-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L7YCIv5XX4et11P/SHjlEKyA4OH2+PNwajGgcy76AsixNHTtyfNL+E82WSPCzh1A yhHrO8TyCiEWYe/xYs4Uig== 0000911420-03-000152.txt : 20030725 0000911420-03-000152.hdr.sgml : 20030725 20030725165600 ACCESSION NUMBER: 0000911420-03-000152 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20030710 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RFS PARTNERSHIP LP CENTRAL INDEX KEY: 0001168409 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-84334 FILM NUMBER: 03804068 BUSINESS ADDRESS: STREET 1: 850 RIDGE LAKE BLVD STREET 2: SUITE 300 CITY: MEMPHIS STATE: TN ZIP: 38120 8-K 1 d901892.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 10, 2003 Commission File Number: 333-84334 --------- RFS PARTNERSHIP, L.P. ----------------------------------------- (Exact name of registrant as specified in its charter) Tennessee 62-1541639 ----------------------- ------------------- (State of organization) (I.R.S. Employer Identification No.) 450 South Orange Avenue, Orlando, Florida 32801 - ----------------------------------------- ---------- (Address of principal executive office) (Zip Code) (800) 650-1000 - ---------------------------------------------------- (Registrant's telephone number, including area code) (Page 1 of 6) ITEM 1. CHANGES IN CONTROL OF REGISTRANT. On July 10, 2003, RFS Hotel Investors, Inc. ("RFS"), the former general partner of RFS Partnership, L.P. (the "Partnership"), consummated its previously announced merger with CNL Rose Acquisition Corp. ("CNL Acquisition"), a wholly owned subsidiary of CNL Hospitality Properties, Inc. ("CNL"). Further, on July 10, 2003, the Partnership consummated its previously announced merger with a wholly owned subsidiary of CNL, in which the Partnership is the surviving entity (the "Partnership Merger", and together with the merger of RFS with and into CNL Acquisition, the "Mergers"). As a result of the Mergers, RFS's separate corporate existence terminated and CNL Rose GP Corp., a Delaware corporation and wholly owned subsidiary of CNL ("CNL Rose GP") became the new general partner of the Partnership. On July 10, 2003, the Partnership filed an amendment to its Certificate of Limited Partnership with the Tennessee Secretary of State, reflecting the change in its general partner. In connection with the consummation of the Partnership Merger, the partnership units held by the Partnership's limited partners were converted into the right to receive $12.35 in cash per limited partnership unit outstanding, and each limited partner's interest in the Partnership terminated. By virtue of the Mergers, CNL Acquisition became the sole limited partner, and CNL Rose GP became the sole general partner, of the Partnership and, accordingly, the Partnership is currently an indirect, wholly owned subsidiary of CNL. On July 10, 2003, the Partnership amended and restated its partnership agreement to reflect, among other things, its new ownership and simplify the methods by which it is governed. In the Mergers, CNL paid approximately $383 million in total merger consideration to the former stockholders of RFS and the former limited partners of the Partnership. Of the total merger consideration, (i) approximately $189 million was financed by proceeds from the sale of CNL's common stock in its current equity offering, (ii) approximately $43 million was financed by borrowings under CNL's existing line of credit, (iii) approximately $50 million was provided in permanent financing related to one of CNL's properties, and (iv) approximately $101 million was financed by a bridge loan (the "Bridge Loan"), pursuant to the terms of that certain Credit Agreement (the "Credit Agreement") dated July 10, 2003, among the Partnership and RFS Financing Partnership, L.P., a Tennessee limited partnership ("RFS Financing", and together with the Partnership, the "Borrowers")), as borrowers, CNL, certain lenders, and Bank of America, N.A. ("BOA"). The Borrowers executed a note in the amount of $320 million on July 10, 2003, evidencing the Bridge Loan (the "Note"). The Bridge Loan requires monthly payments of interest only. Interest is incurred at an annual rate equal to the average British Bankers Association Interest Settlement Rate for Deposits in Dollars with a term equivalent to one month (the "Eurodollar Rate") plus (i) 3% of the loan value up to $278,650,000 and (ii) 6% of the loan value in excess of $278,650,000 (collectively referred to as the "Applicable Rate"). The Eurodollar Rate on July 10, 2003, the date of the execution of the Credit Agreement, was 1.05%. The Applicable Rate will increase by 0.5% on November 7, 2003, and on the last day of each subsequent three-month period thereafter. The first $250 million borrowed under the Bridge Loan (the "Tranche A Loans") and any interest accrued thereon, is due and payable by the Borrowers no later than January 10, 2004. Subject to compliance with certain loan covenants, the balance of the loan proceeds, an additional $219 million is available to the Borrowers for future draws in order to refinance former RFS debt to which CNL succeeded and 2 for certain other approved uses. The Borrowers may continue to make multiple draws until November 7, 2003. Any additional borrowings in excess of the Tranche A Loans and any interest accrued thereon is due and payable by the Borrowers on July 10, 2005. Pursuant to that certain Continuing Guaranty Agreement, dated July 10, 2003 (the "Guaranty Agreement"), CNL, CNL Rose GP and CNL Acquisition have jointly and severally guaranteed the repayment of any borrowings by the Partnership under the Credit Agreement. In connection with the Bridge Loan, certain parent entities of the Partnership each entered into Security and Pledge Agreements with BOA, all dated July 10, 2003, pledging, as collateral security, its equity ownership interests in the Partnership and certain of its direct parent entities. Pursuant to the terms of the Security and Pledge Agreements, upon an Event of Default, as defined in the Credit Agreement, BOA may foreclose on the equity ownership interests being held as collateral pursuant to the Security and Pledge Agreements. Such a foreclosure may result in a change in control of the Partnership. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On July 10, 2003, the Partnership and several of its subsidiaries entered into that certain RFS Acquisition Agreement by and among CNL Hospitality Partners, LP, a Delaware limited partnership and wholly owned subsidiary of CNL, CNL Hotel RI-Orlando, Ltd., a Florida limited partnership and indirect wholly owned subsidiary of CNL, CNL Hotel CY-Edison, LP, a Delaware limited partnership and wholly owned subsidiary of CNL (collectively, the "Transferors"), the Partnership and CNL Acquisition, pursuant to which CNL Acquisition issued an amount equal to 24.4% of all classes of its capital stock to the Transferors in exchange for the Transferors transferring certain real estate properties to the Partnership. In connection with the Bridge Loan, the Partnership and certain of its parent entities also entered into certain Security and Pledge Agreements with BOA, all dated July 10, 2003, pledging, as collateral security, its equity ownership interests in certain of its subsidiaries to BOA. