foreclosure or the appointment of a receiver, Mortgagor will, at its sole cost and expense, and without expense to Mortgagee, cooperate fully and completely to effect the assignment or transfer of any license, permit, agreement or any other right necessary or useful to the operation of the Mortgaged Property. Mortgagor grants to Mortgagee an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Mortgagee at law and in equity, including, without limitation, such rights and remedies available to Mortgagee pursuant to this paragraph. (b) Subject to the terms and conditions set forth in the Loan Agreement, Mortgagee shall have the right to engage in one or more Secondary Market Transactions (as defined in the Loan Agreement) and, in connection therewith, Mortgagee may transfer its obligations under this Mortgage, the Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Debt), and thereafter Mortgagee shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. 15. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the execution and delivery of this Mortgage and thereafter, from time to time, will cause this Mortgage, and any security instrument creating a lien or security interest or evidencing the lien hereof upon the Mortgaged Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien or security interest hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all filing, registration or recording fees, and all expenses incident to the preparation, execution and acknowledgment of this Mortgage, any deed of trust supplemental hereto, any security instrument with respect to the Mortgaged Property and any instrument of further assurance, and all federal, state, county and municipal, taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Mortgage, any deed of trust supplemental hereto, any security instrument with respect to the Mortgaged Property or any instrument of further assurance, except where prohibited by law so to do. Mortgagor shall hold harmless and indemnify Mortgagee, its 9 successors and assigns, against any liability incurred by reason of the imposition of any tax on the making and recording of this Mortgage. 16. REPORTING REQUIREMENTS. Mortgagor agrees to give prompt notice to Mortgagee of the insolvency or bankruptcy filing of Mortgagor or the death, insolvency or bankruptcy filing of any Guarantor. 17. EVENTS OF DEFAULT. The Debt shall become immediately due and payable at the option of Mortgagee upon the happening of any Event of Default. The term "EVENT OF DEFAULT" as used in this Mortgage shall have the meaning given such term in the Loan Agreement. 18. RIGHT TO CURE DEFAULTS. Upon the occurrence and during the continuance of any Event of Default, Mortgagee may, but without any obligation to do so and without notice to or demand on Mortgagor and without releasing Mortgagor from any obligation hereunder, make or do the same in such manner and to such extent as Mortgagee may deem necessary to protect the security hereof. Mortgagee is authorized to enter upon the Mortgaged Property for such purposes or appear in, defend, or bring any action or proceeding to protect its interest in the Mortgaged Property or to foreclose this Mortgage or collect the Debt, and the cost and expense thereof (including reasonable attorneys' fees and disbursements to the extent permitted by law), with interest at the Default Rate (as defined in the Loan Agreement) for the period after notice from Mortgagee that such cost or expense was incurred to the date of payment to Mortgagee, shall constitute a portion of the Debt, shall be secured by this Mortgage and the other Loan Documents and shall be due and payable to Mortgagee upon demand. 19. REMEDIES. (a) Upon the occurrence and during the continuance of any Event of Default, Mortgagee may take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Mortgagor and in and to the Mortgaged Property by Mortgagee itself or otherwise, including, without limitation, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Mortgagee may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Mortgagee: (i) declare the entire Debt to be immediately due and payable; (ii) institute a proceeding or proceedings, judicial or nonjudicial, by advertisement or otherwise, for the complete foreclosure of this Mortgage in which case the Mortgaged Property or any interest therein may be sold for cash or upon credit in one or more parcels or in several interests or portions and in any order or manner; (iii) with or without entry, to the extent permitted and pursuant to the procedures provided by applicable law, institute proceedings for the partial foreclosure of this Mortgage for the portion of the Debt then due and payable, subject to the continuing lien of this Mortgage for the balance of the Debt not then due; (iv) sell for cash or upon credit the Mortgaged Property or any part thereof and all estate, claim, demand, right, title and interest of Mortgagor therein and rights of redemption thereof, pursuant to the power of sale contained herein or otherwise, at one or more 10 sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law; (v) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained herein, or in any of the other Loan Documents; (vi) recover judgment on the Note either before, during or after any proceedings for the enforcement of this Mortgage; (vii) apply for the appointment of a trustee, receiver, liquidator or conservator of the Mortgaged Property, to the extent permitted by applicable law, without notice and without regard for the adequacy of the security for the Debt and without regard for the solvency of the Mortgagor, any Guarantor or of any person, firm or other entity liable for the payment of the Debt; (viii) enforce Mortgagee's interest in the Leases and Rents and enter into or upon the Mortgaged Property, either personally or by its agents, nominees or attorneys and dispossess Mortgagor and its agents and servants therefrom, and thereupon Mortgagee may (A) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Mortgaged Property and conduct the business thereat; (B) complete any construction on the Mortgaged Property in such manner and form as Mortgagee deems advisable; (C) make alterations, additions, renewals, replacements and improvements to or on the Mortgaged Property; (D) exercise all rights and powers of Mortgagor with respect to the Mortgaged Property, whether in the name of Mortgagor or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rents; and (E) apply the receipts from the Mortgaged Property to the payment of Debt, after deducting therefrom all expenses (including reasonable attorneys' fees and disbursements) incurred in connection with the aforesaid operations and all amounts necessary to pay the taxes, assessments insurance and other charges in connection with the Mortgaged Property, as well as just and reasonable compensation for the services of Mortgagee, its counsel, agents and employees; or (ix) pursue such other rights and remedies as may be available at law or in equity or under the Uniform Commercial Code. In the event of a sale, by foreclosure or otherwise, of less than all of the Mortgaged Property, this Mortgage shall continue as a lien on the remaining portion of the Mortgaged Property. (b) The proceeds of any sale made under or by virtue of this paragraph, together with any other sums which then may be held by Mortgagee under this Mortgage, whether under the provisions of this paragraph or otherwise, shall be applied by Mortgagee to the payment of the Debt in such priority and proportion as Mortgagee in its sole discretion shall deem proper. (c) Mortgagee may adjourn from time to time any sale by it to be made under or by virtue of this Mortgage by announcement at the time and place appointed for such sale or for such adjourned sale or sales; and, except as otherwise provided by any applicable provision 11 of law, Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. (d) Upon the completion of any sale or sales pursuant hereto, Mortgagee, or an officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient instruments, conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold. Any sale or sales made under or by virtue of this paragraph, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Mortgagor in and to the properties and rights so sold, and shall be a perpetual bar both at law and in equity against Mortgagor and against any and all persons claiming or who may claim the same, or any part thereof from, through or under Mortgagor. (e) Upon any sale made under or by virtue of this paragraph, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the Debt the net sales price after deducting therefrom the expenses of the sale and costs of the action and any other sums which Mortgagee is authorized to deduct under this Mortgage. (f) No recovery of any judgment by Mortgagee and no levy of an execution under any judgment upon the Mortgaged Property or upon any other property of Mortgagor shall affect in any manner or to any extent the lien of this Mortgage upon the Mortgaged Property or any part thereof, or any liens, rights, powers or remedies of Mortgagee hereunder, but such liens, rights, powers and remedies of Mortgagee shall continue unimpaired as before. (g) Mortgagee may terminate or rescind any proceeding or other action brought in connection with its exercise of the remedies provided in this paragraph at any time before the conclusion thereof, as determined in Mortgagee's sole discretion and without prejudice to Mortgagee. (h) Mortgagee may resort to any remedies and the security given by the Note, this Mortgage or the other Loan Documents in whole or in part, and in such portions and in such order as determined in Mortgagee's sole discretion. No such action shall in any way be considered a waiver of any rights, benefits or remedies evidenced or provided by the Note, this Mortgage or any of the other Loan Documents. The failure of Mortgagee to exercise any right, remedy or option provided in the Note, this Mortgage or any of the other Loan Documents shall not be deemed a waiver of such right, remedy or option or of any covenant or obligation secured by the Note, this Mortgage or the other Loan Documents. No acceptance by Mortgagee of any payment after the occurrence of any Event of Default and no payment by Mortgagee of any obligation for which Mortgagor is liable hereunder shall be deemed to waive or cure any Event of Default with respect to Mortgagor, or Mortgagor's liability to pay such obligation. No sale of all or any portion of the Mortgaged Property, no forbearance on the part of Mortgagee, and no extension of time for the payment of the whole or any portion of the Debt or any other 12 indulgence given by Mortgagee to Mortgagor, shall operate to release or in any manner affect the interest of Mortgagee in the remaining Mortgaged Property or the liability of Mortgagor to pay the Debt. No waiver by Mortgagee shall be effective unless it is in writing and then only to the extent specifically stated. All reasonable costs and expenses of Mortgagee in exercising its rights and remedies under this paragraph (including reasonable attorneys' fees and disbursements to the extent permitted by law), shall be paid by Mortgagor immediately upon notice from Mortgagee, with interest at the Default Rate for the period after notice from Mortgagee and such costs and expenses shall constitute a portion of the Debt and shall be secured by this Mortgage. (i) The interests and rights of Mortgagee under the Note, this Mortgage or in any of the other Loan Documents shall not be impaired by any indulgence, including (i) any renewal, extension or modification which Mortgagee may grant with respect to any of the Debt, (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Mortgagee may grant with respect to the Mortgaged Property or any portion thereof; or (iii) any release or indulgence granted to any maker, endorser, Guarantor or surety of any of the Debt. 20. RIGHT OF ENTRY. In addition to any other rights or remedies granted under this Mortgage, Mortgagee and its agents shall have the right to enter and inspect the Mortgaged Property at any reasonable time during the Term. The reasonable cost of such inspections or audits shall be borne by Mortgagor should Mortgagee determine that an Event of Default exists, including the cost of all follow up or additional investigations or inquiries deemed reasonably necessary by Mortgagee. The reasonable cost of such inspections, if not paid for by Mortgagor within ten (10) Business Days of demand therefor, may be added to the principal balance of the sums due under the Note and this Mortgage and shall bear interest thereafter until paid at the Default Rate. 21. SECURITY AGREEMENT. This Mortgage is both a real property mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Mortgaged Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor by executing and delivering this Mortgage has granted and hereby grants to Mortgagee, as security for the Debt, a security interest in the Mortgaged Property to the full extent that the Mortgaged Property may be subject to the Uniform Commercial Code (said portion of the Mortgaged Property so subject to the Uniform Commercial Code being called in this paragraph the "COLLATERAL"). Mortgagor hereby agrees with Mortgagee to execute and deliver to Mortgagee, in form and substance reasonably satisfactory to Mortgagee, such financing statements and such further assurances as Mortgagee may from time to time, reasonably consider necessary to create, perfect, and preserve Mortgagee's security interest herein granted. This Mortgage shall also constitute a "fixture filing" for the purposes of the Uniform Commercial Code as to all or any items of the Collateral that are or are to become fixtures under the Uniform Commercial Code. Information concerning the security interest herein granted may be obtained from the parties at the addresses of the parties set forth in the first paragraph of this Mortgage. If an Event of Default shall occur, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Collateral or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, 13 protection and preservation of the Collateral. Upon request or demand of Mortgagee after the occurrence and during the continuance of an Event of Default, Mortgagor shall at its expense assemble the Collateral and make it available to Mortgagee at a convenient place reasonably acceptable to Mortgagee. Mortgagor shall pay to Mortgagee within ten (10) Business Days of demand therefor any and all expenses, including reasonable attorneys' fees and disbursements, incurred or paid by Mortgagee in protecting the interest in the Collateral and in enforcing the rights hereunder with respect to the Collateral. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Collateral sent to Mortgagor in accordance with the provisions hereof at least ten (10) Business Days prior to such action, shall constitute commercially reasonable notice to Mortgagor. The proceeds of any disposition of the Collateral, or any part thereof, may be applied by Mortgagee to the payment of the Debt in such priority and proportions as Mortgagee in its sole discretion shall deem proper. In the event of any change in name, identity or structure of any Mortgagor, such Mortgagor shall notify Mortgagee thereof and promptly after Mortgagee's request shall execute, file and record such Uniform Commercial Code forms as are necessary to maintain the priority of Mortgagee's lien upon and security interest in the Collateral, and shall pay all reasonable expenses and fees in connection with the filing and recording thereof. If Mortgagee shall require the filing or recording of additional Uniform Commercial Code forms or continuation statements, Mortgagor shall, promptly after request, execute, file and record such Uniform Commercial Code forms or continuation statements as Mortgagee shall deem reasonably necessary, and shall pay all reasonable expenses and fees in connection with the filing and recording thereof, it being understood and agreed, however, that no such additional documents shall increase Mortgagor's obligations or decrease Mortgagor's rights under the Note, this Mortgage and any of the other Loan Documents. Mortgagor hereby irrevocably appoints Mortgagee as its attorney-in-fact, coupled with an interest, to file with the appropriate public office on its behalf any financing or other statements signed only by Mortgagee, as secured party, in connection with the Collateral covered by this Mortgage. 22. ACTIONS AND PROCEEDINGS. Mortgagee has the right to appear in and defend any action or proceeding brought with respect to the Mortgaged Property and to bring any action or proceeding, in the name and on behalf of Mortgagor, which Mortgagee, in its reasonable discretion, decides should be brought to protect their interest in the Mortgaged Property. Mortgagee shall, at its option, be subrogated to the lien of any deed of trust or other security instrument discharged in whole or in part by the Debt, and any such subrogation rights shall constitute additional security for the payment of the Debt. 23. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due, without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Mortgagor existing at the time such earlier action was commenced. 24. MARSHALLING AND OTHER MATTERS. Mortgagor hereby waives, to the extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Mortgaged Property or any part thereof or any interest therein. Further, 14 Mortgagor hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date of this Mortgage and on behalf of all persons to the extent permitted by applicable law. Mortgagee shall not be under any obligation to marshal any assets in favor of any Person or in payment of any of the Debt. 25. HANDICAPPED ACCESS. (a) Mortgagor agrees that the Mortgaged Property shall at all times comply, with the requirements of the Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of 1988, if applicable, all state and local laws and ordinances related to handicapped access and all rules, regulations, and orders issued pursuant thereto including, without limitation, the Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities (collectively "ACCESS LAWS"). (b) Without limiting the foregoing, Mortgagor shall cause any alterations to the Mortgaged Property to comply with all applicable Access Laws. The foregoing shall apply to tenant improvements constructed by Mortgagor or by any of its tenants. Mortgagee may condition any such approval upon receipt of a certificate of Access Law compliance from an architect, engineer, or other person acceptable to Mortgagee. (c) Mortgagor agrees to give prompt notice to Mortgagee of the receipt by Mortgagor of any material complaints related to violation of any Access Laws and of the commencement of any proceedings or investigations which relate to compliance with applicable Access Laws. 26. INDEMNIFICATION. In addition to any other indemnifications provided herein or in the other Loan Documents, Mortgagor shall protect, defend, indemnify and save harmless Mortgagee and its successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Secondary Market Transaction backed in whole or in part by the Loan and any other person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, and Affiliates of Mortgagee and such successors and assigns (each an "INDEMNIFIED PARTY") from and against all liabilities, obligations, claims, demands, damages, penalties, causes of action, losses, fines, costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements), imposed upon or incurred by or asserted against any Indemnified Party by reason of: (a) ownership of this Mortgage, the Mortgaged Property or any interest therein or receipt of any Rents; (b) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) any use, nonuse or condition in, on or about the Mortgaged Property or any part thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (d) any failure on the part of Mortgagor to perform or comply with any of the terms of this Mortgage; (e) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof; (f) any failure of the Premises or the Improvements to comply with any applicable law, statute, code, ordinance, rule or regulation 15 including, without limitation, any Access Laws; (g) any default by Mortgagor under this Mortgage, the Loan Agreement or any of the other Loan Documents; (h) any actions taken by any Indemnified Party in the enforcement of this Mortgage and other Loan Documents in accordance with their respective terms; (i) any representation or warranty made in the Note, this Mortgage or any of the other Loan Documents being false or misleading in any material respect as of the date such representation or warranty was made; (j) any claim by brokers, finders or similar persons claiming to be entitled to a commission in connection with any Lease or other transaction involving the Mortgaged Property or any part thereof under any legal requirement or any liability asserted against Mortgagee with respect thereto; and (k) the claims of any lessee of any or any portion of the Mortgaged Property or any person acting through or under any lessee or otherwise arising under or as a consequence of any Lease (collectively, the "INDEMNIFIED LIABILITIES"), provided that Mortgagor shall not have an obligation to an Indemnified Party hereunder with respect to the Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnified Party as determined by a court of competent jurisdiction. Any amounts payable to Mortgagee by reason of the application of this paragraph shall be secured by this Mortgage and shall become immediately due and payable and shall bear interest at the Default Rate from the date loss or damage is sustained by Mortgagee until paid. The obligations and liabilities of Mortgagor under this paragraph shall survive the termination, satisfaction, or assignment of this Mortgage and the exercise by Mortgagee of any of its rights or remedies hereunder, including, but not limited to, the acquisition of the Mortgaged Property by foreclosure or a conveyance in lieu of foreclosure. 27. NOTICES. Any notice, demand, statement, request or consent made hereunder shall be in writing, addressed to the intended recipient at its address set forth in the Loan Agreement, and shall be made and deemed given in accordance with the terms of the Loan Agreement. 28. AUTHORITY. (a) Mortgagor (and the undersigned representative of Mortgagor, if any) represent and warrant that it (or they, as the case may be) has full power, authority and right to execute, deliver and perform its obligations pursuant to this Mortgage, and to deed, mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, warrant, pledge, hypothecate and assign the Mortgaged Property pursuant to the terms hereof and to keep and observe all of the terms of this Mortgage on Mortgagor's part to be performed; and (b) Mortgagor represents and warrants that Mortgagor is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended and the related Treasury Department regulations, including temporary regulations. 29. NON-WAIVER. The failure of Mortgagee to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Mortgage. Any consent or approval by Mortgagee in any single instance shall not be deemed or construed to be Mortgagee's consent or approval in any like matter arising at a subsequent date. Mortgagor shall not be relieved of Mortgagor's obligations hereunder by reason of (a) the failure of Mortgagee to comply with any request of Mortgagor or any Guarantor to take any action to foreclose this Mortgage or otherwise enforce any of the provisions hereof or of the Note, or the other Loan Documents, (b) the release, regardless of consideration, of the whole or any part of the Mortgaged Property, or of any person liable for the Debt or any portion thereof, or (c) any agreement or stipulation by Mortgagee extending the time of payment or otherwise modifying or supplementing the terms of the Note, this Mortgage or any of the other Loan Documents. 16 Mortgagee may resort for the payment of the Debt to any other security held by Mortgagee in such order and manner as Mortgagee, in its sole discretion, may elect. Mortgagee may take action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Mortgagee thereafter to foreclosure this Mortgage. The rights and remedies of Mortgagee under this Mortgage shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Mortgagee shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded at law or in equity. 