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Not Applicable (b) Financial Statements required by this Item 7(b) will be filed by amendment within 60 days after the date hereof. (c) The following Exhibits are filed as part of this Current Report on Form 8-K: 2.1 RFS Acquisition Agreement dated as of July 10, 2003, by and among CNL Hospitality Partners, LP, CNL Hotel RI-Orlando, Ltd., CNL Hotel CY-Edison, LP, RFS Partnership, L.P. and CNL Rose Acquisition Corp. 3 3.1 Amendment to the Certificate of Limited Partnership of RFS Partnership, L.P. (This Exhibit 3.1 was filed as Exhibit 3.17 to the Post-Effective Amendment No. 2 to CNL Hospitality Properties, Inc.'s Registration Statement on Form S-11, filed with the Securities and Exchange Commission on July 14, 2003, and is incorporated herein by reference in its entirety). 3.2 Sixth Amended and Restated Agreement of Limited Partnership of RFS Partnership, L.P. 10.1 Credit Agreement, dated as of July 10, 2003, among RFS Partnership, L.P., RFS Financing Partnership, L.P., CNL Hospitality Properties, Inc., Bank of America, N.A. and certain lenders named therein. (This Exhibit 10.1 was filed as Exhibit 10.69 to the Post-Effective Amendment No. 2 to CNL Hospitality Properties, Inc.'s Registration Statement on Form S-11, filed with the Securities and Exchange Commission on July 14, 2003, and is incorporated herein by reference in its entirety). 10.2 Note, dated July 10, 2003, made by RFS Partnership, L.P. and RFS Financing Partnership, L.P. (This Exhibit 10.2 was filed as Exhibit 10.70 to the Post-Effective Amendment No. 2 to CNL Hospitality Properties, Inc.'s Registration Statement on Form S-11, filed with the Securities and Exchange Commission on July 14, 2003, and is incorporated herein by reference in its entirety). 10.3 Continuing Guaranty Agreement, dated as of July 10, 2003 among CNL Hospitality Properties, Inc., CNL Rose GP Corp., and CNL Rose Acquisition Corp., in favor of Bank of America, N.A. 10.4 Security and Pledge Agreement, dated as of July 10, 2003 between RFS Partnership, L.P. and Bank of America, N.A. (relating to common stock of RFS TRS Holdings, Inc.). 10.5 Security and Pledge Agreement, dated as of July 10, 2003 between CNL Rose Acquisition Corp. and Bank of America, N.A. (relating to limited partner interests in RFS Partnership, L.P.). 10.6 Security and Pledge Agreement, dated as of July 10, 2003 between CNL Hospitality Properties, Inc. and Bank of America, N.A. (relating to common stock of CNL Rose Acquisition Corp.). 10.7 Security and Pledge Agreement, dated as of July 10, 2003 between CNL Rose GP Corp. and Bank of America, N.A. (relating to general partner interest in RFS Partnership, L.P.). 4 10.8 Security and Pledge Agreement, dated as of July 10, 2003 between CNL Hospitality Properties, Inc. and Bank of America, N.A. (relating to common stock of CNL Rose GP Corp.). 10.9 Security and Pledge Agreement, dated as of July 10, 2003 between RFS Partnership, L.P. and Bank of America, N.A. (relating to limited partner interest in Ridge Lake, L.P.). 10.10 Security and Pledge Agreement, dated as of July 10, 2003 between RFS Partnership, L.P. and Bank of America, N.A. (relating to common stock of RFS 2002 Financing, Inc.). 10.11 Security and Pledge Agreement, dated as of July 10, 2003 between RFS Partnership, L.P. and Bank of America, N.A. (relating to limited liability company interest in RFS Financing 2002, L.L.C.). 10.12 Security and Pledge Agreement, dated as of July 10, 2003 between RFS Partnership, L.P. and Bank of America, N.A. (relating to limited partner interest in RFS Financing Partnership, L.P.). 10.13 Security and Pledge Agreement, dated as of July 10, 2003 between RFS Partnership, L.P. and Bank of America, N.A. (relating to common stock of Ridge Lake General Partner, Inc.). 10.14 Security and Pledge Agreement, dated as of July 10, 2003 between RFS Partnership, L.P. and Bank of America, N.A. (relating to limited liability company interests in Ridge Lake, L.L.C.). [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be filed on its behalf by the undersigned thereunto duly authorized. RFS PARTNERSHIP, L.P. By: CNL Rose GP Corp., its general partner Dated: July 25, 2003 By: /s/ Thomas J. Hutchison, III ----------------------------- Name: Thomas J. Hutchison, III Title: Chief Executive Officer EX-2.1 3 e903467.txt RFS ACQUISITION AGREEMENT Exhibit 2.1 RFS ACQUISITION AGREEMENT CNL Hospitality Partners/CNL Hotel RI-Orlando/CNL Hotel CY-Edison THIS RFS ACQUISITION AGREEMENT ("Agreement") made as of the 10th day of July, 2003 by and among CNL HOSPITALITY PARTNERS, LP, a Delaware limited partnership, CNL HOTEL RI-ORLANDO, LTD., a Florida limited partnership, CNL HOTEL CY-EDISON, LP, a Delaware limited partnership (collectively, "CNL"), RFS PARTNERSHIP, L.P., a Tennessee limited partnership (the "Company"), and CNL ROSE ACQUISITION CORP., a Delaware corporation and owner of 99.9% of the partnership interests of the Company ("Rose Acquisition"). RECITALS WHEREAS, CNL owns the fee simple title to the existing hotel properties set forth on Exhibit A attached hereto (collectively, the "Property") and desires that the Property be transferred and conveyed to the Company in exchange for limited partnership interests of the Company (or comparable shares of common stock of Rose Acquisition, the Company's sole limited partner). WHEREAS, in connection with and as consideration for the transfer and conveyance to it of the Property, the Company shall issue limited partnership interests or Rose Acquisition will issue shares of its common stock to CNL as payment of the purchase price for the Property. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows: ARTICLE I PROPERTY TRANSFER Subject to and in accordance with the terms of this Agreement, upon execution hereof, CNL shall transfer, convey and assign all of CNL's right, title and interest in and to the Property to the Company in exchange for the consideration set forth in Section 2.1 below. ARTICLE II CONSIDERATION Section 2.1. In consideration for the transfer and assignment of Property set forth in Section 1.1 above, which the parties stipulate and agree represents a purchase price amount of $127,348,074 in the aggregate, the Company shall issue to CNL limited partnership interests in an amount equal to Twenty-Four and Four-Tenths Percent (24.4%) of the outstanding partnership interests of the Company (the "Equity Interest"), all as more particularly described in Section 3.2 herein. Purchase price amounts and related Equity Interest allocations for each of the subject hotel properties is set forth on Exhibit A attached hereto. In lieu of issuing limited partnership interests of the Company as consideration for the transfer of the Property to the Company as set forth in the preceding paragraph of this Section 1 2.1, Rose Acquisition may issue to CNL approximately 244 shares of Rose Acquisition's single class of common stock in an amount which will equal approximately 24.4% of the outstanding capital stock of all classes of Rose Acquisition as consideration for the transfer of the Property to the Company. In such case, the term "Equity Interest" shall refer to such shares of common stock of Rose Acquisition issued to CNL as consideration for the transfer of the Property. Section 2.2. CNL shall execute, or where applicable, cause the following to be delivered to Company and/or Rose Acquisition, as the case may be, upon execution hereof: (a) executed conveyance and transfer documents as scheduled in Exhibit B attached hereto, and such other instruments as are necessary to effect and confirm the transfer and assignment of all of CNL's interests in the Property to the Company, in form and substance mutually acceptable to CNL and the Company; and (b) such other documents, instruments, resolutions and other material reasonably requested by the Company as may be necessary or desirable to effect the transactions contemplated hereby. Section 2.3. Upon execution hereof, the Company and/or Rose Acquisition, as the case may be shall execute and/or deliver, or cause to be executed and/or delivered to CNL the following: (a) an executed assignment and assumption acknowledging the receipt by the Company of the transfer and assignment of certain interests in the Property and the assumption of obligations thereunder as may arise from or after the date of the conveyance hereunder; (b) a certificate or certificates representing the Equity Interest; and (c) such other documents, instruments, resolutions and other material necessary to effect the transactions contemplated hereby. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Each of the Company and Rose Acquisition hereby represents and warrants to and for the benefit of CNL as follows: Section 3.1. Authority Relative to this Agreement. Each of the Company and Rose Acquisition is a limited partnership or corporation duly formed or incorporated, validly existing and in good standing under the laws of the jurisdiction of formation and has the requisite power or corporate power and authority to own, lease and operate its respective properties and carry on its business as now being conducted. Each of the Company and Rose Acquisition has all limited partnership power or corporate power, as the case may be, and authority necessary to execute and deliver this Agreement and to consummate the transactions contemplated hereby. Each of the Company and Rose Acquisition is duly qualified and is authorized to do business and is in good standing as a foreign limited partnership or foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on either of the Company or Rose Acquisition, or their businesses. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the General Partner of the Company and the Board of Directors of Rose Acquisition and no other proceedings on the part of the Company or Rose Acquisition are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and Rose Acquisition and, assuming that this Agreement constitutes a valid and binding agreement of CNL, constitutes a valid and binding agreement of the Company and Rose Acquisition enforceable against the Company and Rose Acquisition in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. Section 3.2. Equity Interests. Upon transfer and assignment of the Property pursuant to this Agreement, CNL will receive good and marketable title to the Equity Interest, constituting approximately 24.4% of the outstanding partnership interests and economic interests of the Company (or equivalent percentage interest in the outstanding shares of common stock of Rose Acquisition, if applicable), free and clear of all liens, options, encumbrances and restrictions of any kind or nature whatsoever other than restrictions imposed by federal and state securities laws with respect to the transfer of the Equity Interest. There are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or agreements among partners or potential partners, or agreements of any kind for the purchase or acquisition from the Company or Rose Acquisition of any of its partnership interests, common stock, equity interests or securities. The Equity Interest (i) has been duly authorized and validly issued and is fully paid, (ii) to the extent applicable, non-assessable, and (iii) was issued in compliance with all applicable state and federal laws concerning the issuance of securities. Section 3.3. Legal Proceedings and Judgments. There are no claims, actions, proceedings or investigations pending or, to the Company's knowledge or Rose Acquisition's knowledge, threatened against or relating to the Company or Rose Acquisition before any court or other governmental authority acting in an adjudicative capacity that could have an adverse effect on the Company's ability to consummate the transactions contemplated hereby. Section 3.4. No Conflict. Each of the Company and Rose Acquisition has, as applicable, delivered to CNL true and complete copies of the Certificate of Limited Partnership and Limited Partnership Agreement of the Company, and the Articles of Incorporation and By-laws of Rose Acquisition, as amended to date. The execution, delivery, and performance of and compliance with this Agreement and the issuance of the Equity Interest pursuant hereto will not, with or without the passage of time or giving of notice, result in any such violation, or be in conflict with or constitute a default under the Certificate of Limited Partnership or the Limited Partnership Agreement of the Company, or the Articles of Incorporation or By-laws of Rose Acquisition, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or Rose Acquisition or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. Section 3.5. Brokers. No person is entitled to any brokerage, financial advisory, finder's or similar fee or commission payable by the Company or Rose Acquisition or any of their affiliates in connection with the transactions contemplated by this Agreement or associated with the based-upon arrangements made by or on behalf of the Company or Rose Acquisition. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER CNL hereby represents and warrants to the Company and Rose Acquisition as follows: Section 4.1. Authority Relative to this Agreement. CNL is a limited partnership, duly organized, validly existing and in good standing under the laws of the jurisdiction of incorporation and has the requisite power and authority to own, lease and operate its respective properties and carry on its business as now being conducted. CNL has all limited partnership power and authority necessary to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all of the partners of CNL and no other corporate proceedings on the part of CNL are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by CNL, and, assuming that this Agreement constitutes a valid and binding agreement of the Company and Rose Acquisition, constitutes a valid and binding agreement of CNL, enforceable against CNL in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. Section 4.2. Legal Proceedings and Judgments. There are no material claims, actions, proceedings or investigations pending or, to CNL's knowledge, threatened against or relating to CNL before any court or other governmental authority acting in an adjudicative capacity that could have a material adverse effect