30. NO ORAL CHANGE. This Mortgage, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Mortgagor or Mortgagee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 31. LIABILITY. Subject to the provisions hereof requiring Mortgagee's consent to any transfer of the Mortgaged Property, this Mortgage shall be binding upon and inure to the benefit of Mortgagor and Mortgagee and their respective successors and assigns forever. 32. INAPPLICABLE PROVISIONS. If any term, covenant or condition of the Note or this Mortgage is held to be invalid, illegal or unenforceable in any respect, the Note and this Mortgage shall be construed without such provision. 33. HEADINGS, ETC. The headings and captions of various paragraphs of this Mortgage are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. 34. DUPLICATE ORIGINALS. This Mortgage may be executed in any number of duplicate originals and each such duplicate original shall be deemed to be an original. 35. DEFINITIONS. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Mortgage may be used interchangeably in singular or plural form and the word "MORTGAGOR" shall mean "each Mortgagor and any subsequent owner or owners of the Mortgaged Property or any part thereof or any interest therein," the word "MORTGAGEE" shall mean "Mortgagee and any subsequent holder of the Note," the word "NOTE" shall mean "the Note and any other evidence of indebtedness secured by this Mortgage," the word "PERSON" shall include an individual, corporation, partnership, trust, unincorporated association, government, governmental authority, and any other entity, and the words "MORTGAGED PROPERTY" shall include any portion of the Mortgaged Property and any interest therein and the words "ATTORNEYS' FEES" shall include any and all reasonable attorneys' fees, paralegal and law clerk fees, including, without limitation, fees at the pre-trial, trial and appellate levels incurred or paid by Mortgagee in protecting its interest in the Mortgaged Property and Collateral and enforcing its rights hereunder. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. 17 36. HOMESTEAD. Mortgagor hereby waives and renounces all homestead and exemption rights provided by the Constitution and the laws of the United States and of any state, in and to the Mortgaged Property as against the collection of the Debt, or any part hereof. 37. ASSIGNMENTS. Mortgagee shall have the right to assign or transfer its rights under this Mortgage without limitation. Any assignee or transferee shall be entitled to all the benefits afforded Mortgagee under this Mortgage. 38. WAIVER OF JURY TRIAL. EACH OF MORTGAGOR AND MORTGAGEE HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE NOTE, THIS MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY MORTGAGOR AND MORTGAGEE, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH OF MORTGAGOR AND MORTGAGEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER PARTY. 39. INTENTIONALLY OMITTED. 40. POWER OF SALE. Except as otherwise provided in Section 45 of this Mortgage, the following provisions shall apply: (a) Upon the occurrence and during the continuance of an Event of Default, Mortgagee may sell or offer for sale the Mortgaged Property in such portions, order and parcels as Mortgagee may determine with or without having first taken possession of same, to the highest bidder for cash, free from the equity of redemption, statutory right of redemption, homestead, dower and all other rights and exemptions of every kind, each of which are hereby expressly waived, at one or more public auctions in accordance with the terms and provisions of the law of the State in which the Mortgaged Property is located. Such sale shall be made at the area within the courthouse of the county in which the Mortgaged Property (or any portion thereof to be sold) is situated (whether the parts or parcels thereof, if any, in different counties are contiguous or not, and without the necessity of having any personal property hereby secured present at such sale) which is designated by the applicable court of such County as the area in which public sales are to take place, or, if no such area is designated, at the area at the courthouse designated in the notice of sale as the area in which the sale will take place, on such day and at such times as permitted under applicable law of the State where the Mortgaged Property is located, after advertising the time, place and terms of the sale of the Mortgaged Property for twenty-one (21) days by three (3) weekly notices in a newspaper published in the County wherein the Mortgaged Property is wholly or partially located. Mortgagor agrees that Mortgagee shall have the right to adjourn any such sale to another date and time to be announced at the time and place of the sale as set forth in the published notice, and in such event, no further publication of the sale is required. The sale or sales of less than the whole of the Mortgaged Property shall 18 not exhaust the power of sale granted herein, and Mortgagee is specifically empowered to make successive sales under such power until the whole of the Mortgaged Property shall be sold. At any such public sale, Mortgagee may execute and deliver in the name of Mortgagor to the purchaser a conveyance of the Mortgaged Property or any part of the Mortgaged Property in fee simple. In the event of any sale under this Mortgage by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Mortgaged Property may be sold in its entirety or in separate parcels and in such manner or order as Mortgagee in its sole discretion may elect, and Mortgagee may sell the personal property covered by this Mortgage at one or more separate sales in any manner permitted by the Uniform Commercial Code of the State in which the Mortgaged Property is located, and one or more exercises of the powers herein granted shall not extinguish or exhaust such powers, until all the Mortgaged Property is sold or the Note and other secured indebtedness is paid in full. If the Note and other secured indebtedness is now or hereafter further secured by any chattel Mortgages, pledges, contracts or guaranty, assignments of lease, or other security instruments, Mortgagee at its option may exhaust the remedies granted under any of said security instruments either concurrently or independently, and in such order as Mortgagee may determine. (b) Upon any foreclosure sale or sales of all or any portion of the Mortgaged Property under the power herein granted, Mortgagee may bid for and purchase the Mortgaged Property and shall be entitled to apply all or any part of the Debt as a credit to the purchase price. (c) In the event of a foreclosure or a sale of all or any portion of the Mortgaged Property under the power herein granted, the proceeds of said sale shall be applied, in whatever order Mortgagee in its sole discretion may decide, to the reasonable expenses of such sale and of all proceedings in connection therewith (including, without limitation, reasonable attorneys' fees and expenses), to insurance premiums, liens, assessments, taxes and charges (including, without limitation, utility charges advanced by Mortgagee), to payment of the outstanding principal balance of the Debt, and to the accrued interest on all of the foregoing; and the remainder, if any, shall be paid to Mortgagor, or to the person or entity lawfully entitled thereto. 41. LIMITATIONS ON RECOURSE PROVISIONS. The obligations of Mortgagor hereunder are subject to limitations on recourse as provided in Article XII of the Loan Agreement. 42. MISCELLANEOUS. (a) Intentionally Omitted. (b) The Loan Documents contain the entire agreement between Mortgagor and Mortgagee relating to or connected with the Loan. Any other agreements relating to or connected with the Loan not expressly set forth in the Loan Documents are null and void and superseded in their entirety by the provisions of the Loan Documents. (c) Mortgagor represents and warrants to Mortgagee that, to Mortgagor's knowledge, there has not been committed by Mortgagor or any other person in occupancy of or involved with the operation or use of the Mortgaged Property any act or omission affording the federal government or any state or local government the right of forfeiture as against the 19 Mortgaged Property or any part thereof or any monies paid in performance of Mortgagor's obligations under the Note or under any of the other Loan Documents. Mortgagor hereby covenants and agrees not to commit, intentionally permit or suffer to exist any act, omission or circumstance affording such right of forfeiture. In furtherance thereof, Mortgagor hereby indemnifies Mortgagee and agrees to defend and hold Mortgagee harmless from and against any loss, damage or injury by reason of the breach of the covenants and agreements or the representations and warranties set forth in this paragraph. Without limiting the generality of the foregoing, the filing of formal charges or the commencement of proceedings against Mortgagor or all or any part of the Mortgaged Property under any federal or state law for which forfeiture of the Mortgaged Property or any part thereof or of any monies paid in performance of Mortgagor's obligations under the Loan Documents is a potential result, shall, at the election of Mortgagee, constitute an Event of Default hereunder without notice or opportunity to cure. (d) Mortgagor acknowledges that, with respect to the Loan, Mortgagor is relying solely on its own judgement and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Mortgagee or any parent, subsidiary or affiliate of Mortgagee. Mortgagor acknowledges that Mortgagee engages in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of the Mortgagor or its affiliates. Mortgagor acknowledges that it is represented by competent counsel and has consulted counsel before executing the Loan Documents. (e) Intentionally Omitted. (f) This Mortgage and the obligations arising hereunder shall be governed by and construed in accordance with the laws of the State of New York and any applicable laws of the United States of America, except that at all times the provisions for the creation, perfection and enforcement of the liens and the security interests created pursuant to this Mortgage shall be governed by the laws of the State where the Premises are located. 43. FUTURE ADVANCES. This Mortgage secures "FUTURE ADVANCES," as hereinafter defined. Any portion of the Debt which is incurred after the execution of this Mortgage pursuant to any instrument referring to this Mortgage, or which is evidenced by any instrument stating that said indebtedness is secured by this Mortgage, shall be defined as a "FUTURE ADVANCE," including, without limitation, indebtedness incurred or advanced by Mortgagee to Mortgagor or pursuant to the Loan Documents. It is agreed that the Loan Documents are intended to secure all of the debts and obligations referred to in the Loan Documents, some of which will be obligatory future advances, and all advances under the Loan Documents will be for commercial purposes. This Paragraph shall serve as notice to any subsequent holder of a lien, encumbrance, security title or other claim in and to the Mortgaged Property that Mortgagee claims the priority of the lien of this Mortgage for all such Future Advances, as well as for all other obligations secured hereby. This Paragraph shall also be notice that Mortgagee reserves the right, upon agreement thereto with Mortgagor, to modify, extend, consolidate, and renew the Debt, or any portions thereof, and the rate of interest charged thereon, without affecting the priority of the lien created by this Mortgage. 20 44. CROSS-COLLATERALIZATION. The mortgages and deeds of trust (other than this Mortgage) listed on EXHIBIT B attached hereto and made a part hereof, as any of same may be amended, modified or supplemented from time to time, are collectively referred to for purposes of this Section 44 as the "OTHER MORTGAGES." This Mortgage, as it may be amended, modified or supplemented from time to time, together with the Other Mortgages, are collectively referred to for purposes of this Section 44 as the "MORTGAGES." The Debt is secured by, among other things, the Mortgages, which encumber real and personal property in the States set forth on EXHIBIT B, as more particularly described in each of the Mortgages. The Debt may be accelerated as provided in the Loan Documents. Upon the occurrence and during the continuance of an Event of Default, Mortgagee may, at its option, accelerate the Debt and foreclose upon any one or more of the Mortgages or resort to any one or more of its other rights and remedies under any or all of the Mortgages and the other Loan Documents. Except as otherwise provided herein, all of the real and personal property conveyed and/or mortgaged by the Mortgages are security for the Debt without allocation of any one or more of the parcels or portions thereof to any portion of the Debt. Mortgagee may allocate the proceeds that it receives upon the exercise of its rights and remedies, including foreclosure, to payment of the Debt as Mortgagee in its sole discretion may determine to be advisable pursuant to the terms of the Loan Documents. Mortgagee may proceed, at the same or different times, to foreclose the Mortgages or any one or more of them, by any proceedings appropriate in the state where any of the real property encumbered by one or more of the Mortgages lies, including private sale if permitted, and no event of enforcement taking place in any state, including without limiting the generality of the foregoing, any pending foreclosure, judgment or decree of foreclosure, foreclosure sale, rents received, possession taken, deficiency judgment or decrees, or judgment taken on the Debt, shall in any way stay, preclude or bar enforcement of the Mortgages or any of them in any other state, and Mortgagee may pursue any or all of its remedies to the maximum extent permitted by applicable law pursuant to the terms of the Loan Documents until all of the Debt and all other obligations now or hereafter secured by any or all of the Mortgages have been paid or discharged in full. Additionally, and without limitation of any other provision of this Mortgage, if this Mortgage is foreclosed and the Mortgaged Property is sold (or any part thereof) pursuant to foreclosure or other proceedings, and if the proceeds of such sale (after application of such proceeds as provided in this Mortgage and the other Loan Documents) are not sufficient to pay the total sum of the Debt then outstanding and any other amounts provided for by applicable law (the "BALANCE Owed"), then, to the extent permitted by law, the Debt shall not be satisfied to the extent of the Balance Owed, but such Debt shall continue 21 in existence and continue to be evidenced and secured by the Loan Documents and the Mortgages. Subject to the requirements of applicable law, if Mortgagee shall acquire the Mortgaged Property as a result of any foreclosure or other sale (whether by bidding all or any portion of the Debt or otherwise), the proceeds of such sale, to the extent permitted by law, shall not be deemed to include (and Mortgagor shall not be entitled to any benefit or credit on account of) proceeds of any subsequent sale of the Mortgaged Property by Mortgagee. Without limitation of any other provision hereof, Mortgagor further agrees that if any of the Other Mortgages are foreclosed and sale is made of any of the property subject to any Other Mortgages, and if the proceeds of such sale (after application of such proceeds as provided for herein and after deducting all accrued and general and special taxes and assessments) are not sufficient to pay the Debt and any other amounts provided for by applicable law, then, to the extent permitted by law, the Debt then outstanding shall not be satisfied to the extent of the Balance Owed, but such Debt shall continue in existence and continue to be evidenced and secured by the Loan Documents and the Mortgages existing immediately prior to any such foreclosure, except such Mortgages foreclosed upon. No release of personal liability, if any, of any Person whatsoever and no release of any portion of the property now or hereafter subject to the lien of any of the Mortgages shall have any effect whatsoever by way of impairment or disturbance of the lien or priority of any other of the Mortgages or the unreleased properties encumbered by any of the Mortgages, to the extent permitted by law. Any foreclosure or other appropriate remedy brought in any of the states aforesaid may be brought and prosecuted as to any part of the security, wherever located, without regard to the fact that foreclosure proceedings or other remedies have or have not been instituted elsewhere on any other property subject to the lien of the Mortgages. Neither Mortgagor nor any Person claiming by, through or under Mortgagor shall have any right to marshal the assets, all such rights being hereby expressly waived as to Mortgagor and all Persons claiming by, through or under Mortgagor, Debt, without limitation, junior lienors. Each of Mortgagor and all endorsers, guarantors and sureties of the Debt, hereby waives any and all rights arising because of payment or performance by Mortgagor of any Debt (a) against any Person by way of subrogation of the rights of Mortgagee or (b) against any Person obligated to pay or perform the Debt or other obligations secured by the Other Mortgages by way of contribution, reimbursement or otherwise. 45. CERTAIN MATTERS RELATING TO MORTGAGED PROPERTY LOCATED IN THE STATE OF NEW YORK. With respect to the Mortgaged Property which is located in the State of New York, notwithstanding anything contained herein to the contrary: (a) Mortgagor represents that this Mortgage does not encumber property principally improved or to be improved by one or more structures containing in the aggregate not more than six (6) residential dwelling units. (b) Pursuant to Section 13 of the lien law of New York, Mortgagor shall receive the advances secured hereby and shall hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of any improvement and shall apply such advances first to the payment of the cost of any such improvements on the Mortgaged Property before using any part of the total of the same for any other purpose. (c) Mortgagee shall have all of the rights against lessees of the Mortgaged Property as set forth in Section 291(f) of the Real Property Law of New York. (d) The provisions of subsection 4 of Section 254 of the New York Real Property Law covering the insurance of buildings against loss by fire and the application of Insurance Proceeds shall not apply to this Mortgage. In the event of any conflict, inconsistency or ambiguity between the provisions of Sections 5.4 and/or 5.5 of The Loan Agreement hereof and the provisions of subsection 4 of Section 254 of the New York Real Property Law covering the insurance of buildings against loss by fire and the application of Insurance Proceeds, the provisions of Sections 5.4 and/or 5.5 of The Loan Agreement shall control. 22 (e) (i) In the event of any sale or transfer of the Mortgaged Property, or any part thereof, including any sale or transfer by reason of foreclosure of this Mortgage or any prior or subordinate mortgage or by deed in lieu of any such foreclosure, Mortgagor shall timely and duly complete, execute and deliver to Mortgagee all forms and supporting documentation required by any taxing authority to estimate and fix any tax payable by reason of such sale or transfer or recording of the deed evidencing such sale or transfer, including any New York State Real Estate Transfer Tax payable pursuant to Article 31 of the New York Tax Law and New York City Real Property Transfer Tax payable pursuant to Chapter 21, Title 11 of the New York City Administrative Code (individually, a "Transfer Tax" and collectively, the "Transfer Taxes"). (ii) Mortgagor shall pay the Transfer Taxes that may hereafter become due and payable with respect to any sale or transfer of the Mortgaged Property described in this Section 45, and in default of such payment, Mortgagee may pay the same and the amount of such payment shall be added to the Debt secured hereby and, unless incurred in connection with a foreclosure of this Mortgage or deed in lieu of such foreclosure, shall be secured by this Mortgage. (iii) Mortgagor hereby irrevocably constitutes and appoints Mortgagee as its attorney-in-fact, coupled with an interest, to prepare and deliver any questionnaire, statement, affidavit or tax return in connection with any Transfer Tax applicable to any foreclosure or deed in lieu of foreclosure described in this Section 45. (iv) Mortgagor shall indemnify and hold harmless Mortgagee against (i) any and all liability incurred by Mortgagee for the payment of any Transfer Tax with respect to any transfer of the Mortgaged Property by reason of foreclosure, and (ii) any and all expenses incurred by Mortgagee in connection therewith including, without limitation, interest, penalties and attorneys' fees. (v) The obligation to pay the Transfer Taxes and indemnify Mortgagee under this Article is a personal obligation of Mortgagor, whether or not Mortgagor is personally obligated to pay the Debt secured by this Mortgage, and shall be binding upon and enforceable against the distributees, successors and assigns of Mortgagor with the same force and effect as though each of them had personally executed and delivered this Mortgage, notwithstanding any exculpation provision in favor of Mortgagor with respect to the payment of any other monetary obligations under this Mortgage. (vi) In the event that Mortgagor fails or refuses to pay a tax payable by Mortgagor with respect to a sale or transfer by reason of a foreclosure of this Mortgage in accordance with this Section, the amount of the tax, any interest or penalty applicable thereto and any other amount payable pursuant to Mortgagor's obligation to indemnify Mortgagee under this Section may, at the sole option of Mortgagee, be paid as an expense of the sale out of the proceeds of the mortgage foreclosure sale. (vii) The provisions of this Section shall survive any transfer and the delivery of the deed affecting such transfer. Nothing in this Section shall be deemed to grant to Mortgagor any greater rights to sell, assign or otherwise transfer the Premises than are expressly 23 provided in Article IX nor to deprive Mortgagee of any right to refuse to consent to any transaction referred to in this Section. (f) The clauses and covenants contained in this Mortgage that are construed by Section 254 of the New York Real Property Law shall be construed as provided in those sections (except as provided in Section 45 of this Mortgage and Sections 5.4 and/or 5.5 of the Loan Agreement). The additional clauses and covenants contained in this Mortgage shall afford rights supplemental to and not exclusive of the rights conferred by the clauses and covenants construed by Section 254 and shall not impair, modify, alter or defeat such rights (except as provided in Section 45 of this Mortgage and Sections 5.4 and/or 5.5 of the Loan Agreement), notwithstanding that such additional clauses and covenants may relate to the same subject matter or provide for different or additional rights in the same or similar contingencies as the clauses and covenants construed by Section 254. The right of Mortgagee arising under the clauses and covenants contained in this Mortgage shall be separate, distinct and cumulative and none of them shall be in exclusion of the others. No act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision, anything herein or otherwise to the contrary notwithstanding. In the event of any inconsistencies between the provisions of Section 254 and the provisions of this Mortgage, the provisions of this Mortgage shall prevail. (g) Notwithstanding anything to the contrary in this Mortgage, the maximum amount of principal indebtedness secured by this Mortgage or which under any contingency may be secured by this Mortgage is ______________. (h) This Mortgage (a) was created pursuant to and in accordance with that certain Note and Mortgage Consolidation, Spreader, Severance and Modification Agreement among the mortgagors named therein and Mortgagee, dated as of the date hereof and recorded immediately prior hereto, and (b) is intended to replace and supercede in its entirety that certain previous mortgage instrument between Mortgagor and Mortgagee, dated November 25, 2002. 24 IN WITNESS WHEREOF, Mortgagor has executed this instrument the day and year first above written. MORTGAGOR: [LODGIAN ENTITY] By: _________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary ACKNOWLEDGMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of June in the year 2004 before me, the undersigned, personally appeared Daniel E. Ellis, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. ___________________________________ Notary Public EXHIBIT A LEGAL DESCRIPTION A-1 EXHIBIT B List of Mortgages B-1 EX-10.36 33 g87458a3exv10w36.txt EX-10.36 FORM OF CASH MANAGEMENT AGREEMENT EXHIBIT 10.36 FORM OF CASH MANAGEMENT AGREEMENT Dated: as of June __, 2004 among THE BORROWERS LISTED ON THE SIGNATURE PAGES HERETO, as Borrowers, MERRILL LYNCH MORTGAGE LENDING, INC. as Lender, WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent and LODGIAN MANAGEMENT CORP., a Delaware corporation, as Manager FORM OF CASH MANAGEMENT AGREEMENT CASH MANAGEMENT AGREEMENT (this "AGREEMENT"), dated as of June __, 2004, among the Borrowers listed on the signature pages hereto, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "BORROWER", and collectively, "BORROWERS"), WACHOVIA BANK, NATIONAL ASSOCIATION, having an address at 8739 Research Drive, URP4, Charlotte, North Carolina 28288-1075 ("AGENT"), MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation having an office at Four World Financial Center, New York, New York 10080 ("LENDER"), and LODGIAN MANAGEMENT CORP., a Delaware corporation, having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 ("MANAGER"). WITNESSETH: WHEREAS, pursuant to a certain Loan and Security Agreement, dated as of the date hereof (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "LOAN Agreement"), between the Borrowers and Lender, Lender has made a loan to the Borrowers in the principal amount of _________________________________________ (the "LOAN"), which Loan is evidenced by a Promissory Note, dated as of the date hereof (together with all extensions, renewals, modifications, restatements, replacements, substitutions, by means of multiple notes or otherwise, and amendments thereof, collectively, the "NOTE"), made by the Borrowers, as makers, to Lender, as payee, and secured by, among other things, (i) those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents, Security Agreements and Fixture Filings, each dated as of the date hereof (together with all extensions, renewals, modifications, restatements, substitutions and amendments thereof, each a "SECURITY INSTRUMENT" and, collectively, the "SECURITY Instruments"), each made by a Borrower for the benefit of Lender and covering the properties as more particularly described therein (collectively, the "PROPERTIES"), (ii) those certain Assignments of Leases and Rents, dated as of the date hereof (together with all extensions, renewals, modifications, restatements, substitutions and amendments thereof, collectively, the "ASSIGNMENT OF LEASES"), made by the applicable Borrower, as assignor, to Lender, as assignee, and (iii) the other Loan Documents (as defined in the Loan Agreement); WHEREAS, pursuant to the Security Instruments and the Assignment of Leases, the Borrowers have each granted to Lender a security interest in all of the Borrowers' right, title and interest in, to and under the Rents (as defined in the Security Instruments) and other revenues derived from and otherwise attributable or allocable to the Properties, and have assigned and conveyed to Lender all of the Borrowers' right, title and interest in, to and under the Operating Revenues due and to become due to each of the Borrowers or to which any of the Borrowers are now or may hereafter become entitled, arising out of the Property or any part or parts thereof; WHEREAS, the Borrowers and Manager have entered into Management Agreements with respect to the Properties pursuant to which Manager has agreed to manage the Properties; and WHEREAS, Manager has agreed to subordinate any right, title and interest that Manager may have in and to the Operating Revenues and any other income and revenues from the Properties to the interests of Lender under the Loan Agreement and the Loan Documents; and WHEREAS, in order to fulfill all of the Borrowers' obligations under the Loan Agreement, the Borrowers and Manager have agreed that all Operating Revenues and other revenues from the Properties will be deposited directly into the Deposit Account or the Lock Box Account (as such terms are hereinafter defined), transferred to a Lock Box Account (if not deposited directly therein) established hereunder with Agent and allocated and/or disbursed in accordance with the terms and conditions hereof. NOW, THEREFORE, in consideration of the covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: I. DEFINITIONS Capitalized terms not otherwise defined herein shall have the meaning set forth in the Loan Agreement. As used herein, the following terms shall have the following definitions: "ACCOUNTS" shall mean, collectively, the Deposit Account, the Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds Account, and any other accounts pledged to Lender pursuant to this Agreement or any of the other Loan Documents. "AGENT" shall mean Wachovia Bank, National Association, as agent under this Agreement, together with its successors and assigns. "AGREEMENT" shall mean this Cash Management Agreement among the Borrowers, Manager, Agent and Lender, as amended, supplemented, restated or otherwise modified from time to time. "APPROVED OPERATING BUDGET" shall mean, for any period, each Borrower's Operating Budget as approved or deemed approved by Lender from time to time in accordance with Section 5.1(D) of the Loan Agreement, setting forth such Borrower's reasonable estimate of Operating Revenues and Operating Expenses for the applicable Property for such period. "BORROWERS" as defined in the Preamble, together with their successors and permitted assigns. "BUSINESS INTERRUPTION INSURANCE" as defined in Section 2.1(d). "CAP" means the interest rate cap agreement to be provided by the Borrowers pursuant to Section 2.3 of the Loan Agreement. "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" as defined in Section 2.1(c). 2 "CASH TRAP EVENT" as defined in Section 6.8 of the Loan Agreement. "CASH TRAP RESERVE SUB-ACCOUNT" as defined in Section 2.1(c). "COLLATERAL" as defined in Section 5.1. "CREDIT CARD COMPANIES" as defined in Section 2.2(a). "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" as defined in Section 2.2(a). "DEBT SERVICE SUB-ACCOUNT" as defined in Section 2.1(c). "DEPOSIT ACCOUNT" as defined in Section 2.1(a). "DEPOSIT ACCOUNT AGREEMENT" as defined in Section 2.1(a). "DEPOSIT BANK" as defined in Section 2.1(a). "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulation ss.9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" shall mean a bank that satisfies the Rating Criteria. "EXCESS CASH FLOW" means any and all amounts available for distribution in any calendar month after allocations and/or distribution of all amounts required to be allocated under Sections 3.3(a)(i) through (ix) hereof. "EXTRAORDINARY EXPENSES" shall mean any extraordinary Operating Expense or Capital Expenditure not set forth in the Approved Operating Budget then in effect for the Property. "EXTRAORDINARY RECEIPTS" shall mean any receipts of the Borrowers not included within the definition of Operating Revenues under the Loan Agreement, including, without limitation, receipts from litigation proceedings and tax certiorari proceedings. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" as defined in Section 2.1(e). "FF&E RESERVE ACCOUNT" as defined in Section 2.1(f). "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT" as defined in Section 2.1(c). 3 "IMPOSITIONS AND INSURANCE RESERVE SUB-ACCOUNT" as defined in Section 2.1(c). "LENDER" shall mean Merrill Lynch Mortgage Lending, Inc., together with its successors and assigns. "LOCK BOX ACCOUNT" as defined in Section 2.1(b). "LOSS PROCEEDS ACCOUNT" as defined in Section 2.1(d). "MANAGER" shall mean Lodgian Management Corp., together with its successors and permitted assigns. "MEZZANINE BORROWER" as defined in the Loan Agreement. "MEZZANINE LENDER" as defined in the Loan Agreement. "MEZZANINE LENDER'S PERCENTAGE" as defined in the Loan Agreement. "MEZZANINE LOAN" as defined in the Loan Agreement. "MEZZANINE LOAN AGREEMENT" means that certain Mezzanine Loan Agreement dated as of the date hereof, between Mezzanine Lender and Mezzanine Borrower. "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" as defined in Section 2.1(c). "MEZZANINE SERVICER" means the Servicer as such term is defined in the Mezzanine Loan Agreement. "MEZZANINE SERVICING FEE" shall mean the monthly Servicing Fee (as defined in the Mezzanine Loan Agreement) for which the Mezzanine Borrower is responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement. "MINIMUM BALANCE" as defined in Section 2.1(g). "MINIMUM BALANCE SUB-ACCOUNT" as defined in Section 2.1(c). "MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment of principal and interest on the Loan required to be paid on each Monthly Payment Date during the term of the Loan. "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required to be made to the FF&E Reserve pursuant to Section 6.4 of the Loan Agreement for any month provided that if at the time of determination thereof the actual Operating Revenues utilized in calculating the Monthly FF&E Payment have not been determined for the prior calendar month (the "Measurement Month"), such calculation shall be based upon the Operating Revenues set forth for the Measurement Month in the applicable Operating Budget (the "Estimated Monthly FF&E Payment"), and, upon determination of the actual Operating Revenues for the Measurement Month, funds from the Lock Box Account in an amount equal to any deficit between the 4 Estimated Monthly FF&E Payment and the Monthly FF&E Payment required to be allocated to the FF&E Reserve based upon the actual Operating Revenues for the Measurement Month, shall be allocated (or if funds available in the Lock Box Account and not otherwise required to be deposited in any other Sub-Account for the applicable month are not sufficient to cover such deficit, paid by the Borrowers) to the FF&E Reserve within five (5) Business Days of such determination. Any excess of the Estimated Monthly FF&E Payment allocated to the FF&E Reserve for the applicable month over the Monthly FF&E Payment based upon the actual Operating Revenues for the Measurement Month shall be made available for allocation to the other Sub-Accounts or disbursed in accordance with Section 3.3(a) hereof. "MONTHLY IMPOSITIONS AND INSURANCE AMOUNT" shall mean the aggregate monthly deposit for Impositions and Insurance Premiums required to be paid pursuant to Section 6.3 of the Loan Agreement. "MONTHLY MEZZANINE DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment of principal and interest on the Mezzanine Loan required to be paid on each Monthly Payment Date to Mezzanine Lender pursuant to the Mezzanine Loan Agreement. "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with respect to each month, an amount equal to the Operating Expenses plus estimated sales, use, occupancy and similar taxes relating to the Properties (excluding therefrom Impositions, Insurance Premiums, FF&E expenditures, and management fees payable to any Manager that is an Affiliate of the Borrowers) set forth in the Approved Operating Budget for the applicable month of determination. "MONTHLY PAYMENT DATE" means the date that is the last day of each calendar month occurring during the term of the Loan (or if such last day of such calendar month is not a Business Day, the immediately preceding day that is a Business Day). "MORTGAGE LENDER'S PERCENTAGE" as defined in the Loan Agreement. "OPERATING EXPENSES" as defined in the Loan Agreement. "OPERATING EXPENSE SUB-ACCOUNT" as defined in Section 2.1(c). "OPERATING REVENUES" as defined in the Loan Agreement. "PERMITTED INVESTMENTS" shall mean any one or more of the following obligations or securities acquired at a purchase price of not greater than par, including those issued by any Servicer, the trustee under any Securitization or any of their respective Affiliates, payable on demand or having a maturity date not later than the Business Day immediately prior to the date on which the invested sums are required for payment of an obligation for which the related Sub-Account was created and meeting one of the appropriate standards set forth below: (i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States of America including, without limitation, obligations of: the U.S. Treasury (all direct or 5 fully guaranteed obligations), the Farmers Home Administration (certificates of beneficial ownership), the General Services Administration (participation certificates), the U.S. Maritime Administration (guaranteed Title XI financing), the Small Business Administration (guaranteed participation certificates and guaranteed pool certificates), the U.S. Department of Housing and Urban Development (local authority bonds) and the Washington Metropolitan Area Transit Authority (guaranteed transit bonds); provided, however, that the investments described in this clause (i) must (A) have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change, (B) if rated by S&P, not have an "r" highlighter affixed to their rating, (C) if such investments have a variable rate of interest, have an interest rate tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) not be subject to liquidation prior to their maturity; (ii) Federal Housing Administration debentures; (iii) obligations of the following United States government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage Association (debt obligations), the Student Loan Marketing Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt obligations); provided, however, that the investments described in this clause (iii) must (A) have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change, (B) if rated by S&P, not have an "r" highlighter affixed to their rating, (C) if such investments have a variable rate of interest, have an interest rate tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) not be subject to liquidation prior to their maturity; (iv) federal funds, unsecured certificates of deposit, time deposits, bankers' acceptances and repurchase agreements with maturities of not more than 365 days of any bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial or, if higher, then current ratings assigned to any class of certificates or other securities issued in connection with any Securitization backed in whole or in part by the Loan (collectively the "CERTIFICATES"); provided, however, that the investments described in this clause (iv) must (A) have a ------------- predetermined fixed dollar amount of principal due at maturity that cannot vary or change, (B) if rated by S&P, not have an "r" highlighter affixed to their rating, (C) if such investments have a variable rate of interest, have an interest rate tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) not be subject to liquidation prior to their maturity; (v) fully Federal Deposit Insurance Corporation-insured demand and time deposits in, or certificates of deposit of, or bankers' acceptances issued by, any 6 bank or trust company, savings and loan association or savings bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial or, if higher, then current ratings assigned to any class of Certificates); provided, however, that the investments described in this clause (v) must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, not have a "r" highlighter affixed to their rating, (C) if such investments have a variable rate of interest, have an interest rate tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) not be subject to liquidation prior to their maturity; (vi) debt obligations with maturities of not more than 365 days and at all times rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investments would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial or, if higher, then current ratings assigned to the Certificates) in its highest long-term unsecured debt rating category; provided, however, that the investments described in this clause (vi) must (A) have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change, (B) if rated by S&P, not have an "r" highlighter affixed to their rating, (C) if such investments have a variable rate of interest, have an interest rate tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, (D) not be subject to liquidation prior to their maturity, and (E) if such investment has a maturity of (1) less than one month, have a long-term rating of at least "A2" by Moody's, (2) up to three months, have a long-term rating of at least "Aa" by Moody's, (3) up to six months, have a long-term rating of at least "Aa3" by Moody's, and (4) over six months, have a long-term rating of at least "Aaa" by Moody's; (vii) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) with maturities of not more than 365 days and that at all times is rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial or, if higher, then current ratings assigned to any class of Certificates) in its highest short-term unsecured debt rating; provided, however, that the investments described in this clause (vii) must (A) have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change, (B) if rated by S&P, not have a "r" highlighter affixed to their rating, (C) if such investments have a variable rate of interest, have an interest rate tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) not be subject to liquidation prior to their maturity; 7 (viii) units of taxable money market funds or mutual funds, which funds are regulated investment companies, seek to maintain a constant net asset value per share and have the highest rating from each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial or, if higher, then current ratings assigned to any class of Certificates) for money market funds or mutual funds; and (ix) any other security, obligation or investment which has been approved as a Permitted Investment in writing by (a) Lender and (b) each Rating Agency, as evidenced by a written confirmation that the designation of such security, obligation or investment as a Permitted Investment will not, in and of itself, result in a downgrade, qualification or withdrawal of the initial or, if higher, then current ratings assigned to any class of Certificates by such Rating Agency; provided, however, that such instrument continues to qualify as a "CASH FLOW INVESTMENT" pursuant to Code Section 860G(a)(6) earning a passive return in the nature of interest and no obligation or security shall be a Permitted Investment if (A) such obligation or security evidences a right to receive only interest payments or (B) the right to receive principal and interest payments on such obligation or security are derived from an underlying investment that provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment; and provided, further, no obligation or security, other than an obligation or security constituting real estate assets, cash, cash items or Government securities pursuant to Code Section 856(c)(4)(A), shall be a Permitted Investment if the value of such obligation or security exceeds ten percent (10%) of the total value of the outstanding securities of any one issuer. "RATING CRITERIA" with respect to any Person, shall mean that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa3" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "SERVICING FEE" shall mean the monthly Servicing Fee (as defined in the Loan Agreement) for which the Borrowers are responsible under Section 2.11 of the Loan Agreement. "SPECIAL PAYMENTS" shall mean (x) any Release Price paid pursuant to the Loan Agreement, (y) any principal prepayments made pursuant to Sections 2.5(B)(iii), 5.5(C) or 6.8 of the Loan Agreement, and (z) any Prepayment Consideration due on any of the foregoing principal prepayments received pursuant to the terms of the Loan Agreement. "SUB-ACCOUNTS" shall mean, collectively, the Debt Service Sub-Account, the Impositions and Insurance Reserve Sub-Account, the Mezzanine Loan Debt Service Sub-Account, the Capital Improvement Reserve Sub-Account, the Hazardous Materials Remediation Reserve Sub- Account, the Extraordinary Receipts Sub-Account, the Cash Trap Reserve Sub- 8 Account, the Operating Expense Sub-Account, the Minimum Balance Sub-Account and any other sub-accounts of the Lock Box Account which may hereafter be established by Lender hereunder. "UCC" as defined in Section 5.1(a)(iv). II. THE ACCOUNTS SECTION 2.1 ESTABLISHMENT OF DEPOSIT ACCOUNT, LOCK BOX ACCOUNT AND SUB-ACCOUNTS. (a) DEPOSIT ACCOUNT. On or before the Closing Date, one or more deposit accounts (collectively, the "DEPOSIT ACCOUNT") shall be established at the Borrowers' sole cost and expense with financial institutions approved by Lender (collectively, the "DEPOSIT BANK"), each pursuant to an agreement (collectively, the "DEPOSIT ACCOUNT AGREEMENT") in form and substance reasonably acceptable to Lender, executed and delivered by each Borrower and the applicable Deposit Bank. Among other things, the Deposit Account Agreement shall provide that the Borrowers shall have no access to or control over the Deposit Account, and that all available funds on deposit in the Deposit Account shall be deposited by wire transfer (or transfer via the ACH System) on each Business Day by the Deposit Bank into the Lock Box Account. (b) LOCK BOX ACCOUNT. On or before the Closing Date, an Eligible Account shall be established with Agent for the purposes specified herein, which shall be entitled "Lock Box Account for the benefit of Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured party" (said account, and any account replacing the same in accordance with this Agreement, the "LOCK BOX ACCOUNT"). The Lock Box Account shall be under the sole dominion and control of Lender and/or its designee, including any Servicer of the Loan, and the Borrowers shall have no rights to control or direct the investment or payment of funds therein except as may be expressly provided herein. Any amounts that Lender may hold in reserve pursuant to the Loan Agreement may be held by Lender in the Lock Box Account (including in a Sub-Account thereof) or may be held in another account or manner as specified in Articles VI or VII of the Loan Agreement. (c) SUB-ACCOUNTS OF THE LOCK BOX ACCOUNT. The Lock Box Account shall be deemed to contain, among others, the following Sub-Accounts (which may be maintained as separate ledger accounts): (i) "DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of depositing the amounts required for payments of principal and interest under the Loan and all other amounts then due under the Note and the Loan Agreement; (ii) "IMPOSITION AND INSURANCE RESERVE SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of depositing the sums required to be deposited pursuant to Section 6.3 of the Loan Agreement; 9 (iii) "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of depositing the sums required to be deposited pursuant to Section 6.5 of the Loan Agreement; (iv) "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of depositing sums required to be deposited pursuant to Section 6.6 of the Loan Agreement; (v) "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of depositing the amounts required for payments of the Monthly Mezzanine Debt Service Payment Amount; (vi) "CASH TRAP RESERVE SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of depositing Excess Cash Flow when required to be deposited pursuant to Section 6.8 of the Loan Agreement; (vii) "OPERATING EXPENSE SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of depositing the Monthly Operating Expense Budget