on CNL's ability to consummate the transactions contemplated hereby. Section 4.3. Property. CNL owns good and marketable fee simple title to the Property free and clear of all liens and encumbrances, other than standard deed restrictions (which would not materially impair the use and occupancy of the Property). On the date hereof, CNL will convey good and marketable fee simple title to the Property to the Company free and clear of all such liens and encumbrances, other than as described above. Section 4.4. Acquisition of the Equity Interest for Investment. CNL has been informed that the Equity Interest has not been registered under the Securities Act of 1933, as amended or under any applicable state securities laws. CNL acknowledges that it will acquire ownership of the Equity Interest for its own account, for investment purposes only, and not with a view to the resale or distribution thereof in violation of any applicable securities laws. Section 4.5. No Conflict. CNL has delivered to the Company true and complete copies of the Certificate of Incorporation, as amended to date. The execution, delivery, and performance of and compliance with this Agreement will not, with or without the passage of time or giving of notice, result in any such violation, or be in conflict with or constitute a default under the Certificate of Incorporation of CNL, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of CNL or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to CNL, its business or operations or any of its assets or properties. Section 4.6. Brokers. No person is entitled to any brokerage, financial advisory, finder's or similar fee or commission payable by CNL or any of its affiliates in connection with the transactions contemplated by this Agreement or associated with the based upon arrangements made by or on behalf of CNL. ARTICLE V ASSIGNMENT Section 5.1. This Agreement and the Company's, Rose Acquisition's and CNL's rights hereunder may not be assigned by Company, Rose Acquisition or CNL without the prior written consent of the other. ARTICLE VI COUNTERPARTS Section 6.1. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and together constitute one original agreement. ARTICLE VII FURTHER ASSURANCES Section 7.1. The Company, Rose Acquisition and CNL agree to execute and deliver to the other such further documents or instruments as may be reasonable and necessary in furtherance of the performance of the terms, covenants and conditions of this Agreement. This paragraph shall survive the closing hereunder. ARTICLE VIII MISCELLANEOUS Section 8.1. This Agreement shall be binding upon and shall inure to the benefit of CNL, the Company, and Rose Acquisition and their respective successors and assigns. Section 8.2. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing this Agreement to be drafted. If any words or phrases in this Agreement shall have been stricken or otherwise eliminated, whether or not any other words or phrases have been added, this Agreement shall be construed as if the words or phrases so stricken or otherwise eliminated were never included in this Agreement and no implication or inference shall be drawn from the fact that said words or phrases were so stricken or otherwise eliminated. All terms and words used in this Agreement, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. Section 8.3. The captions, headings and titles of the several Sections contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Agreement or the intent of any provision thereof. Section 8.4. The invalidity or unenforceability of any provision of this Agreement shall not affect or impair any other provision of this Agreement. Section 8.5. This Agreement contains the entire agreement between CNL, Rose Acquisition and the Company, and any and all prior understandings and dealings heretofore had are merged herein and any agreement hereafter made shall be ineffective to change, modify or discharge this Agreement in whole or in part unless such agreement hereafter made is in writing and signed by CNL, Rose Acquisition and Company. Section 8.6. Any notice or other communication permitted or required to be given hereunder by one party to the other shall be in writing and shall be hand delivered, sent by overnight courier service requiring receipt or mailed by registered or certified United States Mail, postage prepaid, return receipt requested, to the party entitled or required to receive the same at the address specified below or at such other address as may hereafter be designated in writing by any such party: To the Company: c/o CNL Hospitality Corp. or Rose Acquisition CNL Center at City Commons 450 South Orange Avenue Orlando, Florida 32801 Attention: With a copy to: Lowndes, Drosdick, Doster, Kantor & Reed, P.A. 215 North Eola Avenue Orlando, Florida 32801 Attn.: Richard J. Fildes, Esq. To CNL: c/o CNL Hospitality Corp.. CNL Center at City Commons 450 South Orange Avenue Orlando, Florida 32801 Attention: With a copy to: Lowndes, Drosdick, Doster, Kantor & Reed, P.A. 215 North Eola Avenue Orlando, Florida 32801 Attn.: Richard J. Fildes, Esq. Section 8.7. None of the provisions of this Agreement shall be construed as having been made for the benefit of any creditor of either CNL, Rose Acquisition or the Company, nor shall any of such provisions be enforceable (except as otherwise required by law) by any person not a party hereto. Section 8.8. The Property being owned by the separate entities identified as "CNL" herein, the terms and provisions of this Agreement shall be applied separately to each of the CNL owner entities as to their respective ownership interests to be conveyed and the equity interests to be received in consideration thereof. SIGNATURES ON FOLLOWING PAGE IN WITNESS WHEREOF, the parties hereto have executed and acknowledged this Agreement as of the date first above written.
CNL HOSPITALITY PARTNERS, LP, CNL HOTEL RI-ORLANDO, LTD., a Delaware limited partnership a Florida limited partnership By: CNL Hospitality GP Corp., By: CNL RI-Orlando, LLC, a Florida a Delaware corporation, its General Partner limited liability company, its General partner By: CNL Hospitality Properties, Inc., By: /s/ Marcel Verbaas a Maryland corporation, as sole ------------------ member Name: Marcel Verbaas Title: Senior Vice President RFS PARTNERSHIP, L.P., By: /s/ C. Brian Strickland a Tennessee limited partnership -------------------------- Name: C. Brian Strickland Title: Executive Vice By: CNL Rose GP Corp., President a Delaware corporation, its General Partner CNL HOTEL CY-EDISON, LP, A Delaware limited partnership By: /s/ Marcel Verbaas --------------------------------- Name: Marcel Verbaas By: CNL CY-Edison, LLC, a Delaware Title: Senior Vice President limited liability company, its General partner CNL ROSE ACQUISITION CORP. By: CNL Hospitality Properties, Inc., a Delaware corporation a Maryland corporation, as sole member By:/s/ Marcel Verbaas By: /s/ C. Brian Strickland ---------------------- ------------------------ Name: Marcel Verbaas Name: C. Brian Strickland Title: Senior Vice President Title: Executive Vice President