Amount, Extraordinary Expenses approved by Lender, if any, and fees due to the Manager; and (viii) "MINIMUM BALANCE SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of depositing and maintaining the Minimum Balance as and to the extent required under Section 2.1(g) hereof. (d) If the proceeds of any business interruption or rent loss insurance maintained under Section 5.4 of the Loan Agreement (any such insurance, "BUSINESS INTERRUPTION INSURANCE") paid upon the occurrence of any fire or casualty to any Property shall be paid in a lump sum (rather than on a monthly basis), the Borrowers and Lender shall establish a separate Eligible Account with Agent hereunder entitled "Loss Proceeds Account for the benefit of Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured party" (said account, the "LOSS PROCEEDS ACCOUNT") for deposit of such Business Interruption Insurance proceeds and such proceeds shall be held, allocated and disbursed in accordance with the terms and conditions hereof and of the Loan Agreement. The Loss Proceeds Account shall be under the sole dominion and control of Lender and/or its designee, including any Servicer of the Loan, and the Borrowers shall have no rights to control or direct the investment or payment of funds therein except as expressly provided herein. (e) If any Extraordinary Receipts are received by any Borrower, such amounts shall be paid to the Lock Box Account to be retained in a subaccount thereof (the "EXTRAORDINARY RECEIPTS SUB-ACCOUNT"). Amounts held in the Extraordinary Receipts Sub-Account shall be disbursed to the Lock Box Account and allocated and distributed in accordance with Section 3.3 upon receipt by Lender of evidence reasonably satisfactory to Lender that (x) with respect to Extraordinary Receipts received in connection with any pending litigation, action, or similar matter, such action has been concluded in favor of the Borrowers and no appeal has been timely filed within the applicable appeal period, (y) with respect to Extraordinary Receipts received with respect to work at, or other conditions with respect to, any of the Properties, the 10 item of work or other condition has been completed or corrected and paid for to the reasonable satisfaction of Lender, and (z) with respect to Extraordinary Receipts received in any other circumstance, the Borrowers are not liable directly, or indirectly, to refund or repay any such amounts; provided however, all Extraordinary Receipts with respect to lease termination payments, advance booking terminations, and similar payments or fees, shall be retained in the Extraordinary Receipts Sub-Account and disbursed in equal monthly installments during the period of time for which such payments relate in accordance with Section 3.3. The Extraordinary Receipts Sub-Account shall be under the sole dominion and control of Lender and/or its designee, including any Servicer of the Loan, and the Borrowers shall have no rights to control or direct the investment or payment of funds therein except as expressly provided herein. (f) On or before the Closing Date, the Borrowers shall establish a separate Eligible Account hereunder entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured party" (said account, the "FF&E RESERVE ACCOUNT") with Agent for the purpose of depositing Monthly FF&E Reserve Payments pursuant to Section 6.4 of the Loan Agreement, to be held, allocated and disbursed in accordance with the terms and conditions hereof and of the Loan Agreement. The FF&E Reserve Account shall be under the sole dominion and control of Lender and/or its designee, including any Servicer of the Loan, and the Borrowers shall have no rights to control or direct the investment or payment of funds therein except as expressly provided herein and in the Loan Agreement. Notwithstanding the foregoing, the Borrowers shall, in accordance with the terms of this Agreement and the Loan Agreement, have access to and the right to withdraw funds held in the FF&E Reserve Account on or prior to (x) the occurrence and during the continuance of an Event of Default, or (y) the failure of the Borrowers or Manager to comply with the reporting requirements set forth in Section 5.1(A)(v) of the Loan Agreement, at which time Agent, upon receipt of notice from Lender, shall (i) cease to honor checks drawn by Manager or any Borrower on the FF&E Reserve Account, (ii) cease to disburse funds from the FF&E Reserve Account to either the Manager or the Borrowers except in accordance with written instructions received from Lender, and (iii) deposit the amounts in the FF&E Reserve Account, together with any funds from time to time held or deposited or received into the FF&E Reserve Account, in accordance with Lender's instructions from time to time on the day such instructions are received, if such instructions are received prior to 12:00 p.m. on such day, or, if received after 12:00 p.m., on the following Business Day. The Borrowers shall not withdraw any funds from the FF&E Reserve Account in violation of this Agreement or the Loan Agreement. (g) Upon the occurrence and during the continuance of a Cash Trap Event or an Event of Default, the Borrowers shall be required to deposit, from and at the time of the allocations from the Lock Box Account pursuant to Section 3.3(a)(ix) hereof, and maintain in the Minimum Balance Sub-Account an amount equal to $50,000 (the "MINIMUM BALANCE"). In the event that, during the continuance of a Cash Trap Event, funds available in a Deposit Account are insufficient to pay the amount of any checks deposited into such Deposit Account which are returned for insufficient or uncollected funds (collectively "CHARGEBACKS"), and such Chargebacks are required to be paid by the applicable Borrower to the applicable Deposit Account Bank pursuant to the terms of the applicable Deposit Account Agreement, provided that no Event of Default exists, funds shall be made available from the Minimum Balance Sub-Account to the applicable Borrower to pay the amount of such Chargebacks due to such Deposit Account Bank (or to reimburse the applicable Borrower for any such amounts as may have been 11 previously paid by or on behalf of such Borrower from other funds on account of any Chargebacks at a time when insufficient amounts were available therefor in the Minimum Balance Sub-Account) promptly after delivery to Lender of evidence reasonably satisfactory to Lender that such amounts are due (or have been paid by or on behalf of the applicable Borrower). In the event that during a Cash Trap Event, as a result of any such disbursement or otherwise, the Minimum Balance Sub-Account shall contain less than the Minimum Balance, the Borrowers shall be required to deposit such deficiency from and at the time of allocations from the Lock Box Account pursuant to Section 3.3(a)(ix) hereof. SECTION 2.2 DEPOSITS INTO ACCOUNTS. The Borrowers and Manager represent, warrant and covenant that: (a) Each Borrower and Manager shall cause all Operating Revenues and other income and revenues received by such Borrower or Manager to be deposited directly into the Deposit Account for each applicable Property. The Borrowers shall obtain an agreement (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each of the Persons paying or disbursing credit card receivables (each, a "CREDIT CARD COMPANY" and collectively, the "CREDIT CARD COMPANIES"), in substantially the form of EXHIBIT A attached hereto or as otherwise approved by Lender in its reasonable discretion, pursuant to which the Credit Card Companies agree to pay all credit card receivables for the Properties directly into the Lock Box Account, and acknowledge and agree that Lender shall have a first priority perfected security interest in such credit card receivables. Pursuant to the Deposit Account Agreement, all available funds on deposit in the applicable Deposit Account shall be deposited directly by the Deposit Bank into the Lock Box Account by wire transfer on each Business Day. (b) If any Borrower or Manager receives any Operating Revenues or other income or revenues from any Property, or any Extraordinary Receipts, then such receipt shall not constitute a Default provided (i) such amounts shall be deemed to be Collateral and shall be held in trust for the benefit, and as the property, of Lender, and (ii) such Borrower or Manager shall deposit such amounts into the applicable Deposit Account within two (2) Business Days of receipt. (c) Without the prior written consent of Lender, which shall not be unreasonably withheld, delayed or conditioned, neither the Borrowers nor Manager shall (i) terminate, amend, revoke or modify any Credit Card Receivables Payment Direction Letter in any manner whatsoever, or (ii) direct or cause any Credit Card Company to pay any amount in any manner other than as provided in the related Credit Card Receivables Payment Direction Letter, unless a replacement Credit Card Receivables Payment Direction Letter in form reasonably acceptable to Lender is executed and delivered to Lender by any proposed replacement Credit Card Company prior to termination of the then effective Credit Card Receivables Payment Direction Letter. (d) Each Borrower and Manager shall also cause the proceeds of any Business Interruption Insurance to be deposited directly into the Lock Box Account as same are paid (or, if any such proceeds are received by such Borrower or Manager, same shall be deposited into the Lock Box Account within two (2) Business Days after receipt thereof) and such proceeds shall be allocated and disbursed in accordance with Section 3.3 hereof. If the proceeds of any such 12 Business Interruption Insurance are paid in a lump sum, such proceeds shall be deposited into the Loss Proceeds Account. Agent shall cause monthly amounts to be transferred from the Loss Proceeds Account to the Lock Box Account as directed by Lender (based upon a ratable allocation of such proceeds over the casualty restoration period as reasonably determined by Lender) on the first (1st) Business Day of each calendar month during the period of restoration of the Property, and after transfer of same to the Lock Box Account, such amounts shall be allocated and disbursed in accordance with Section 3.3 hereof. (e) The Borrowers and Manager shall also cause any payments and proceeds payable to the Borrowers under any Cap entered into by or for the benefit of the Borrowers and pledged to Lender in accordance with the terms of the Loan Agreement to be deposited directly into the Lock Box Account by the applicable Cap Provider (or, if any such proceeds are received by any Borrower or Manager, same shall be deposited into the Lock Box Account within two (2) Business Days after receipt thereof) and such proceeds shall be allocated, disbursed and applied in accordance with Section 3.3 hereof. SECTION 2.3 ACCOUNT NAME. The Accounts shall each be in the names set forth herein; provided, however, that if Lender transfers or assigns the Loan, Agent, at Lender's request (with respect to the Accounts other than the Deposit Account), and each Deposit Bank (with respect to its Deposit Account) shall change the name of each Account to the name of the transferee or assignee. If Lender retains a Servicer to service the Loan, Agent, at Lender's request, shall change the name of each Account to the name of Servicer, as agent for Lender. SECTION 2.4 ELIGIBLE ACCOUNTS/CHARACTERIZATION OF ACCOUNTS. The Borrowers and Agent shall maintain each Account (other than the Deposit Account) as an Eligible Account. Each Account (other than the Deposit Account) is and shall be treated as a "SECURITIES ACCOUNT" as such term is defined in Section 8-501(a) of the UCC. Agent hereby agrees that each item of property (whether investment property, financial asset, securities, securities entitlement, instrument, cash or other property) credited to each Account shall be treated as a "FINANCIAL ASSET" within the meaning of Section 8-102(a)(9) of the UCC. Agent shall, subject to the terms of this Agreement, treat Lender as entitled to exercise the rights that comprise any financial asset credited to each Account. All securities or other property underlying any financial assets credited to each Account (other than cash) shall be registered in the name of Agent, indorsed to Agent or in blank or credited to another securities account maintained in the name of Agent and in no case will any financial asset credited to any Account be registered in the name of any Borrower, payable to the order of any Borrower or specially indorsed to any Borrower. SECTION 2.5 PERMITTED INVESTMENTS. Sums on deposit in the Accounts may, at the Borrowers' election, be invested in Permitted Investments, provided that, notwithstanding the foregoing, in no event will funds in the Deposit Account be subject to any investment. Except during the existence of any Event of Default, the Borrowers shall have the right to direct Agent to invest sums on deposit in the Accounts in Permitted Investments. After an Event of Default and during the continuance thereof, Lender may direct Agent to invest sums on deposit in the Accounts in Permitted Investments as Lender shall determine in its sole discretion. The Borrowers hereby irrevocably authorize and direct Agent to apply any income earned from Permitted Investments to the respective Accounts. The amount of actual losses sustained on a 13 liquidation of a Permitted Investment shall be deposited into the Lock Box Account by the Borrowers no later than three (3) Business Days following such liquidation. The Borrowers shall be responsible for payment of any federal, state or local income or other tax applicable to income earned from Permitted Investments. The Accounts shall be assigned the federal tax identification number of the applicable Borrowers, which numbers are set forth on the signature page hereof. Any interest, dividends or other earnings which may accrue on the Accounts shall be added to the balance in the applicable Account and allocated and/or disbursed in accordance with the terms hereof. III. DEPOSITS SECTION 3.1 INITIAL DEPOSITS. (a) The Borrowers shall deposit in the Debt Service Sub-Account on the date hereof the amount of **[$___________]**. (b) The Borrowers shall deposit in the Impositions and Insurance Reserve Sub-Account on the date hereof the amount of **[$_________________]**. (c) The Borrowers shall deposit in the Hazardous Materials Remediation Reserve Sub-Account on the date hereof the amount of **[$________________]**. (d) The Borrowers shall deposit in the FF&E Reserve Account on the date hereof the amount of **[$___________________]**. (e) The Borrowers shall deposit in the Capital Improvement Reserve Sub-Account on the date hereof the amount of **[$______________]**. SECTION 3.2 ADDITIONAL DEPOSITS; SPECIAL PAYMENTS. The Borrowers shall make such additional deposits into the Accounts as may be required by the Loan Agreement. In addition, any Special Payments received by Lender under the Loan Agreement, together with interest thereon through the immediately following Payment Date pursuant to the Loan Agreement and the Mezzanine Loan Agreement, shall be deposited by Lender in the Lock Box Account and shall, at any time other than after the occurrence and during the continuance of an Event of Default, be distributed by Agent on the immediately following Monthly Payment Date, or on such earlier date as may be reasonably requested by Lender, as follows: (i) to Lender, the Mortgage Lender's Percentage of such Special Payment together with any interest due thereon pursuant to the terms of the Loan Agreement, and (ii) to Mezzanine Lender, the Mezzanine Lender's Percentage of such Special Payment together with any interest due thereon pursuant to the terms of the Mezzanine Loan Agreement. Lender and Mezzanine Lender shall apply such portions of the Special Payments as provided in the Loan Agreement and in the Mezzanine Loan Agreement, as applicable. SECTION 3.3 ALLOCATION OF FUNDS FROM THE LOCK BOX ACCOUNT. (a) At any time other than after the occurrence and during the continuance of an Event of Default, Agent shall allocate and deposit, as applicable, all available funds on 14 deposit in the Lock Box Account on each Business Day of each calendar month (or such other period of time as set forth below) in the following amounts and order of priority: (i) First, to the Impositions and Insurance Reserve Sub-Account, the Monthly Impositions and Insurance Amount for the next Monthly Payment Date; (ii) Second, (A) to the Agent, as Servicer, the monthly Servicing Fee on the Loan and then (B) to the Debt Service Sub-Account, the Monthly Debt Service Payment Amount due under the Loan Agreement for the next Monthly Payment Date; (iii) Third, to the FF&E Reserve Account, the Monthly FF&E Payment for the next Monthly Payment Date; (iv) Fourth, to the Operating Expense Sub-Account, funds sufficient to pay the Monthly Operating Expense Budget Amount for the next calendar Month; (v) Fifth, to the Operating Expense Sub-Account, funds in an amount necessary to pay Extraordinary Expenses approved by Lender, if any; (vi) Sixth, to the Operating Expense Sub-Account, subject to the terms and conditions of the Assignment of Management Agreement, any management fees due and owing to Manager which have not previously been paid to Manager, together with any fees payable to Manager for the next calendar month pursuant to the Management Agreement not otherwise paid pursuant to (iv) above; (vii) Seventh, to the Debt Service Sub-Account any late payment charges, default interest, and any other amounts (other than interest and principal paid pursuant to (ii) above) then due and owing under the Loan Agreement; (viii) Eighth, for so long as the Mezzanine Loan is outstanding, (A) to the Mezzanine Servicer, the monthly Mezzanine Servicing Fee, and then (B) to the Mezzanine Loan Debt Service Sub-Account, an amount equal to the Monthly Mezzanine Debt Service Payment Amount due for the next Monthly Payment Date under the Mezzanine Loan Agreement; (ix) Ninth, if a Cash Trap Event shall have occurred and is continuing and the balance then held in the Minimum Balance SubAccount is less than the Minimum Balance, to the Minimum Balance Sub-Account until such Sub-Account contains the Minimum Balance; (x) Tenth, if a Cash Trap Event shall have occurred and is continuing, any amounts remaining in the Lock Box Account after deposits for items (i) through (ix) above shall be deposited into the Cash Trap Reserve Sub-Account; and (xi) Eleventh, if no Cash Trap Event shall have occurred and is continuing, any amounts remaining in the Lock Box Account after deposits for items (i) through (viii) above shall be paid to, or as directed by, the Borrowers. 15 (b) If there are insufficient funds in the Lock Box Account for the deposits required by Sections 3.3(a)(i) through (iii) and (vii) above, the Borrowers shall deposit such deficiency into the Lock Box Account on or before the applicable Monthly Payment Date. Except as expressly provided in Section 6.8 of the Loan Agreement, under no circumstances shall Lender be required to utilize the Cash Trap Reserve or funds in any other Sub-Account to cure any deficiencies in any other Sub-Accounts. The deposit by the Borrowers of any such deficiency pursuant to this Section 3.3(b) shall satisfy the obligation of the Borrowers to make the related deposit under the Loan Agreement. (c) The Borrowers shall use, or caused to be used, all disbursements made to it under Sections 3.3(a)(iv) and (v) solely to pay Operating Expenses in accordance with the Approved Operating Budget and to pay Extraordinary Expenses for which Lender has approved disbursements under Section 3.3(a)(v) above. (d) Notwithstanding anything to the contrary contained herein, Lender shall not be obligated to make any disbursement from the Lock Box Account (under Sections 3.3(a)(iv) and (v) or otherwise) to pay for any costs or expenses (including legal fees) in connection with any dispute or defense of the Borrowers under any of the Loan Documents. (e) Upon the expiration of a Cash Trap Event in accordance with Section 6.8 of the Loan Agreement, any funds remaining in the Cash Trap Reserve Sub-Account and in the Minimum Balance Sub-Account will be disbursed pursuant to Section 6.8 of the Loan Agreement. (f) Notwithstanding anything herein to the contrary, upon the occurrence and during the continuance of an Event of Default, all funds on deposit in the Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, and any Loss Proceeds Account shall be disbursed to or as directed by Lender, it being agreed that application of any such amounts shall be in Lender's sole discretion and shall not be subject to the terms of Section 3.3(a) hereof. (g) Except as otherwise agreed to by Lender in writing, no funds shall be withdrawn from the FF&E Reserve Account other than in accordance with the CapEx/FF&E Budget. SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation of any variances of ten percent (10%) or more between budgeted (as set forth in the Approved Operating Budget) and actual Operating Expense amounts for any month in the aggregate, and (b) with respect to any individual item with a cost of $10,000 or more and not otherwise covered by the Approved Operating Budget, all invoices or other backup requested by Lender to substantiate the amount disbursed to the Borrowers pursuant to Section 3.3(a)(iv) and (v). IV. PAYMENT OF FUNDS FROM SUB-ACCOUNTS SECTION 4.1 PAYMENTS FROM SUB-ACCOUNTS. (a) Impositions and Insurance Reserve Sub-Account. Lender shall have the right to withdraw amounts on deposit in the Impositions and Insurance Reserve Sub-Account to 16 pay (or reimburse any Borrower for repayment of) Impositions and Insurance Premiums in accordance with the Loan Agreement. (b) Debt Service Sub-Account. Lender shall have the right to withdraw amounts from the Debt Service Sub-Account to pay: (i) default interest and late charges, if any, and any amounts then due and payable under the Note and the Loan Agreement, and (ii) the Monthly Debt Service Payment Amount on each Monthly Payment Date on which same are due and payable under the Loan Agreement. (c) Operating Expense Sub-Account. Funds deposited into the Operating Expense Sub-Account pursuant to Sections 3.3(a)(iv) through (vi) shall be distributed to the Borrowers on each Business Day. (d) Mezzanine Loan Debt Service Sub-Account. On each Monthly Payment Date, all funds held in the Mezzanine Loan Debt Service Sub-Account shall be distributed to Mezzanine Lender, and such distribution shall be deemed to have been distributed by the Borrowers to the Mezzanine Borrowers and shall be applied by Mezzanine Borrowers to the obligations under the Mezzanine Loan Agreement. (e) Distributions to the Borrowers. Following the date in each month that Borrower has made all required deposits pursuant to Section 3.3(i) through (viii), to the extent that Excess Cash Flow is to be distributed to the Borrowers pursuant to Section 3.3(a)(xi) above, such funds shall be distributed to the Borrowers on each Business Day. (f) FF&E Reserve Account. Distributions from the FF&E Reserve Account will be made in accordance with Section 2.1(f). (g) Minimum Balance Sub-Account. Distributions from the Minimum Balance Sub-Account will be made in accordance with Section 2.1(g). SECTION 4.2 REQUESTS FOR WITHDRAWALS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT AND CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT. Agent shall disburse funds on deposit in the Hazardous Materials Remediation Reserve Sub-Account and the Capital Improvement Reserve Sub-Account within five (5) Business Days after written request made from time to time (but not more often than twice per calendar month) by the Borrowers in accordance with the terms and conditions of Section 6.7 of the Loan Agreement. SECTION 4.3 SOLE DOMINION AND CONTROL. The Borrowers and Manager acknowledge and agree that the Accounts are subject to the sole dominion, control and discretion of Lender, its authorized agents or designees, including Agent, subject to the terms hereof and the Loan Agreement. Neither the Borrowers nor Manager shall have any right of withdrawal with respect to any Account except, subject to the terms and conditions hereof and the Loan Agreement, the FF&E Reserve Account. Agent shall have the right and agrees to comply with the instructions of Lender with respect to the Accounts without the further consent of the Borrowers or Manager. Agent shall comply with all "entitlement orders" (as defined in Section 8-102(a)(8) of the UCC) and instructions originated by Lender without further consent by the Borrowers or any other Person. 