EXHIBIT A PROPERTIES All land, buildings, improvements on the land and buildings, and all hereditaments and appurtenances to the improvements, the land and the buildings, including without limitation all easements, rights-of-way and other similar interests appertaining to the land and/or the buildings, if any, relating to:
Hotel Address City State Zip Code Owner Purchase Price Percent RFS/Rose - ----- ------- ---- ----- -------- ----- -------------- -------- -------- Interest Shares Wyndham 270 Concord Road Billerica MA 01821 CNL $23,610,899 Hospitality Partners, LP Wyndham 7675 East Union Ave Denver CO 80237 CNL $17,187,108 Hospitality 15.01% 150.1428 Partners, LP Hyatt 50 Alhambra Plaza Coral Gables FL 33134 CNL $37,550,869 Hospitality Partners, LP Residence Inn 11000 Westwood Blvd. Orlando FL 32821 CNL Hotel $33,010,349 6.33% 63.25893 RI-Orlando, Ltd. Courtyard 3105 Woodbridge Ave. Edison NJ 08837 CNL Hotel $15,988,849 3.06% 30.64001 CY-Edison TOTALS $127,384,074 24.4% 244.04174
EXHIBIT B SCHEDULE OF CONVEYANCE DOCUMENTS 1. Coral Gables Special Warranty Deed 2. Coral Gables Amendment to Memorandum of Lease 3. Coral Gables Assignment and Assumption of Lease Agreement (Operating Lease) 4. Coral Gables Special Warranty Bill of Sale 5. Coral Gables Assignment of Licenses, Permits, Plans, Contracts and Warranties 6. Coral Gables Assignment and Assumption of Owner, Lessee and Manager Non- Disturbance and Attornment Agreement 7. Coral Gables Assignment of Software 8. Sea World Special Warranty Deed 9. Sea World Amendment to Memorandum of Lease 10. Sea World Assignment and Assumption of Amended and Restated Lease Agreement (Operating Lease) 11. Sea World Special Warranty Bill of Sale 12. Sea World Assignment of Licenses, Permits, Plans, Contracts and Warranties 13. Sea World Assignment and Assumption of Amended and Restated Owner Agreement 14. Edison Deed 15. Edison Assignment and Assumption of Lease Agreement (Operating Lease) 16. Edison Special Warranty Bill of Sale 17. Edison Assignment of Licenses, Permits, Plans, Contracts and Warranties 18. Billerica Quitclaim Deed 19. Billerica Amendment to Memorandum of Lease 20. Billerica Assignment and Assumption of Lease Agreement (Operating Lease) 21. Billerica Special Warranty Bill of Sale 22. Billerica Assignment of Licenses, Permits, Plans, Contracts and Warranties 23. Denver Tech Special Warranty Deed 24. Denver Tech Amendment to Memorandum of Lease 25. Denver Tech Assignment and Assumption of Lease Agreement (Operating Lease) 26. Denver Tech Special Warranty Bill of Sale 27. Denver Tech Assignment of Licenses, Permits, Plans, Contracts and Warranties EX-3.2 4 e903177.txt SIXTH AMENDED AND RESTATED AGT Exhibit 3.2 SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF RFS PARTNERSHIP, L.P. THIS SIXTH AMENDED AND RESTATED AGREEMENT of Limited Partnership (the "Agreement") of RFS PARTNERSHIP, L.P., a Tennessee limited partnership (the "Partnership"), dated as of July 10, 2003, is entered into by and between CNL ROSE GP CORP., a Delaware corporation, and CNL ROSE ACQUISITION CORP., a Delaware corporation. PRELIMINARY STATEMENTS A. The sole General Partner and the sole Limited Partner desire to terminate the current Fifth Amended and Restated Partnership Agreement, dated January 2, 2001, by and among the Partnership and its partners; and B. Whereas, the parties wish to provide for the harmonious management of the Partnership pursuant to the terms hereof; and C. All of the parties have agreed to set forth in writing the terms and provisions of their agreement with respect to the Partnership. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree that, as of the date hereof, the Partnership shall be governed by and operated pursuant to the terms of this Agreement as hereinafter set forth. ARTICLE 1 EXISTENCE AND NAME ------------------ 1.1 TERMINATION OF FORMER PARTNERSHIP AGREEMENT. That certain Fifth Amended and Restated Agreement of Limited Partnership of RFS Partnership, L.P. is hereby terminated and shall be of no further force or effect. 1.2 EXISTENCE AND NAME. The Partnership was formed as a partnership under and pursuant to the provisions of the Tennessee Revised Uniform Limited Partnership Act, as amended from time to time (the "Act"), and shall be conducted under the name of "RFS PARTNERSHIP, L.P." The rights and liabilities of the Partners shall be as provided for in the Act if not otherwise expressly provided for in this Agreement. 1.3 REGISTERED AGENT AND OFFICE. The registered office of the Partnership shall be at 540 Gay Street, Knoxville, Tennessee 38120 and the registered agent for service of process at such office shall be The CT Corporation Service. 1.4 PARTNERS. The General Partner of the Partnership is CNL ROSE GP CORP., a Delaware corporation (the "General Partner"), and the Limited Partner of the Partnership is CNL ROSE ACQUISITION CORP., a Delaware corporation (the "Limited Partner"). The General Partner and the Limited Partner are each sometimes referred to herein as a "Partner" or together as the "Partners". 1.5 PARTNERSHIP PROPERTY. Legal title to all Partnership property and assets shall be taken and at all times held in the name of the Partnership. 1.6 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the Partnership shall be 450 South Orange Avenue, Orlando, Florida 32801, telephone (407) 650-1000, or such other location(s) as the General Partner in its discretion shall determine. ARTICLE 2 TERM ---- The Partnership shall continue in full force and effect until dissolved as provided in Article 12 hereof or by law. ARTICLE 3 PURPOSE OF BUSINESS ------------------- The purpose of the Partnership shall be to do any and all things reasonably incident thereto or in connection therewith. ARTICLE 4 CAPITAL AND CAPITAL ACCOUNTS ---------------------------- A separate capital account (each, a "Capital Account") shall be maintained for each Partner in accordance with the rules of Section 1.704-1(b)(2)(iv) of the U.S. Treasury Regulations (the "Treasury Regulations"), and this Article 4 shall be interpreted and applied in a manner consistent with said Section of the Treasury Regulations. The Partnership may adjust the Capital Accounts of its Partners to reflect revaluations of the Partnership property whenever the adjustment would be permitted under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the Capital Accounts of the Partners are so adjusted, (i) the Capital Accounts of the Partners shall be adjusted in accordance with Treasury Regulations Section 1.704-1 (b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain or loss, as computed for book purposes, with respect to such property and (ii) the Partners' distributive shares of depreciation, depletion, amortization and gain or loss, as computed for tax purposes, with respect to such property shall be determined so as to take account of the variation between the adjusted tax basis and book value of such property in the same manner as under Section 704(c) of the Code (defined below). In the event that Code Section 704(c) applies to Partnership property, the Capital Accounts of the Partners shall be adjusted in accordance with Treasury Regulations Section l.704.1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain and loss, as computed for book purposes, with