17 V. PLEDGE OF ACCOUNTS SECTION 5.1 SECURITY FOR OBLIGATIONS. (a) To secure the full and punctual payment and performance of all Obligations of the Borrowers under the Loan Agreement, the Note, the Security Instruments, this Agreement and all other Loan Documents, the Borrowers hereby grant to Lender a first priority continuing security interest in and to the following property of the Borrowers, whether now owned or existing or hereafter acquired or arising and regardless of where located (all of the same, collectively, the "COLLATERAL"): (i) the Deposit Account, the Lock Box Account, each of the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds Account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in the Lock Box Account, each of the Sub-Accounts, any Loss Proceeds Account and the FF&E Reserve Account, including, without limitation, all deposits or wire transfers made to the Deposit Account, the Lock Box Account, each of the Sub-Accounts, the FF&E Reserve Account, and any Loss Proceeds Account; (ii) any and all amounts invested in Permitted Investments; (iii) 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 (iv) to the extent not covered by clauses (i), (ii) or (iii) above, all "proceeds" (as defined under the Uniform Commercial Code as in effect in the State of New York (the "UCC")) of any or all of the foregoing. (b) Lender and Agent, as agent for Lender, shall have with respect to the Collateral, in addition to the rights and remedies herein set forth, all of the rights and remedies available to a secured party under the UCC, as if such rights and remedies were fully set forth herein. SECTION 5.2 RIGHTS ON DEFAULT. Upon the occurrence and during the continuance of an Event of Default, Lender shall promptly notify Agent of such Event of Default and, without notice from Lender, (a) the Borrowers shall have no further right in respect of (including, without limitation, the right to instruct Lender or Agent to transfer from) the Accounts, (b) Lender may direct Agent to liquidate and transfer any amounts then invested in Permitted Investments to the Accounts or reinvest such amounts in other Permitted Investments as Lender may reasonably determine is necessary to perfect or protect any security interest granted or purported to be granted hereby or to enable Agent, as agent for Lender, or Lender to exercise and enforce Lender's rights and remedies hereunder with respect to any Collateral, and (c) Lender may apply any Collateral to any Obligations in such order of priority as Lender may determine. The proceeds of any disposition of the Collateral, or any part thereof, may be applied by Lender to the payment of the Obligations in such priority and proportions as Lender in its discretion shall deem proper. SECTION 5.3 FINANCING STATEMENT; FURTHER ASSURANCES. Simultaneously herewith, the Borrowers shall deliver to Lender for filing a financing statement or statements in 18 connection with the Collateral in the form reasonably required by Lender to properly perfect Lender's security interest therein to the extent a security interest in the Collateral may also be perfected by filing. The Borrowers agree that at any time and from time to time, at the expense of the Borrowers, the Borrowers will promptly execute and deliver all further instruments and documents, and take all further actions, that may be reasonably necessary, or that Agent or Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby (including, without limitation, any security interest in and to any Permitted Investments) or to enable Agent or Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. In the event of any change in name, identity or structure of any Borrower, such Borrower shall notify Lender thereof and promptly after Lender's reasonable request shall file and record, or deliver to Lender, such UCC financing statements (if any) as are necessary to maintain the priority of Lender's lien upon and security interest in the Collateral, and shall pay all expenses and fees in connection with the filing and recording thereof. If Lender shall require the filing or recording of additional UCC financing or continuation statements, the Borrowers shall, promptly after request, execute, if necessary, file and record such UCC financing or continuation statements as Lender shall deem reasonably necessary, and shall pay all reasonable expenses and fees in connection with the filing and recording thereof. SECTION 5.4 TERMINATION OF AGREEMENT. This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until payment in full of the Obligations. Upon payment and performance in full of the Obligations, this Agreement shall terminate and the Borrowers shall be entitled to the return, at their expense, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof, and Agent and/or Lender shall execute such instruments and documents as may be reasonably requested by the Borrowers to evidence such termination and the release of the lien hereof including, without limitation, letters to Credit Card Companies, as applicable, prepared by the Borrowers and reasonably acceptable to Lender rescinding the instructions set forth in the Credit Card Receivables Payment Direction Letter and UCC-3 termination statements. VI. RIGHTS AND DUTIES OF LENDER AND AGENT SECTION 6.1 REASONABLE CARE. Beyond the exercise of reasonable care in the custody thereof or as otherwise expressly provided herein, neither Agent nor Lender shall have any duty as to any 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. Agent and Lender each shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which Agent or Lender accords its own property, it being understood that Agent and/or Lender shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in value thereof, by reason of the act or omission of Agent or Lender, its Affiliates, agents, employees or bailees, except to the extent that such loss or damage results from such Person's gross negligence or willful misconduct, provided that nothing in this Article VI shall be deemed to relieve Agent from the duties and standard of care which, as a commercial bank, it generally owes to depositors. Neither Lender nor Agent shall have any liability for any loss resulting from the investment of funds in Permitted Investments in accordance with the terms and conditions of this Agreement. 19 SECTION 6.2 INDEMNITY. Agent, in its capacity as agent hereunder, shall be responsible for the performance only of such duties as are specifically set forth herein, and no duty shall be implied from any provision hereof. Agent shall not be under any obligation or duty to perform any act which would involve it in expense or liability or to institute or defend any suit in respect hereof, or to advance any of its own monies. The Borrowers shall indemnify and hold Agent and Lender, their respective employees, officers, directors and agents harmless from and against any loss, liability, cost or damage (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Agent or Lender in connection with the transactions contemplated hereby, except to the extent that such loss or damage results from such Person's gross negligence or willful misconduct. The foregoing indemnity shall survive the termination of this Agreement and the resignation and removal of Agent. SECTION 6.3 RELIANCE. 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 to be genuine, and it may be assumed that any person purporting to act on behalf of any Person giving any of the foregoing in connection with the provisions hereof has been duly authorized to do so. Agent may consult with legal counsel, and the advice or 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. Agent shall not be liable for any act or omission done or omitted to be done by Agent in reliance upon any instruction, direction or certification received by Agent and without gross negligence or willful or reckless misconduct. Agent shall be entitled to execute any of the powers hereunder or perform any duties hereunder either directly or through agents or attorneys; provided, however, that the execution of such powers by any such agents or attorneys shall not diminish, or relieve Agent for, responsibility therefor to the same degree as if Agent itself had executed such powers. SECTION 6.4 RESIGNATION OF AGENT. (a) Agent shall have the right to resign as Agent hereunder upon sixty (60) days' prior written notice to the Borrowers and Lender, and in the event of such resignation, the Borrowers shall appoint a successor Agent which must be an Eligible Bank. No such resignation by Agent shall become effective until a successor Agent shall have accepted such appointment and executed an instrument by which it shall have assumed all of the rights and obligations of Agent hereunder. If no such successor Agent is appointed within sixty (60) days after receipt of the resigning Agent's notice of resignation, the resigning Agent may petition a court for the appointment of a successor Agent. (b) In connection with any resignation by Agent, (i) the resigning Agent shall, (A) duly assign, transfer and deliver to the successor Agent this Agreement and all cash and Permitted Investments held by it hereunder, (B) deliver such financing statements and execute and deliver such other instruments prepared by the Borrowers and reasonably approved by Lender or prepared by Lender as may be reasonably necessary to assign to the successor Agent, as agent for Lender, any security interest in the Collateral existing in favor of the retiring Agent hereunder and to otherwise give effect to such succession and (C) take such other actions as may be reasonably required by Lender or the successor Agent in connection with the foregoing and (ii) the successor Agent shall establish in Lender's name, as secured party, cash collateral accounts, which shall become the Accounts for purposes of this Agreement upon the succession 20 of such Agent, and which Accounts shall also be "securities accounts" within the meaning of the UCC. (c) Lender at its sole discretion shall have the right, upon thirty (30) days notice to Agent, to substitute Agent with a successor Agent that satisfies the requirements of an Eligible Bank or to have one or more of the Accounts held by another Eligible Bank, provided that such successor Agent shall perform the duties of Agent pursuant to the terms of this Agreement. SECTION 6.5 LENDER APPOINTED ATTORNEY-IN-FACT. The Borrowers hereby irrevocably constitute and appoint Lender as the Borrowers' true and lawful attorney-in-fact, coupled with an interest and with full power of substitution, to exercise and enforce every right, power, remedy, option and privilege of the Borrowers with respect to the Collateral, and do in the name, place and stead of the Borrowers, all such acts, things and deeds for and on behalf of and in the name of the Borrowers, which the Borrowers are required to do hereunder or under the other Loan Documents or which Agent or Lender may reasonably deem necessary to more fully vest in Lender the rights and remedies provided for herein and to accomplish the purposes of this Agreement including, without limitation, the filing of any UCC financing statements or continuation statements in appropriate public filing offices on behalf of the Borrowers, in any of the foregoing cases, upon the Borrowers' failure to take any of the foregoing actions within ten (10) days after notice from Lender. The foregoing powers of attorney are irrevocable and coupled with an interest. If any Borrower fails to perform any agreement herein contained and such failure shall continue for ten (10) days after notice of such failure is given to such Borrower, Lender may perform or cause performance of any such agreement, and any reasonable expenses of Lender and Agent in connection therewith shall be paid by the Borrowers. SECTION 6.6 ACKNOWLEDGMENT OF LIEN/OFFSET RIGHTS. Agent hereby acknowledges and agrees with respect to the Accounts that (a) the Accounts shall be held by Agent in the names set forth herein, (b) all funds held in the Accounts shall be held for the benefit of Lender, (c) the Borrowers have granted to Lender a first priority security interest in the Collateral, (d) Agent shall not disburse any funds from the Accounts except as provided herein, and (e) Agent shall invest and reinvest any balance of the Accounts in Permitted Investments in accordance with Section 2.5 hereof. Agent hereby waives any right of offset, banker's lien or similar rights against, or any assignment, security interest or other interest in, the Collateral. SECTION 6.7 REPORTING PROCEDURES. Agent shall provide the Borrowers and Lender with a record of all checks and any other items deposited to the Lock Box Account or processed for collection. Agent shall send a daily credit advice to the Borrowers and Manager, which credit advice shall specify the amount of each receipt deposited into each Account on such date. Agent shall send a monthly report to the Borrowers, Manager and Lender, which monthly report shall specify the credits and charges to the Accounts for the previous calendar month. Agent shall, at the request of Lender, establish Lender and its designated Servicer, and the Borrowers, as users of Agent's electronic data transfer system in accordance with Agent's standard procedures; provided that, the Borrowers' access shall be limited to information services and shall under no circumstances provide the Borrowers with transaction rights in any such account. Upon request of Lender or its designated 21 Servicer, (i) Agent shall send to Lender or its designated Servicer, as applicable, either (x) copies of the daily credit advices and any other advices or reports furnished by Agent to the Borrowers and/or Manager hereunder or (y) information on Account balances, to the extent said balances in the Accounts have changed from the previous report, the aggregate amount of withdrawals from the Accounts and other similar information via the electronic data transfer system or facsimile transmission on a daily basis, and (ii) Agent shall advise Lender or its designated Servicer, as applicable, of the amount of available funds in the Accounts and shall deliver to Lender or its designated Servicer copies of all statements and other information concerning the Accounts, to the extent that the balances in the Accounts have changed from the previous report, as Lender or its designated Servicer shall reasonably request. In the event Agent shall resign as Agent hereunder, Agent shall provide the Borrowers with a final written accounting, including closing statements, with respect to the Accounts within thirty (30) days of resignation. VII. REMEDIES SECTION 7.1 REMEDIES. Upon the occurrence and during the continuance of an Event of Default, Lender or Agent at the direction of Lender, as agent for Lender, may: (a) without notice to the Borrowers, 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 Collateral against the Obligations or any part thereof, including, without limitation, reasonable costs and expenses set forth in Section 8.4 hereof; (b) in its 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 and/or under any other applicable law or in equity; and (c) demand, collect, take possession of, receive, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral (or any portion thereof) as Lender may determine in its sole discretion. SECTION 7.2 WAIVER. The Borrowers hereby expressly waive, to the fullest extent permitted by law, presentment, demand, protest or any notice of any kind in connection with this Agreement or the Collateral. The Borrowers acknowledge and agree that ten (10) days' prior written notice of the time and place of any public sale of the Collateral or any other intended disposition thereof shall be reasonable and sufficient notice to the Borrowers within the meaning of the UCC. VIII. MISCELLANEOUS SECTION 8.1 TRANSFERS AND OTHER LIENS. Each Borrower agrees that it will not (i) sell or otherwise dispose of any of the Collateral or (ii) create or permit to exist any Lien upon or with respect to all or any of the Collateral, except for the Lien granted under this Agreement. SECTION 8.2 LENDER'S RIGHT TO PERFORM BORROWER'S OBLIGATIONS; NO LIABILITY OF LENDER. If any Borrower fails to perform any of the covenants or obligations contained herein, and such failure shall continue for a period ten (10) Business Days after such Borrower's receipt of written notice thereof from Lender, Lender may itself perform, or cause 22 performance of, such covenants or obligations, and the reasonable expenses of Lender incurred in connection therewith shall be payable by the Borrowers to Lender. Notwithstanding Lender's right to perform certain obligations of the Borrowers, it is acknowledged and agreed that the Borrowers retain control of the Property and operation thereof and notwithstanding anything contained herein or Agent's or Lender's exercise of any of its rights or remedies hereunder, under the Loan Documents or otherwise at law or in equity, neither Agent nor Lender shall be deemed to be a mortgagee-in-possession nor shall Lender be subject to any liability with respect to the Property or otherwise based upon any claim of lender liability except as a result of Lender's gross negligence or willful misconduct. SECTION 8.3 NO WAIVER. The rights and remedies provided in this Agreement and the other Loan Documents are cumulative and may be exercised independently or concurrently, and are not exclusive of any other right or remedy provided at law or in equity. No failure to exercise or delay by Agent or Lender in exercising any right or remedy hereunder or under the Loan Documents shall impair or prohibit the exercise of any such rights or remedies in the future or be deemed to constitute a waiver or limitation of any such right or remedy or acquiescence therein. Every right and remedy granted to Agent and/or Lender hereunder or by law may be exercised by Agent and/or Lender at any time and from time to time, and as often as Agent and/or Lender may deem it expedient. Any and all of Agent's and/or Lender's rights with respect to the lien and security interest granted hereunder shall continue unimpaired, and the Borrowers shall be and remain obligated in accordance with the terms hereof, notwithstanding (a) any proceeding of the Borrowers under the Federal Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or statutes of any state, (b) the release or substitution of Collateral at any time, or of any rights or interests therein or (c) any delay, extension of time, renewal, compromise or other indulgence granted by the Agent and/or Lender in the event of any default, with respect to the Collateral or otherwise hereunder. No delay or extension of time by Agent and/or Lender in exercising any power of sale, option or other right or remedy hereunder, and no notice or demand which may be given to or made upon the Borrowers by Agent and/or Lender, shall constitute a waiver thereof, or limit, impair or prejudice Agent's and/or Lender's right, without notice or demand, to take any action against the Borrowers or to exercise any other power of sale, option or any other right or remedy. SECTION 8.4 EXPENSES. Agent shall deduct from the Lock Box Account for its own account the monthly Servicing Fee for which the Borrowers are responsible pursuant to Section 2.11 of the Loan Agreement prior to making any disbursements pursuant to Section 3.3(a)(ii) hereof, and, for so long as the Mezzanine Loan is outstanding, Agent shall deduct from the Lock Box Account the monthly Mezzanine Servicing Fee for which the Mezzanine Borrower is responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement to be remitted to the Mezzanine Servicer prior to making any disbursements pursuant to Section 3.3(a)(viii) hereof. The Collateral shall secure, and the Borrowers shall pay to Agent and Lender within five (5) Business Days of the written demand therefor, from time to time, all reasonable costs and expenses (including, but not limited to, reasonable attorneys' fees and disbursements, and transfer, recording and filing fees, taxes and other charges) of, or incidental to, the creation or perfection of any lien or security interest granted or intended to be granted hereby, the custody, care, sale, transfer, administration, collection of or realization on the Collateral, or in any way relating to the enforcement, protection or preservation of the rights or remedies of Agent and/or Lender under this Agreement, the Loan Agreement, the Note, the Security Instruments, or the 23 other Loan Documents. Standard and customary fees and charges associated with the Accounts shall be included on a monthly consolidated account analysis statement which Agent shall submit to the Borrowers for the Borrowers' payment. This statement shall set forth the fees and charges payable for such month, including, but not limited to reasonable fees and reasonable expenses incurred in connection with this Agreement and be accompanied by reasonably detailed supporting documentation. Agent shall be entitled to charge the Accounts for such reasonable fees and expenses as indicated by the analysis statement. SECTION 8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire and final agreement between the parties with respect to the subject matter hereof and may not be changed, terminated or otherwise varied, except by a writing duly executed by the parties. SECTION 8.6 NO WAIVER. No waiver of any term or condition of this Agreement, whether by delay, omission or otherwise, shall be effective unless in writing and signed by the party sought to be charged, and then such waiver shall be effective only in the specific instance and for the purpose for which given. SECTION 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors and permitted assigns. SECTION 8.8 NOTICES. All notices, demands, requests, consents, approvals and other communications (any of the foregoing, a "NOTICE") required, permitted, or desired to be given hereunder to the Borrowers, Lender or Manager shall be in writing and delivered to such parties at the addresses and in the manner provided in Section 14.5 of the Loan Agreement. Notices to the Agent shall be addressed as follows: Wachovia Bank, National Association 8739 Research Drive URP4 Charlotte, North Carolina 28288-1075 Attention: David Tucker Facsimile No.: (704) 593-7737 SECTION 8.9 CAPTIONS. All captions in this Agreement are included herein for convenience of reference only and shall not constitute part of this Agreement for any other purpose. SECTION 8.10 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in all respects in accordance with the laws of the State of New York without regard to conflicts of law principles of such State. SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any number of counterparts. SECTION 8.12 EXCULPATION. The provisions of Article XII of the Loan Agreement are hereby incorporated by reference into this Agreement as to the liability of the Borrowers hereunder to the same extent and with the same force as if fully set forth herein, and shall apply equally to Manager to the same extent and with the same force as if fully set forth 24 herein, provided, however, that notwithstanding the foregoing, there shall be personal liability to the Borrowers and Manager for the payment to Lender of all losses, damages, costs and expenses suffered or incurred by Lender and arising from the failure of the Borrowers and/or Manager to comply with the provisions of Section 2.2 of this Agreement. SECTION 8.13 LOAN AGREEMENT. If any inconsistency exists between the terms of this Agreement and the terms of the Loan Agreement, the terms of the Loan Agreement shall prevail. 