respect to such property. The Capital Accounts shall be maintained for the sole purpose of allocating items of income, gain, loss and deduction among the Partners and shall have no effect on the amount of any distributions to any Partners in 2 liquidation or otherwise. The amounts of all distributions to the Partners shall be determined pursuant to Article 6. The capital of each Partner is set forth on Schedule A ("Capital Contributions"). No Partner shall be entitled, nor required, to make any contributions to the capital of; or loans to, the Partnership. Except as otherwise provided in this Agreement, whenever it is necessary to determine the Capital Account of any Partner for any purpose hereunder, the Capital Account of such Partner shall be determined after giving effect to all adjustments provided for in Article 5 hereof for the current fiscal year of the Partnership which shall be the calendar year ("Fiscal Year"), unless otherwise required by the Internal Revenue Code of 1986, as amended from time to time (the "Code") in respect of transactions effected prior to the date such determination is to be made. No Partner shall be entitled to withdraw any part of its Capital Account, or to receive any distribution from the Partnership except as specifically provided in this Agreement. ARTICLE 5 PROFITS AND LOSSES ------------------ All items of Partnership income, gain, loss and deduction as determined for book purposes shall be allocated among the Partners and credited or debited to their respective Capital Accounts in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to ensure to the maximum extent possible (i) that such allocations satisfy the economic effect equivalence test of Treasury Regulations Section 1.704-i (b)(2)(ii)(j) (as provided hereinafter) and (ii) that all allocations of items that cannot have economic effect (including credits and nonrecourse deductions) are allocated to the Partners in accordance with their interests in the Partnership, which, unless otherwise required by Code Section 704(b) and the Treasury Regulations promulgated thereunder, shall be in proportion to their Percentage Interests (as defined below). To the extent possible, items that can have economic effect shall be allocated in such a manner that the balance of each Partners' Capital Account at the end of any taxable year (increased by the sum of (a) such Partners "share of partnership minimum gain" as defined in Treasury Regulations Section 1.704-2(g)(i) and (b) such Partners' share of "partner nonrecourse debt minimum gain" as defined in Treasury Regulations Section 1.704-2(i)(5)) would be positive to the extent of the amount of cash that such would receive (or would be negative to the extent of the amount of cash that such would be required to contribute to the Partnership) if the Partnership sold all of its property for an amount of cash equal to the book value (as determined pursuant to Treasury Regulations Section 1.704-1 (b)(2)(iv)) of such property (reduced, but not below zero, by the amount of nonrecourse debt to which such property is subject) and all of the cash of the Partnership remaining after payment of all liabilities (other than nonrecourse liabilities) of the Partnership were distributed in liquidation immediately following the end of such taxable year in accordance with Article 6. For purposes of the foregoing the General Partner's percentage interest shall be one-tenths percent (0.10%) and the Limited Partner's percentage interest shall be ninety nine and nine tenths percent (99.90%). 3 ARTICLE 6 DISTRIBUTIONS ------------- 6.1 NET CASH FLOW. Distributions of the Partnership's cash shall be distributed one-tenths percent (0.1 0%) to the General Partner and ninety nine and nine tenths percent (99.90%) to the Limited Partner. 6.2 PROCEEDS AVAILABLE UPON DISSOLUTION. Upon the dissolution and winding up of the Partnership, the proceeds from the sale of the Partnership's assets, after (i) making payment of or provision for payment of all liabilities and obligations of the Partnership and (ii) the setting up of such reserves as the person required by law to wind up the Partnership's affairs may reasonably deem necessary for any contingent liabilities or obligations of the Partnership shall be distributed, as expeditiously as possible, one-tenths percent (0.10%) to the General Partner and ninety nine and nine tenths percent (99.90%) to the Limited Partner. ARTICLE 7 MANAGEMENT OF PARTNERSHIP ------------------------- RIGHTS AND POWERS OF THE GENERAL PARTNER. The General Partner shall have the exclusive right to manage the business of; and conduct the day-to-day operations of, the Partnership and is hereby authorized to take any action of any kind and to do anything and everything it deems necessary in conjunction therewith including engaging in any kind of activity and performing and carry out contracts of any kind necessary to, in connection with or incidental to the accomplishment of the purposes of the Partnership, as may be lawfully carried on or performed by a partnership under the laws of Tennessee. ARTICLE 8 RIGHTS AND LIABILITIES OF THE LIMITED PARTNER --------------------------------------------- 8.1 NO RIGHT TO MANAGE OR REPRESENT PARTNERSHIP. The Limited Partner shall not take part in the management of the business of the Partnership, transact any business for the Partnership, or have the power to sign for or to bind the Partnership to any agreement or documents, said powers being vested solely and exclusively in the General Partner. 8.2 LIMITATIONS ON LIABILITY. The Limited Partner shall not have any personal liability whatsoever, whether to the Partnership, to any of the Partners, or to the creditors of the Partnership, for the debts of the Partnership or for any of the losses of the Partnership except for (i) the amount committed by it to the capital of the Partnership as set forth on Schedule A hereto and (ii) for the amount of any distributions required to be returned to the Partnership in accordance with the provisions of the Act. 4 ARTICLE 9 WITHDRAWAL, BANKRUPTCY, INSOLVENCY OR DISSOLUTION OF THE GENERAL PARTNER ------------------------------------- 9.1 WITHDRAWAL OF A GENERAL PARTNER. The General Partner may not withdraw as a General Partner. 9.2 TERMINATED GENERAL PARTNER. Upon the adjudication of bankruptcy, insolvency or dissolution of the General Partner, the Partnership shall be dissolved and its business wound up in accordance with Article 12 hereof. ARTICLE 10 TRANSFER OF PARTNERSHIP INTERESTS --------------------------------- No assignment, transfer, sale, hypothecation, mortgage, pledge or encumbrance, directly, indirectly, by operation of law or otherwise, of all or any portion of the Limited Partner's right, title and interest in the Partnership, including its rights to a return of its Capital Contributions, a distribution of the Partnership's property and all other rights under this Agreement, shall be permitted without the consent of the General Partner, which consent may be withheld by the General Partner in its sole and absolute discretion. ARTICLE 11 LIABILITY AND INDEMNIFICATION ----------------------------- 11.1 LIABILITY OF GENERAL PARTNER. The General Partner and its officers, directors, partners, employees, agents, affiliates, successors or assigns shall not be liable to the Partnership or the Limited Partners for any loss or damage incurred by reason of any act performed or omitted in connection with the activities of the Partnership or in dealing with third parties on behalf of the Partnership, if such act or omission was determined, in good faith, to be in the best interests of the Partnership and if such act or omission does not constitute fraud, gross negligence or breach of fiduciary duty or constitute a breach of this Agreement. 