25 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: ________________________________ Name: Title: AGENT: WACHOVIA BANK, NATIONAL ASSOCIATION By: _________________________________ Name: Title: MANAGER: LODGIAN MANAGEMENT CORP. By: __________________________________ Name: Title: [SIGNATURES CONTINUE ON THE FOLLOWING PAGE] A-26 BORROWERS: [LODGIAN ENTITIES] By: __________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above A-27 EX-10.37 34 g87458a3exv10w37.txt EX-10.37 FORM OF ENVIRONMENTAL INDEMNITY EXHIBIT 10.37 FORM OF ENVIRONMENTAL INDEMNITY This ENVIRONMENTAL INDEMNITY, made as of June __, 2004 (this "AGREEMENT"), by the Borrowers named on the signature pages hereto, each having an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "BORROWER" and collectively, "BORROWERS"), by LODGIAN, INC., a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 ("OBLIGOR"), jointly and severally (Borrowers and Obligor being referred to herein collectively as "INDEMNITORS" and individually as an "INDEMNITOR"), in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an address at 4 World Financial Center, New York, New York, 10080 (together with its successors, transferees and assigns, "LENDER"). WITNESSETH: WHEREAS: A. Borrowers are the owners of fee simple or leasehold title, as applicable, to those certain parcels of real property (collectively, the "PREMISES") described in EXHIBIT A attached hereto, and the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and other improvements now or hereafter located thereon (the "IMPROVEMENTS"; together with the Premises, collectively, the "PROPERTY"). B. Borrowers and Lender have entered into a certain Loan and Security Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has agreed to make a loan to Borrowers as more particularly described below. Capitalized terms used herein and not herein defined shall have the meanings assigned to such terms in the Loan Agreement. C. Pursuant to the Loan Agreement, Lender is making a Loan to Borrower in the aggregate original principal amount of up to ______________________________________ (the "LOAN"). The Loan is evidenced by those certain Promissory Notes, each dated as of the date hereof (as amended, modified, restated or split from time to time, collectively, the "NOTE") and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as of the date hereof (as amended, modified or restated from time to time, collectively, the "SECURITY INSTRUMENT"), with respect to the Property. D. As a condition to Lender's making the Loan, Lender is requiring that Indemnitors indemnify the Indemnified Parties (as hereinafter defined) with respect to environmental conditions or liabilities on, in, under or affecting the Property as hereinafter set forth. E. Obligor holds a direct and/or indirect ownership interest in Borrower and will derive substantial economic benefit from Lender making the Loan to Borrower. NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitors hereby covenant and agree for the benefit of the Indemnified Parties as follows: 1. DEFINITIONS. The following terms shall have the following meanings when used herein: "COSTS" shall mean, collectively, all liens, damages, losses, fines, liabilities (including, without limitation, any strict liability), obligations, settlements, penalties, assessments, citations, directives, claims, litigations, demands, response costs (including, without limitation, investigation, removal, remediation, mitigation, containment, post-closure and monitoring costs), defenses, judgments, suits, proceedings, costs, laboratory fees, disbursements and expenses of any kind or nature whatsoever (including, without limitation, reasonable attorneys', consultants' and experts' fees and disbursements). Costs shall also include any future reduction in sales price of, or unmarketability and consequent inability of Lender to foreclose on or otherwise sell, the Property and the lost opportunity costs resulting from the inability of Lender to sell or dispose of its interest in the Property, all as a consequence of any event described in paragraph 2 herein to the extent that such loss in value results in Lender receiving in any foreclosure, or deed in lieu thereof, of the Properties less than the full amount of the Obligations by reason of any matter set forth in Section 2. "ENVIRONMENTAL LAWS" shall have the meaning given to such term in the Loan Agreement. "HAZARDOUS MATERIAL" shall have the meaning given to such term in the Loan Agreement. "INDEMNIFIED PARTY" shall mean Lender, any subsequent holder of the Note and each of their officers, directors, shareholders, principals, partners, representatives, employees, agents, successors and assigns. "TENANTS" shall mean all tenants, lessees, subtenants and other occupants of the Property. 2. INDEMNITY. (a) Except as provided in Section 2(b) below, Indemnitors hereby assume liability for, and agree to pay, protect, defend, indemnify and save all Indemnified Parties harmless from and against any and all Costs which may be imposed upon, incurred by or asserted or awarded against any of the Indemnified Parties or the Property, and arising directly or indirectly from: (i) the violation or alleged violation of any Environmental Laws relating to or affecting the Property, whether or not caused by or within the control of Indemnitors; (ii) the actual or alleged presence, release or threat of release of, or exposure to any Hazardous Material on, in, under or affecting all or any portion of the Property or any surrounding areas, regardless of whether or not caused by or within the control of Indemnitors; (iii) any actual or alleged personal injury or property damage arising out of or related to Hazardous Material on the Property; (iv) any acts or omissions that exacerbate an existing condition at the Property and give 2 rise to liability under any Environmental Law; (v) the failure by Indemnitors to comply fully with the terms and conditions of this Agreement in all material respects; (vi) a material breach of any representation or warranty contained in this Agreement; (vii) the enforcement of this Agreement; or (viii) assessment, investigation, containment, monitoring, remediation and/or removal of any and all Hazardous Material from the Property or any surrounding areas, and costs incurred to comply with Environmental Laws in connection with the Property or any surrounding areas. (b) Notwithstanding any provision hereof to the contrary, Indemnitors shall have no liability under this Agreement with respect to Costs relating to Hazardous Material which is initially placed on, in or under the Property after the earlier of (i) Lender or any receiver appointed at the request of Lender taking actual possession and control of the Property following an Event of Default, and (ii) Lender completing a foreclosure or other sale pursuant to which Lender takes title to the Property. Indemnitors shall have no liability under this Agreement to any Indemnified Party with respect to Costs which result from such Indemnified Party's willful misconduct or gross negligence. In addition to the foregoing, Obligor shall have no liability pursuant to this Agreement with respect to costs relating to Hazardous Material which is initially placed on, in or under the Property after the transfer of the Mezzanine Borrowers' equity interest in the applicable Borrower to the Mezzanine Lender or its designee by reason of, or in lieu of, enforcement of the Mezzanine Lender's rights under the Mezzanine Loan Documents. (c) Indemnitors' obligation to defend the Indemnified Parties hereunder shall include defense at both the trial and appellate levels and shall be with attorneys, consultants and experts selected by Indemnitor and subject to the reasonable approval of the Indemnified Parties. 3. REPRESENTATIONS REGARDING HAZARDOUS MATERIAL. Indemnitors hereby represent and warrant to agree with the Indemnified Parties as follows: (a) Indemnitors, the Property and all businesses or operations conducted thereon are in compliance with all applicable Environmental Laws in all material respects; (b) Except as previously disclosed to Lender in the Phase I Reports, no Hazardous Material has been disposed of on or released (as used herein, "RELEASE" shall have the meaning provided in 42 U.S.C. ss. 9601(22)) at, onto oR under the Property by any Indemnitor or, to Indemnitors' knowledge, by any other Person that has not been remediated in accordance with applicable Environmental Laws or that is present at or under the Property at a level in excess of that allowed by applicable Environmental Laws; (c) Except as previously disclosed to Lender in the Phase I Reports, no Hazardous Material is located in, on or under, or has been handled, generated, stored, processed or discharged from the Property in violation of applicable Environmental Laws by any Indemnitor or, to the Indemnitors' knowledge, by any other Person, except for those materials used by Borrowers, Manager or tenants of the Property ("TENANTS") in the ordinary course of their business in material compliance with all applicable Environmental Laws and not reasonably expected to give rise to liability under applicable Environmental Laws; 3 (d) Indemnitors have received no written notice that the Property is subject to any private or governmental lien or judicial or administrative notice or action relating to or arising under applicable Environmental Laws; (e) Except as previously disclosed to Lender in the Phase I Reports, there are no underground storage receptacles or surface impoundments, landfills or dumps for Hazardous Material on the Property; (f) Indemnitors have received no notice of, and to Indemnitors' knowledge there exists no investigation, action, proceeding or claim by any agency, authority or unit of government or by any third party asserted or threatened which could result in any liability, penalty, sanction or judgment under any applicable Environmental Laws with respect to any condition, use or operation of the Property, nor do Indemnitors know of any basis for any of the foregoing; (g) Except as previously disclosed to Lender in the Phase I Reports or the Property Condition Reports, there is no asbestos-containing material or lead-based paint at the Property nor are there any polychlorinated biphenyls ("PCB'S"), endangered species' habitats or wetlands at the Property; (h) Indemnitors have received no notice that, and to Indemnitors' knowledge, there has been no claim by any party that, any use, operation or condition of the Property has caused any nuisance or any other liability or adverse condition on any other property nor do Indemnitors know of any basis for such a claim relating to Hazardous Material; (i) Except as previously disclosed in writing to Lender, Indemnitor has not knowingly waived or released any Person's liability with regard to Hazardous Material in, on, under or around the Property nor retained or assumed, contractually or otherwise, any other Person's liability relative to Hazardous Material or any claim, action or proceeding relating thereto; and (j) Except as previously disclosed to Lender in the Phase I Reports, neither the Property nor any other property owned by any Borrower (i) is included or, to Indemnitor's knowledge, proposed for inclusion on the National Priorities List issued pursuant to CERCLA (hereinafter defined) by the United States Environmental Protection Agency (the "EPA") or on any of the inventories of other potential "Problem" sites issued by the EPA or other applicable Governmental Authority nor (ii) otherwise identified by the EPA as a potential CERCLA site or included or, to Indemnitor's knowledge, proposed for inclusion on any such list or inventory issued pursuant to any other applicable Environmental Law or issued by any other Governmental Authority. 4. COVENANTS OF INDEMNITORS. (a) So long as any Borrower or Affiliate thereof owns or is in possession of the Property, Indemnitors shall, and shall use commercially reasonable efforts to cause all property managers, agents, employees and Tenants to: (i) comply with all Environmental Laws applicable to the Property, (ii) keep or cause the Property to be kept free from Hazardous Material (except those materials used by Borrower, Manager or Tenants in the ordinary course of 4 their business, in compliance with applicable Environmental Laws), (iii) not install or use, or permit the installation or use of, any underground receptacles containing Hazardous Material on the Property, (iv) expressly prohibit the use, generation, handling, storage, production, release, processing and disposal of Hazardous Material by all future Tenants and Managers (except those substances used by such Tenants or Managers in the ordinary course of their business in compliance with all applicable Environmental Laws) and use all commercially reasonable efforts to prevent existing Tenants, Managers and other permitted occupants of the Property from taking any such actions, (v) in any event, not install on the Property or permit to be installed on the Property PCB's, urea formaldehyde insulation, asbestos or any substance containing asbestos or any material containing lead-based paint, (vi) prohibit the disposal and/or release of any Hazardous Material in violation of applicable Environmental Laws on, at or beneath, the Property, (vii) operate and maintain, or cause to be operated and maintained, the HVAC systems at the Property in accordance with standards for operation of similar systems located at properties that are similar (including, without limitation, the manner, class of operation, and/or Franchisor standards) to the Property, (viii) cause the Required Capital Improvements which relate to mold to be completed in accordance with the standards and time frames set forth in Section 6.5 of the Loan Agreement, and (ix) not permit any Lien imposed pursuant to any applicable Environmental Law to be imposed or, subject to Section 4(c) below, to remain on the Property. (b) Indemnitors shall promptly notify Lender in writing should any Indemnitor become aware of (i) any release, disposal or discharge of Hazardous Material in violation of applicable Environmental Laws, or other material actual environmental problem or liability, with respect to or affecting the Property, (ii) any lien, action or notice of violation or potential liability affecting the Property or Borrowers and arising under any applicable Environmental Law, (iii) the institution of any investigation, inquiry or proceeding concerning Borrowers or the Property pursuant to any applicable Environmental Law or otherwise relating to Hazardous Material affecting the Property, (iv) the discovery of any occurrence, condition or state of facts which would render any representation or warranty contained in this Agreement incorrect or incomplete in any material respect if made at the time of such discovery, (v) any remedial action taken by Indemnitors or, if actually known by Indemnitor, any other Person in response to any Hazardous Material on, under or at the Property, (vi) the discovery by Indemnitors of any occurrence or condition on any real property adjoining or in the vicinity of the Property that would reasonably be expected to cause the Property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use thereof under any applicable Environmental Laws, and (vii) any request for information from any governmental agency that indicates such agency is investigating whether Indemnitors may be potentially responsible for a release, disposal or discharge of Hazardous Material. Borrowers shall promptly notify Lender of any proposed action to be taken pertaining in any way to the Property to commence any operations that could reasonably be expected to subject any Borrower or the Property to additional obligations or liabilities under applicable Environmental Laws, including laws, rules and regulations requiring additional or amended environmental permits or licenses which could reasonably be expected to subject any Borrower to any material obligations or requirements under any applicable Environmental Laws. Borrowers shall, at their own expense, provide copies of such documents or information as Lender may reasonably request in relation to any matters disclosed pursuant to this Section. Indemnitor shall promptly transmit to Lender 5 copies of any and all material citations, orders, notices and all other communications sent or received by any Borrower relating to any of the foregoing provisions of this paragraph. (c) Regardless of the source of contamination, Indemnitors shall, at their own expense, promptly take or cause to be taken and diligently prosecute all actions required by applicable Environmental Laws for the clean-up of the Property and other property affected by contamination in, on, under or at the Property, including, without limitation, all investigative, monitoring, removal, containment and remedial actions in accordance with and required by all applicable Environmental Laws (and in all events in a manner satisfactory to the applicable Governmental Authority and reasonably satisfactory to Lender). Indemnitor shall further pay or cause to be paid, at no expense to any Indemnified Party, all clean-up, administrative and enforcement costs of applicable governmental agencies which may be asserted against the Property. In the event Indemnitors fail to do so, or following an Event of Default, Lender may, at its sole election, cause the Property or other affected property to be freed from any Hazardous Material located thereon at a level in excess of that allowed by applicable Environmental Laws, or otherwise be brought into compliance with applicable Environmental Laws, and any cost incurred in connection therewith shall be included in Costs. Borrowers hereby grant to Lender access to the Property and an irrevocable license to remove any Hazardous Material and to do all things necessary to bring the Property into compliance in all material respects with applicable Environmental Laws. However, Lender shall have no obligation to inspect or clean up any Hazardous Material. Lender shall not be deemed a generator of any Hazardous Material removed from the Property. (d) Upon the request of Lender, at any time (i) after the occurrence of an Event of Default or (ii) Lender has reasonable grounds to believe that (A) Hazardous Material is or has been released, stored or disposed of, or existing, on or around the Property at a level in excess of that allowed by applicable Environmental Laws or (B) the Property may be in material violation of applicable Environmental Laws, Indemnitors shall cause an investigation or audit of the Property to be undertaken by a hydrogeologist or environmental engineer or other appropriate consultant reasonably approved by Lender to determine whether any Hazardous Material is located on, at, beneath, or near the Property and/or whether the Property is in compliance in all material respects with Environmental Laws. The scope of any investigation or audit shall be approved by Lender in Lender's reasonable discretion. If Indemnitors fail to provide reports of such investigation or audit within thirty (30) days after such request, Lender may, but shall have no obligation to, order the same. Borrowers hereby grant to Lender and Lender's contractors access to the Property and an irrevocable license to undertake such investigation or audit provided that such investigation is conducted in a manner so as not to unreasonably affect Borrowers' operations at the Property. All reasonable costs of any such investigation or audit shall be included in Costs and shall be paid by Indemnitors in accordance with the terms of paragraph 5(c) hereof. (e) In the event that a Lien is filed against the Property pursuant to any applicable Environmental Law, Indemnitors shall, within ten (10) Business Days from the date that any Borrower receives notice of such Lien (but in any event ten (10) days prior to the date of any contemplated sale pursuant to such Lien), either (i) pay the claim and remove the Lien from the Property, or (ii) furnish, at Indemnitor's option, (A) a bond satisfactory to Lender in the amount of the claim out of which the Lien arises, (B) a cash deposit in the amount of the claim 6 out of which the Lien arises, (C) other security reasonably satisfactory to Lender in an amount sufficient to discharge the claim out of which the Lien arises, or (D) security in a form and amount satisfactory to the applicable Governmental Authority pursuant to a valid consent or other order, and Indemnitors shall promptly arrange for the removal of the Lien. Notwithstanding the foregoing, Indemnitors shall prevent a sale pursuant to any Lien. (f) The amount of Indemnitors' liability hereunder is unrelated to the amount of the Loan and any failure of the Loan to be repaid in full. The enforcement of this Agreement by the Indemnified Parties shall not be construed by Indemnitors as an indirect attempt to recover any Loan deficiency or loss relating to the failure of the Loan to be repaid in full. Indemnitors acknowledge that they may have liability hereunder even if the Loan is repaid in full by reason of a full credit bid at any foreclosure sale under the Security Instrument, and that the amount of Indemnitor's liability hereunder could exceed the entire amount paid by Borrower for the Property. 5. INDEMNIFICATION PROCEDURES. (a) If any action, proceeding, litigation or claim shall be brought or asserted against any Indemnified Party for any matter which the Indemnified Parties are indemnified hereunder (each, a "CLAIM"), such Indemnified Party shall notify Indemnitors in writing thereof and Indemnitors shall promptly assume the defense thereof, including, without limitation, the employment of counsel selected by the Indemnitor and approved by the Indemnified Party, such approval not to be unreasonably withheld, conditioned or delayed, and the negotiation of any settlement. Any failure of such Indemnified Party to notify Indemnitors of such matter shall not impair or reduce the obligations of Indemnitors hereunder. The Indemnified Parties shall have the right, at the reasonable expense of Indemnitors (which expense shall be included in Costs), if an Indemnified Party has reason to believe that its interests are not being adequately represented or diverge from other interests being represented by such counsel, to employ separate counsel in any such action and to participate in the defense thereof at such Indemnitor's sole cost and expense. In the event Indemnitors shall fail to discharge or undertake to defend any Indemnified Party against any Claim, such failure shall constitute an Event of Default and the Indemnified Party may, at its sole election, defend or settle such Claim. The liability of Indemnitors to such Indemnified Party hereunder for any settlement by such Indemnified Party shall be conclusively established by any settlement entered into by the Indemnified Party in good faith. The amount of Indemnitors' liability hereunder shall include the settlement consideration and all other Costs, which shall be paid by the Indemnitors as hereinafter provided. Costs incurred in connection with a Claim shall be reimbursed by Indemnitors without the requirement of waiting for the ultimate outcome of such Claim. (b) Indemnitors shall not, without the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld, conditioned or delayed, settle or compromise any Claim in any manner or consent to the entry of any judgment (i) in which the claimant or plaintiff does not unconditionally release the Indemnified Party from all liability and obligations in respect of such Claim and obtain a dismissal of such Claim with prejudice; or (ii) that may adversely affect the Indemnified Party (as determined in the reasonable discretion of such Indemnified Party) or obligate the Indemnified Party to pay any sum or perform any obligation. 7 (c) Indemnitors shall pay to the applicable Indemnified Party any and all Costs within fifteen (15) days after written notice from such Indemnified Party. All Costs shall be immediately reimbursable to the Indemnified Party or, upon request of the Indemnified Party, paid directly to the party sending a bill or other statement to the Indemnified Party. Any Costs not paid within the aforementioned fifteen (15) day period shall bear interest at the Default Rate from the date incurred until the date paid in full. 6. REINSTATEMENT OF OBLIGATIONS. If at any time all or any part of any payment received by an Indemnified Party pursuant to this Agreement shall be rescinded or returned for any reason whatsoever, including, without limitation, the insolvency, bankruptcy or reorganization of any Indemnitor, then the obligations of Indemnitors hereunder shall, to the extent of such rescinded or returned payment, be reinstated and shall continue as though such previous payment received by the Indemnified Party had never occurred. 7. WAIVERS BY INDEMNITORS. To the extent permitted by law, Indemnitors hereby waive and agree not to assert or take advantage of: (a) Any right to require an Indemnified Party (i) to proceed against Borrower or any other Person, (ii) to proceed against or exhaust any security held by any Indemnified Party at any time or (iii) to pursue any other remedy in such Indemnified Party's power or under any other agreement, in any case, before proceeding against Indemnitors hereunder; (b) Any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or the failure of an Indemnified Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person; (c) Demand, presentment for payment, protest and notice of protest, demand, dishonor and nonpayment and all other notices except as expressly required in the Loan Documents, including, without limitation, notice of new or additional indebtedness or obligations or of any action or non-action on the part of Borrower, Lender, any endorser or creditor of Borrower or of Indemnitor or of any other Person whomsoever under this Agreement or any other Loan Document; (d) Any defense based upon an election of remedies, splitting a cause of action or merger of judgments by any Indemnified Party; (e) Any right or claim of right to cause a marshaling of the assets of Indemnitors; (f) Any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Agreement; (g) Any duty on the part of any Indemnified Party to disclose to Indemnitors any facts such Indemnified Party may now or hereafter know about Borrower or the Property, regardless of whether such Indemnified Party (i) has reason to believe that any such facts materially increase the risk beyond that which Indemnitors intend to assume, (ii) has reason to believe that such facts are unknown to Indemnitors or (iii) has a reasonable opportunity to 8 communicate such facts to Indemnitors, it being understood and agreed that Indemnitors are fully responsible for being informed of the financial condition of Borrower, the condition of the Property and of all other circumstances bearing on the risk that liability may be incurred by Indemnitors hereunder; (h) Any invalidity, irregularity or unenforceability, in whole or in part, of any one or more of the Loan Documents; (i) Any lack of commercial reasonableness in dealing with the collateral for the Loan; (j) Any deficiencies in the collateral for the Loan or any deficiency in the ability of Lender to collect or to obtain performance from any Persons now or hereafter liable for the payment and performance of any obligation hereby guaranteed; (k) An assertion or claim that the automatic stay provided by 11 U.S.C. ss. 362 (arising upon the voluntary or involuntary bankruptcy proceeding of Borrower) or any other stay provided under any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any of its rights, whether now existing or hereafter acquired, which Lender may have against any Indemnitor or the collateral for the Loan; (l) Any modifications of the Loan Documents or any obligation of Borrower relating to the Loan by operation of law or by action of any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or otherwise; (m) Any action, occurrence, event or matter consented to by Indemnitors under Section 8(j) hereof, under any other provision hereof, or otherwise; and (n) the failure of any representation and/or warranties made by Borrower, Indemnitor or any other party to be true, complete or correct when given, or at any time thereafter. Indemnitors covenant and agree that upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against any Borrower, neither such Indemnitor shall seek a supplemental stay or otherwise pursuant to 11 U.S.C. ss. 105 or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against such Indemnitor by virtue of this Agreement or otherwise. 9 8. GENERAL PROVISIONS. (a) Fully Recourse. Notwithstanding any provision of any other Loan Document to the contrary, all of the terms and provisions of this Agreement are recourse obligations of Indemnitors and not restricted by any limitation on personal liability. (b) Right to Indemnification Not Affected by Knowledge. An Indemnified Party's right to defense, indemnification, payment of Costs or other rights and remedies pursuant to this Agreement shall not be diminished or affected in any way by any investigation conducted by or on behalf of such Indemnified Party or other knowledge acquired (or capable of being acquired) by such Indemnified Party through any means at any time. (c) Reliance. Indemnitors hereby acknowledge that Lender would not make the Loan without being able to rely upon the covenants and obligations of Indemnitors set forth herein. Accordingly, Indemnitors intentionally and unconditionally enter into this Agreement. (d) Obligations Unsecured. Indemnitors acknowledge that even though the representations, warranties and covenants of Indemnitors contained herein may be identical or substantially similar to those of Borrower set forth in the Security Instrument, the obligations of Indemnitors hereunder are independent obligations which are not secured by the Security Instrument or the other Loan Documents. The Indemnitors further acknowledge that it is the intent of Lender to create separate obligations of Indemnitors hereunder which can be enforced against Indemnitors without regard to the existence of the Security Instrument or the other Loan Documents or the liens or security interests created therein. (e) Survival. This Agreement shall be deemed to be continuing in nature, remain in full force and effect and survive indefinitely, notwithstanding the exercise of any remedy by Lender under the Security Instrument or any of the other Loan Documents, including, without limitation, any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the Loan is paid or satisfied in full. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Indemnitors under this Agreement shall survive following payment in full of the Obligations in accordance with the terms of the Loan Documents for a period equal to the lesser of (x) five (5) years, or (y) if Borrowers deliver Phase I environmental reports for each of the Properties to Lender, acceptable to Lender in all respects, and which Lender determines in its sole discretion demonstrates that no condition exists which may cause any of the liabilities of Indemnitors to arise after delivery thereof, two (2) years following the delivery of such Phase I environmental reports, provided, however, in the event that (a) any obligations or liabilities of the Indemnitors under this Agreement shall have arisen from any Hazardous Material which existed on, in, under or affecting the Property prior to the expiration of such period or (b) if, prior to payment in full of the Loan, Lender shall have exercised any rights or remedies after an Event of Default or any of the Loan Documents shall have been modified or amended or any provision thereof waived pursuant to any workout or restructuring of the Loan (and if, as a consequence thereof, at any time after the expiration of the survival period specified above, Lender shall be unable to avail itself of any exemption from liability available to lenders under any applicable Environmental Law or shall be required to defend any claim or action relating to any Hazardous Material), then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Indemnitors hereunder shall survive. 10 (f) Subordination; No Recourse Against Lender. Obligor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Obligor to all indebtedness of Borrower to Lender. Obligor shall not demand or accept any payment of principal or interest from Borrower, shall not claim any offset or other reduction of Obligor's obligations hereunder because of any such indebtedness and shall not take any action to obtain any of the collateral for the Loan. Further, Indemnitors shall not have any right of recourse against any Indemnified Party by reason of any action such Indemnified Party may take or omit to take under the provisions of this Agreement or any other Loan Documents. (g) Reservation of Rights. Nothing contained in this Agreement shall prevent or in any way diminish or interfere with any rights or remedies, including, without limitation, the right to cost recovery or contribution, which any Indemnified Party may have against either Indemnitor or any other party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified at Title 42 U.S.C. ss. 9601 et seq.), as it may be amended from time to time ("CERCLA"), or any other applicable Federal, state or local laws, all such rights being hereby expressly reserved. (h) Financial Statements. Each Indemnitor hereby agrees to furnish Lender such financial statements and other information as is required to be delivered pursuant to Section 5.1 of the Loan Agreement. (i) Nature of Obligations. The obligations of Indemnitors hereunder are independent of the obligations of Borrower under the other Loan Documents. In the event of any default hereunder, a separate action or actions may be brought and prosecuted against Indemnitors whether or not Indemnitors are the alter ego of Borrower and whether or not Borrower is joined therein or a separate action or actions are brought against Borrower. Lender's rights hereunder shall not be exhausted until all of the obligations of Indemnitor hereunder have been fully paid and performed. (j) No Limitation on Liability. Indemnitors hereby consent and agree that any of the following may occur from time to time, without notice or consideration to, or consent of, Indemnitors, and the liability of Indemnitors hereunder shall remain unconditional and absolute and shall in no way be impaired or limited by reason thereof: (i) any extension of time for performance required by any of the Loan Documents or otherwise granted by Lender or any extension or renewal of the Note; (ii) any sale, assignment or foreclosure of the Note, the Security Instrument or any of the other Loan Documents or any sale or transfer of the Property, except as set forth in Section 2(b); (iii) any change in the composition of Borrower, including, without limitation, the voluntary or involuntary withdrawal or removal of Indemnitors from any current or future position of ownership, management or control of Borrower; (iv) the release of Borrower or of any other Person from performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law, Lender's voluntary act or otherwise; 11 (v) the release or substitution in whole or in part of any security for the Loan; (vi) Lender's failure to record the Security Instrument or to file any financing statement (or Lender's improper recording or filing thereof) or to otherwise perfect, protect, secure or insure any lien or security interest given as security for the Loan; (vii) the modification of the terms of any one or more of the Loan Documents; (viii) subject to Section 2(b) hereof, the exercise by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan Documents, including, without limitation, foreclosure or similar remedies under any pledge agreement encumbering Mezzanine Borrower's interest in General Partner, Member or any Borrower; or (ix) the taking or failure to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection with the Loan Documents or any collateral for the Loan, nor any course of dealing with Borrower or any other Person, shall limit, impair or release Indemnitor's obligations hereunder, affect this Agreement in any way or afford Indemnitors any recourse against any Indemnified Party. Nothing contained in this Section shall be construed to require any Indemnified Party to take or refrain from taking any action referred to herein. (k) Representations. Each Indemnitor represents and warrants that there is no bankruptcy, reorganization or insolvency proceeding pending or, to its knowledge, threatened against it. (l) Professionals' Fees. In the event it is necessary for any Indemnified Party to retain the services of an attorney or any other consultants in order to enforce this Agreement, or any portion hereof, Indemnitors agree to pay to such Indemnified Party any and all reasonable costs and expenses, including, without limitation, reasonable attorneys' and consultants' fees and disbursements, incurred by such Indemnified Party as a result thereof and all such amounts shall be included in Costs. (m) Successive Actions. A separate right of action hereunder shall arise each time an Indemnified Party acquires knowledge of any matter indemnified or guaranteed by Indemnitors hereunder. Separate and successive actions may be brought hereunder to enforce any of the provisions hereof at any time and from time to time and no action hereunder shall preclude any subsequent action. (n) No Waiver; Remedies Cumulative. No failure or delay on the part of Lender in exercising any right, remedy, power or privilege hereunder or under the other Loan Documents and no course of dealing between Borrower and Lender shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under the other Loan Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege hereunder or thereunder. The rights and remedies provided herein and in the other Loan Documents are cumulative and not exclusive 12 of any rights or remedies provided by law. The giving of notice to or demand on Borrower which notice or demand is not required hereunder or under the other Loan Documents shall not entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights, remedies, powers or privileges of Lender in any circumstances not requiring notice or demand. (o) Notices. All notices, requests and other communications to any party hereunder or under the Note shall be given in the manner set forth in Section 14.5 of the Loan Agreement, to Lender and Borrower at such party's address set forth in Section 14.5 of the Loan Agreement and to each Obligor at its address set forth above, or such other address as Indemnitors or Lender shall hereafter specify by not less than ten (10) days prior written notice as provided herein; provided, however, that notwithstanding any provision of this Section to the contrary, such notice of change of address shall be deemed given only upon actual receipt thereof. Rejection or other refusal to accept or the inability to deliver because of changed addresses of which no notice was given as herein required shall be deemed to be receipt of the notice, demand, statement, request or consent. (p) Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York and the applicable laws of the United States of America. Indemnitors hereby irrevocably submit to the jurisdiction of any court of competent jurisdiction located in the State of New York and in any state in which the Property is located in connection with any proceeding out of or relating to this Agreement. (q) Invalid Provisions. If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision. (r) Amendments. The terms of this Agreement, together with the terms of the other Loan Documents, constitute the entire understanding and agreement of the parties hereto and supersede all prior agreements, understandings and negotiations between Indemnitors and Lender with respect to the obligations contained herein. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. (s) Parties Bound; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that except as provided in the Loan Agreement or herein, Indemnitors may not, without the prior written consent of Lender, assign any of their rights, powers, duties or obligations hereunder. (t) Headings; Construction of Documents. The headings and captions of various sections of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. Indemnitors acknowledge that they were represented by competent counsel in connection with the negotiation and drafting of this Agreement and the other Loan Documents and that neither 13 this Agreement nor the other Loan Documents shall be subject to the principle of construing the meaning against the Person who drafted same. (u) Recitals. The recital and introductory paragraphs hereof are a part hereof, form a basis for this Agreement and shall be considered prima facie evidence of the facts and documents referred to therein. (v) Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all Persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. (w) Cumulative Rights. The rights of Lender under this Agreement shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and remedies herein stated but shall be entitled, subject to the terms of this Agreement, to every right and remedy now or hereafter afforded by law. (x) Waiver of Counterclaim and Right to Trial by Jury. Indemnitors hereby waive the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents, and Lender and Indemnitors waive trial by jury in any action or proceeding brought by either party hereto against the other or in any counterclaim any other party may be permitted to assert hereunder or which may be asserted by any party or its agents, against Indemnitors, or in any matters whatsoever arising out of or in any way connected with this Agreement, the debt or the obligations contained herein. (y) Singular and Plural; Joint and Several Liability. (i) If there is more than one entity comprising Obligor, all references to Obligor herein shall be to Obligor, or any one or more of them. All references to Indemnitors herein shall be to Indemnitors or any one or more of them. All obligations and liabilities of Indemnitors hereunder are in addition to, not in lieu of and are independent of: (A) all obligations of Borrower under any other Loan Document, including the Note and the Loan Agreement; and (B) any obligation of Obligor under any other Loan Document to which Obligor is a party. (ii) All obligations of Indemnitors hereunder shall be joint and several. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 14 IN WITNESS WHEREOF, Indemnitors have executed this Agreement as of the day and year first above written. BORROWERS: [LODGIAN ENTITIES] By: ____________________________________ Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above OBLIGOR: LODGIAN, INC., a Delaware corporation By: _________________________________ Name: Title: EXHIBITS A PROPERTIES CHAIN/NAME CITY ST EX-21.1 35 g87458a3exv21w1.txt EX-21.1 SUBSIDIARIES OF LODGIAN, INC. EXHIBIT 21.1 SUBSIDIARIES OF LODGIAN, INC. (*Significant Subsidiaries) LODGIAN FINANCING CORP. * LODGIAN FINANCING MEZZANINE, LLC * LODGIAN MEZZANINE FIXED, LLC * LODGIAN MEZZANINE FLOATING, LLC * SERVICO, INC. * SERVICO OPERATIONS CORPORATION * 1075 Hospitality, LP 12801 NWF Beverage, Inc. Albany Hotel, Inc. AMI Operating Partners, L.P. AMIOP Acquisition Corp. AMIOP Acquisition General Partner SPE Corp. Apico Hills. Inc. Apico Inns of Green Tree, Inc. Apico Inns of Pennsylvania, Inc. Apico Inns of Pittsburgh, Inc. Apico Management Corp. Atlanta-Boston Holdings, LLC Atlanta-Boston Lodging, LLC Atlanta-Boston SPE, Inc. Atlanta-Rio Rancho Beverage Management, Inc. Brecksville Hospitality, Inc. Brecksville Hospitality, LP Brunswick Motel Enterprises, Inc. Columbus Hospitality Associates, LP The Courtyard Club, Inc. Dedham Lodging Associates I, LP Dedham Lodging SPE, Inc. Dothan Hospitality 3053, Inc. Dothan Hospitality 3071, Inc. East Washington Hospitality, LP Fayetteville Motel Enterprises, Inc. Fort Wayne Hospitality Associates II, LP Fourth Street Hospitality, Inc. Gadsden Hospitality, Inc. Harrisburg Motel Enterprises, Inc. Hilton Head Motel Enterprises, Inc. Impac Holdings III, LLC Impac Hotel Group Mezzanine, LLC Impac Hotel Group, L.L.C. Impac Hotel Management, LLC Impac Hotels I, L.L.C. Impac Hotels II, L.L.C. Impac Hotels III, LLC Impac Hotels Member SPE, Inc. Impac SPE #2, Inc. Impac SPE #4, Inc. Impac SPE #6, Inc. Island Motel Enterprises, Inc. KDS Corporation Kinser Motel Enterprises, Inc. Lafayette Beverage Management, Inc. Lawrence Hospitality Associates, LP Little Rock Beverage Management, Inc. Little Rock Lodging Associates I, LP Lodgian Abeline Beverage Corp. Lodgian Acquisition, LLC Lodgian AMI, Inc. Lodgian Augusta LLC Lodgian Austin Beverage Corp. Lodgian Bridgeport LLC Lodgian Cincinnati LLC Lodgian Coconut Grove, LLC Lodgian Colchester LLC Lodgian Dallas Beverage Corp. Lodgian Denver LLC Lodgian Fairmont LLC Lodgian Florence LLC Lodgian Fort Mitchell LLC Lodgian Hamburg LLC Lodgian Hotels, Inc. Lodgian Hotels Fixed I, LLC Lodgian Hotels Fixed II, Inc. Lodgian Hotels Fixed III, LLC Lodgian Hotels Fixed IV, L.P. Lodgian Hotels Fixed IV GP, Inc. Lodgian Hotels Floating, LLC Lodgian Jackson LLC Lodgian Lafayette LLC Lodgian Lancaster North, Inc. Lodgian Little Rock SPE, Inc. Lodgian Management Corp. Lodgian Market Center Beverage Corp. Lodgian Memphis LLC Lodgian Merrimack LLC Lodgian Memphis Property Owner, LLC Lodgian Mezzanine Springing Member, Inc. Lodgian Morgantown LLC Lodgian Mortgage Springing Member, Inc. Lodgian Mount Laurel, Inc. Lodgian North Miami LLC Lodgian Ontario, Inc. Lodgian Syracuse LLC Lodgian Tulsa LLC Lodgian York Market Street, Inc. Macon Hotel Associates LLC Macon Hotel Associates Manager, Inc. Manhattan Hospitality Associates, LP McKnight Motel, Inc. Melbourne Hospitality Associates, LP Minneapolis Motel Enterprises, Inc. Moon Airport Motel, Inc. New Orleans Airport Motel Associates, LP New Orleans Airport Motel Enterprises, Inc. NH Motel Enterprises, Inc. Penmoco, Inc. 2 Prime American Realty Corp. Raleigh Downtown Enterprises, Inc. REPL, Inc. Royce Management Corp of Morristown Saginaw Hospitality, LP Second Fayetteville Motel Enterprises, Inc. Servico Austin, Inc. Servico Cedar Rapids, Inc. Servico Centre Associates, Ltd. Servico Colesville, Inc. Servico Columbia II, Inc. Servico Columbia, Inc. Servico Columbus, Inc. Servico Concord, Inc. Servico Council Bluffs, Inc. Servico East Washington, Inc. Servico Flagstaff, Inc. Servico Fort Wayne II, Inc. Servico Fort Wayne, Inc. Servico Frisco, Inc. Servico Grand Island, Inc. Servico Hilton Head, Inc. Servico Hotels I, Inc. Servico Hotels II, Inc. Servico Hotels III, Inc. Servico Hotels IV, Inc. Servico Houston, Inc. Servico Jamestown, Inc. Servico Lansing, Inc. Servico Lawrence II, Inc. Servico Lawrence, Inc. Servico Management Corporation (FL) Servico Management Corporation (TX) Servico Manhattan II, Inc. Servico Manhattan, Inc. Servico Market Center, Inc. Servico Maryland, Inc. Servico Melbourne, Inc. Servico Metairie, Inc. Servico New York, Inc. Servico Niagara Falls, Inc. Servico Northwoods, Inc. Servico Operations Mezzanine, LLC Servico Palm Beach General Partner SPE, Inc. Servico Pensacola 7200, Inc. Servico Pensacola 7330, Inc. Servico Pensacola, Inc. Servico Rolling Meadows, Inc. Servico Roseville, Inc. Servico Silver Springs, Inc. Servico Tucson, Inc. Servico West Des Moines, Inc. Servico Wichita, Inc. Servico Windsor, Inc. Servico Winter Haven, Inc. Servico Worcester, Inc. 3 Sharon Motel Enterprises, Inc. Sheffield Motel Enterprises, Inc. Sioux City Hospitality, LP Sixteen Hotels, Inc. South Carolina Interstate Motel Enterprises Southfield Hotel Group II, LP W.V.B.M., Inc. Washington Motel Enterprises, Inc. Wilpen, Inc. Worcester Hospitality Associates, LP 4 EX-23.1 36 g87458a3exv23w1.txt EX-23.1 CONSENT OF DELOITTE AND TOUCHE LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Amendment No. 3 to Registration Statement No. 333-113410 of Lodgian, Inc. of our report dated March 5, 2004 (May 10, 2004 as to Note 22) (which expresses an unqualified opinion and includes an explanatory paragraph relating to the Successor Company's change in its method of accounting for discontinued operations to conform with Statement of Financial Accounting Standards No. 144 and the Successor Company's adoption of the provisions of Statement of Financial Accounting Standards No. 150), appearing in the Registration Statement of which this Prospectus is a part, and to the reference to us under the heading "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP Atlanta, Georgia June 17, 2004 -----END PRIVACY-ENHANCED MESSAGE-----