11.2 INDEMNIFICATION OF GENERAL PARTNER. The Partnership, its receiver or its trustee, shall indemnify, save harmless and pay all judgments and claims against the General Partner and its officers, directors, partners, employees, agents, affiliates, successors and assigns, for any liability, loss or damage incurred by them or by the Partnership by reason of any act performed or omitted to be performed in connection with the activities of the Partnership or in dealing with third parties on behalf of the Partnership, including costs and attorneys' fees (which attorneys' fees may be paid as incurred) and any amounts expended in the settlement of any claims of liability, loss or damage provided that the act or omission of the General Partner was determined, in good faith, to be in the best interests of the Partnership and does not constitute fraud, gross negligence, breach of fiduciary duty or breach of this Agreement by the General Partner and provided further that any such indemnification shall be recoverable only from assets of the Partnership and not from the assets of any Limited Partner. The Partnership shall not pay for any 5 insurance covering liability of the General Partner or of its officers, directors, partners, employees, agents, affiliates, successors and assigns for actions or omissions for which indemnification is not permitted hereunder; provided, that nothing contained herein shall preclude the Partnership from purchasing and paying for such types of insurance, including extended coverage liability and casualty and worker's compensation, as would be customary for any person owning comparable property and engaged in a similar business or from naming the General Partner and any of its affiliates as additional insured parties thereunder. 11.3 CONTRACTUAL PROVISIONS. The General Partner shall have the right and authority to require a provision in all Partnership contracts that it not be personally liable thereon and that the person or entity contracting with the Partnership is to look solely to the Partnership and its assets for satisfaction. 11.4 INDEMNIFICATION OF LIMITED PARTNER. The Partnership will indemnify, to the extent of Partnership assets, the Limited Partner against any claim of liability asserted against a Limited Partner (i) because it is a Limited Partner of the Partnership or (ii) arising from or in connection with the Partnership. ARTICLE 12 DISSOLUTION AND TERMINATION --------------------------- 12.1 DISSOLUTION. The Partnership shall be dissolved and its business wound up, upon the earliest to occur of: (a) The date of disposition of all, or substantially all, of the assets of the Partnership; (b) The date of adjudication of bankruptcy, insolvency or dissolution of the General Partner, or (c) Such other date as is determined by the General Partner in its sole and absolute discretion. 12.2 WINDUP. Upon dissolution of the Partnership, and after payment of all of the debts, liabilities and obligations of the Partnership and the expenses of dissolution and liquidation and the setting up of any reserves for contingencies that the General Partner deems necessary, distributions in liquidation of the Partnership shall be made in the manner set forth in Section 6.2. 12.3 TERMINATION AND CANCELLATION. Upon completion of the liquidation of the Partnership, the Partnership shall terminate and the General Partner shall have the authority to execute and record a certificate of cancellation of the Partnership, as well as any and all other documents required to effectuate the dissolution and termination of the Partnership. 6 ARTICLE 13 NOTICES ------- All notices required or permitted by this Agreement shall be in writing and shall be delivered by hand, sent by registered or certified mail, return receipt requested, by a recognized overnight courier (such as Federal Express) or sent by confirmed facsimile transmission addressed as set forth on Schedule A or to such other address as shall, from time to time, be supplied in writing by such Partner. Notices personally delivered, sent by facsimile or sent by overnight courier shall be deemed given on the date of delivery and notices mailed in accordance with the foregoing shall be deemed given upon the earlier of receipt by the addressees, as evidenced by the return receipt thereof, or three (3) days after deposit in the U.S. Mails. ARTICLE 14 ACCOUNTING, REPORTING AND STATEMENTS ------------------------------------ PARTNERSHIP RECORDS AND TAX RETURNS. The General Partner shall keep, or cause to be kept, full and accurate records of all transactions of the Partnership. The General Partner shall keep the financial records of the Partnership on the cash basis for financial statement and tax purposes unless otherwise required by the Code. The Limited Partner and its designated representative shall be permitted access during reasonable business hours to all records of the Partnership at the principal office of the Partnership and they shall have the right to make copies thereof. Within ninety 90 days after the end of each fiscal year of the Partnership, the General Partner, at the expense of the Partnership, shall cause to be prepared by the accountants auditing the Partnership's financial statements, a U.S. partnership return of income for the Partnership; and, in connection therewith, shall make any available or necessary elections (including elections with respect to the useful lives of the assets of the Partnership and the rates on such assets). Within such ninety (90) days period, the Partnership will furnish to the Limited Partner information required to be set forth in such Partner's Federal income tax return. ARTICLE 15 MISCELLANEOUS ------------- 15.1 SUCCESSORS. This Agreement shall be binding upon the parties hereto, their heirs, administrators, successors, executors and assigns, and the parties hereto covenant and agree that they themselves and their respective heirs, executors, successors, administrators, trustees, representatives and assigns will execute any and all instruments, releases, assignments and consents that may be reasonably required of them to more fully execute the provisions of this Agreement. 15.2 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall serve as an original for all purposes, but all copies of which shall constitute but one and the same Agreement. 7 15.3 GOVERNING LAW; JURISDICTION; VENUE. This Agreement shall be governed by and shall be construed and enforced in accordance with the laws of the State of New York. The parties hereto agree to submit themselves to the jurisdiction of the state and federal courts in the State of Florida in connection with any claims or controversy arising out of this Agreement and that venue for any such actions or proceedings may be laid in Orange County, Florida, and each party waives any claim that the same is an inconvenient forum. 