Delaware	7011	52-2093696
(State or other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)


Securities and Exchange Commission registration fee	$	37,636
NASD, Inc. fee	$	25,500
American Stock Exchange listing fee	$	45,000
Accountants’ fees and expenses	$	300,000
Legal fees and expenses	$	625,000
Blue Sky fees and expenses	$	5,000
Transfer Agent’s fees and expenses	$	15,000
Printing and engraving expenses	$	350,000
Board advisory fee	$	150,000
Miscellaneous	$	41,864
Total Expenses	$	1,595,000


Exhibit
Number			Description

	1	.1†	Form of Purchase Agreement.
	3	.1†	Second Amended and Restated Certificate of Incorporation of Lodgian, Inc.
	3	.2	Amended Restated Bylaws of Lodgian, Inc. (incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-1, filed with the Commission on March 9, 2004).
	4	.1†	Specimen Common Stock Certificate.
	5	.1	Legal Opinion of Morris, Manning & Martin, LLP, Counsel to the Registrant, as to the legality of the shares being registered.
	10	.1.1†	Loan Agreement, dated as of January 31, 1995, by and among Column Financial, Inc., Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc. and Moon Airport Hotel Inc.
	10	.1.2†	Promissory Note, in original amount of $60.5 million, dated as of January 31, 1995, by Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc. and Moon Airport Hotel Inc., in favor of Column Financial, Inc.
	10	.2.1†	Loan and Security Agreement, dated as of November 25, 2002, by and between certain Lodgian subsidiaries and Merrill Lynch Mortgage Lending, Inc.
	10	.2.2†	Promissory Note in original amount of $224,036,325, dated as of November 25, 2002, between certain Lodgian subsidiaries and Merrill Lynch Mortgage Lending, Inc.
	10	.2.3†	Modification of Loan Agreement and Other Loan Documents, dated as of March 31, 2003, by and between certain Lodgian subsidiaries and Merrill Lynch Mortgage Lending, Inc.
	10	.2.4†	Note Severance Agreement, dated as of March 31, 2003, between Merrill Lynch Mortgage Lending, Inc. and certain Lodgian, Inc. subsidiaries.
	10	.2.5†	$218,217,000 Amended and Restated Promissory Note A, dated as of March 31, 2003, between Merrill Lynch Mortgage Lending, Inc. and certain Lodgian, Inc. subsidiaries.
	10	.2.6†	$5,539,275 Promissory Note B, dated as of March 31, 2003, between Merrill Lynch Mortgage Lending, Inc. and certain Lodgian, Inc. subsidiaries.
	10	.3.1†	Mezzanine Loan Agreement, dated as of November 25, 2002, by and between Impac Hotel Group Mezzanine, LLC, Servico Operations Mezzanine, LLC, Lodgian Financing Mezzanine, LLC, Island Motel Enterprises, Inc. and Penmoco, Inc. and Merrill Lynch Mortgage Lending, Inc.
	10	.3.2†	Promissory Note, in original amount of $78,671,201, dated as of November 25, 2002, between Impac Hotel Group Mezzanine, LLC, Servico Operations Mezzanine, LLC, Lodgian Financing Mezzanine, LLC, Island Motel Enterprises, Inc., Penmoco, Inc. and Merrill Lynch Mortgage Lending, Inc.
	10	.3.3†	Guaranty of Resource Obligations, dated as of November 25, 2002, by Lodgian, Inc. and Merrill Lynch Mortgage Lending, Inc.
	10	.3.4†	Modification of Loan Agreement and Other Loan Documents, dated as of March 31, 2003, by and between Impac Hotel Group Mezzanine, LLC, Servico Operations Mezzanine, LLC, Lodgian Financing Mezzanine, LLC, Island Motel Enterprises, Inc., Penmoco, Inc. and Merrill Lynch Mortgage Lending, Inc.
	10	.3.5†	$84,080,526 Amended, Restated and Consolidated Mezzanine Note, dated as of March 31, 2003, by certain Lodgian, Inc. subsidiaries and Merrill Lynch Mortgage Lending, Inc.
	10	.3.6†	Assignment and Assumption Agreement, dated as of March 31, 2003, by and among the Assignors thereto and certain Lodgian, Inc. subsidiaries.
	10	.4.1†	Loan Agreement, dated as of May 22, 2003, between Lehman Brothers Holdings Inc. and certain Lodgian subsidiaries.


Exhibit
Number			Description

	10	.4.2†	$80,000,000 Consolidated, Amended and Restated Mortgage Note, dated as of May 22, 2003, made by certain Lodgian subsidiaries and Lehman Brothers Holdings Inc.
	10	.4.3†	$5,000,000 GAP Mortgage Note, dated as of May 22, 2003, made by certain Lodgian subsidiaries and Lehman Brothers Holdings Inc.
	10	.4.4†	Principal’s Agreement, dated as of May 22, 2003, by Lodgian, Inc. to and for the benefit of Lehman Brothers Holdings Inc.
	10	.4.5†	Security Agreement and LockBox Agreement, dated as of May 22, 2003, by Lodgian, Inc., Lehman Brothers Holdings Inc. and Trimont Real Estate Advisor’s, Inc.
	10	.4.6†	First Amendment to Loan Documents, dated as of November 11, 2003, among certain Lodgian, Inc. subsidiaries, Lodgian, Inc., as Guarantor, and Lehman Brothers Holdings Inc.
	10	.5†	Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc.
	10	.6†	Disclosure Statement for Joint Plan of Reorganization of Lodgian, Inc., et al (other than the CCA Debtors), Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code, dated September 26, 2002.
	10	.7†	First Amended Joint Plan of Reorganization of Lodgian, Inc., et al (other than the CCA Debtors), Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code, dated November 5, 2002.
	10	.8†	Order Confirming the First Amended Joint Plan of Reorganization of Lodgian, Inc., et al., issued on November 5, 2002 by the United States Bankruptcy Court for the Southern District of New York.
	10	.9†	Class A Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia Bank, N.A.
	10	.10†	Class B Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia Bank, N.A.
	10	.11†	Registration Rights Agreement, dated as of November 25, 2002, between Lodgian, Inc. and the other signatories thereto.
	10	.12†	Employment Agreement with W. Thomas Parrington, dated as of December 18, 2003.
	10	.13.1†	Disclosure Statement for Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, LLC together with the Official Committee of Unsecured Creditors Under Chapter 11 of the Bankruptcy Code.
	10	.13.2†	Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. together with the Official Committee of Unsecured Creditors Under Chapter 11 of the Bankruptcy Code.
	10	.13.3†	Order Confirming Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. together with the Official Committee of Unsecured Creditors Under Chapter 11 of the Bankruptcy Code.
	10	.13.4†	Post Confirmation Order and Notice for Joint Plan of Reorganization of Impac Hotels III, L.L.C. together with the Official Committee of Unsecured Creditors Under Chapter 11 of the Bankruptcy Code.
	10	.14.1†	Lease Agreement, dated as of April 7, 1997, by and between CSB-Georgia Limited Partnership and Impac Hotel Group, L.L.C.
	10	.14.2†	First Amendment to Lease Agreement, dated as of May 8, 1998, by and between Cousins LORET Venture, L.L.C. and Impac Hotel Group, L.L.C.
	10	.14.3†	Second Amendment to Lease Agreement, dated as of June 7, 2000, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc.
	10	.14.4†	Third Amendment to Lease Agreement, dated as of April 1, 2002, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc.
	10	.14.5†	Fourth Amendment to Lease Agreement, dated as of April 28, 2003, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc.



Signature		Title	Date


/s/ W. THOMAS PARRINGTON W. Thomas Parrington		Director, President and Chief Executive Officer	June 17, 2004

* Manuel E. Artime		Executive Vice President and Chief Financial Officer	June 17, 2004

* Linda Borchert Philp		Vice President and Chief Accounting Officer	June 17, 2004

* Russel S. Bernard		Chairman of the Board of Directors	June 17, 2004

* Sean F. Armstrong		Director	June 17, 2004

* Stewart Brown		Director	June 17, 2004

* Kenneth A. Caplan		Director	June 17, 2004

* Stephen P. Grathwohl		Director	June 17, 2004

* Jonathan D. Gray		Director	June 17, 2004

* Kevin C. McTavish		Director	June 17, 2004

*By:	/s/ DANIEL E. ELLIS Daniel E. Ellis Attorney-in-fact

Table of Contents

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W. Thomas Parrington President and Chief Executive Officer 3445 Peachtree Road, N.E. — Suite 700 Atlanta, Georgia 30326 (404) 364-9400		Daniel E. Ellis, Esq. Senior Vice President, General Counsel and Secretary 3445 Peachtree Road, N.E. — Suite 700 Atlanta, Georgia 30326 (404) 364-9400


Jeffrey L. Schulte, Esq. David M. Calhoun, Esq. Brandy A. Bayer, Esq. Leigh E. Wilde, Esq. Morris, Manning & Martin, LLP 1600 Atlanta Financial Center 3343 Peachtree Road, N.E. Atlanta, Georgia 30326 (404) 233-7000		Edward F. Petrosky, Esq. J. Gerard Cummins, Esq. Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 (212) 839-5300


PART II
SIGNATURES
INDEX TO EXHIBIT PAGE
EX-5.1 LEGAL OPINION OF MORRIS, MANNING & MARTIN
EX-10.21.1 LOAN & SECURITY AGREEMENT
EX-10.21.2 PROMISSORY NOTE A
EX-10.21.3 PROMISSORY NOTE B
EX-10.21.4 GUARANTY OF RECOURSE OBLIGATIONS
EX-10.22.1 MEZZANINE LOAN AGREEMENT
EX-10.22.2 FORM OF MEZZANINE NOTE(FLOATING)
EX-10.22.3 GUARANTY OF RECOURSE OBLIGATIONS
EX-10.23.1 MEZZANINE LOAN AGREEMENT (FIXED RATE)
EX-10.23.2 FORM OF PROMISSORY NOTE
EX-10.23.3 GUARANTY RECOURSE OBLIGATIONS
EX-10.24.1 LOAN & SECURITY AGMT (FIXED RATE #1)
EX-10.24.2 PROMISSORY NOTE
EX-10.24.3 GUARANTY OF RECOURSE OBLIGATIONS
EX-10.25.1 LOAN & SECURITY AGMT (FIXED RATE #2)
EX-10.25.2 PROMISSORY NOTE
EX-10.25.3 GUARANTY OF RECOURSE OBLIGATIONS
EX-10.26.1 LOAN & SECURITY AGMT (FIXED RATE #3)
EX-10.26.2 PROMISSORY NOTE
EX-10.26.3 GUARANTY OF RECOURSE OBLIGATIONS
EX-10.27.1 LOAN & SECURITY AGMT (FIXED RATE #4)
EX-10.27.2 FORM OF PROMISSORY NOTE
EX-10.27.3 FORM OF GUARANTY OF RECOURSE OBLIGATION
EX-10.28 FORM OF CROSS-GUARANTY
EX-10.29 FORM OF CONDITIONAL ASSIGNMENT
EX-10.30 FORM OF ASSIGNMENT OF AGREEMENTS
EX-10.31 FORM OF COOPERATION AGREEMENT
EX-10.32 FORM OF COLLATERAL ASSIGNMENT OF INTEREST
EX-10.33 FORM OF PLEDGE AND SECURITY AGREEMENT
EX-10.34 FORM OF ASSIGNMENT OF LEASES AND RENTS
EX-10.35 FORM OF SUBSTITUTE MORTGAGE
EX-10.36 FORM OF CASH MANAGEMENT AGREEMENT
EX-10.37 FORM OF ENVIRONMENTAL INDEMNITY
EX-21.1 SUBSIDIARIES OF LODGIAN, INC.
EX-23.1 CONSENT OF DELOITTE AND TOUCHE LLP


Item 13.	*Other Expenses of Issuance and Distribution*


Item 14.	*Indemnification of Directors and Officers*


Item 15.	*Recent Sales of Unregistered Securities*


Item 16.	*Exhibits*