15.4 PRONOUNS AND PLURALS, HEADINGS. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns, pronouns and verbs shall include the plural and vice versa and the word "person" shall include a corporation or other form of association or entity. All headings set forth in this Agreement are intended for convenience only and shall not control or affect the meaning, construction or effect of this Agreement or of any of the provisions thereof. 15.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire agreement of the parties hereto with respect to the transactions contemplated hereby, and it is hereby agreed that any prior oral or written agreements concerning the subject matter hereof shall be null and void. This Agreement shall not be amended without the prior written approval of the General Partner. 15.6 WAIVER AND SEVERABILITY. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any party. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. 15.7 DAMAGES. Nothing contained herein shall be construed to prevent any party hereto from seeking and recovering from any other party or parties, damages sustained as a result of a breach of any term or provision of this Agreement. In the event that any party hereto brings suit for the collection of any damages resulting from, or the injunction of any action constituting, a breach of any of the terms or provisions of this Agreement, then the party or parties found to be at fault shall pay all reasonable court costs and attorneys' fees of the nondefaulting parties. SIGNATURES ON FOLLOWING PAGE 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Limited Partnership as of the day and year first above written. GENERAL PARTNER: CNL ROSE GP CORP. By: /s/ Marcel Verbaas ------------------------------------------ Name: Marcel Verbaas Title: Senior Vice President LIMITED PARTNER: CNL ROSE ACQUISITION CORP. By: /s/ Marcel Verbaas ------------------------------------------ Name: Marcel Verbaas Title: Senior Vice President 9 SCHEDULE A PARTNERS Initial Name and Address Capital Contribution ---------------- -------------------- GENERAL PARTNER: [$0.10] CNL Rose GP Corp. 450 South Orange Avenue Orlando, FL 32801 LIMITED PARTNER: [$99.90] CNL Rose Acquisition Corp. 450 South Orange Avenue Orlando, FL 32801 EX-10.3 5 e903050.txt CONTINUING GUARANTY AGREEMENT Exhibit 10.3 CONTINUING GUARANTY AGREEMENT THIS CONTINUING GUARANTY AGREEMENT (this "Guaranty") is entered into as of July 10, 2003, by each of CNL Hospitality Properties, Inc., a Maryland corporation, CNL Rose GP Corp., a Delaware corporation, and CNL Rose Acquisition Corp., a Delaware corporation (collectively, "Guarantors" and each individually, a "Guarantor") in favor of BANK OF AMERICA, N.A., as administrative agent (in such capacity, "Administrative Agent") for the banks and other financial institutions ("Lenders") that are parties to the Credit Agreement described below. RFS Partnership, L.P., a Tennessee limited partnership ("Operating Company"), and RFS Financing Partnership, L.P., a Tennessee limited partnership ("Financing;" Operating Company and Financing are each a "Borrower" and collectively, "Borrowers"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "Credit Agreement"), among Borrowers, CNL Hospitality Properties, Inc., Lenders, and Administrative Agent, pursuant to which Lenders have agreed, among other things, to make Loans to Borrowers; Capitalized terms not defined herein shall have the meanings assigned to such terms in the Credit Agreement; The Borrowers are members of an affiliated group of entities that includes each Guarantor, The Borrowers and Guarantors are engaged in related businesses, and each Guarantor will derive substantial direct and indirect benefit from the making of the Loans; It is a condition precedent to the obligations of Lenders to make the Loans that Guarantors shall execute and deliver this Guaranty in favor of Administrative Agent for the benefit of Lenders; NOW THEREFORE, FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and in consideration of the Loans, any credit and/or financial accommodation heretofore or hereafter from time to time made or granted to Borrowers under the Loan Documents by Administrative Agent and Lenders, each of the undersigned Guarantors hereby jointly and severally furnishes its guaranty of the Guaranteed Obligations (as hereinafter defined) as follows: 1. GUARANTY. Each of the Guarantors hereby, jointly and severally, absolutely, irrevocably and unconditionally guarantees, as a guarantee of payment and not merely as a guarantee of collection, prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of any and all existing and future indebtedness and liabilities of every kind, nature and character, direct or indirect, absolute or contingent, liquidated or unliquidated, voluntary or involuntary, of Borrowers to Administrative Agent and Lenders arising under the Credit Agreement and the Loan Documents and all instruments, agreements and other documents of every kind and nature now or hereafter executed in connection with any Loan Document (including all renewals, extensions and modifications thereof and all costs, attorneys' fees and expenses incurred by the Lender in connection with the collection or enforcement thereof) (collectively, the "Guaranteed Obligations"). The books and records of Administrative Agent or any Lender showing the amount of the Guaranteed Obligations shall be admissible in evidence in any action or proceeding, and shall be binding upon Guarantor and conclusive for the purpose of establishing the amount of the Guaranteed Obligations. This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Guaranteed Obligations or any instrument or agreement evidencing any Guaranteed Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor, or by any fact or circumstance relating to the Guaranteed Obligations which might otherwise constitute a defense to the obligations of any Guarantor under this Guaranty. Notwithstanding any contrary provision, it is the intention of each Guarantor and Administrative Agent that the amount of the Guaranteed Obligations guaranteed by each Guarantor by this Guaranty shall be in, but not in excess of, the maximum amount permitted by fraudulent conveyance, fraudulent transfer, or similar laws applicable to each Guarantor. Accordingly, notwithstanding anything to the contrary contained in this Guaranty or any other agreement or instrument executed in connection with the payment of any of the Guaranteed Obligations, the amount of the Guaranteed Obligations guaranteed by each Guarantor by this Guaranty shall be limited to an aggregate amount equal to the largest amount that would not render each Guarantor's obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provision of any applicable state law. 2. NO SETOFF OR DEDUCTIONS; TAXES. Each Guarantor represents and warrants that it is incorporated or formed, and resides in, the United States of America. All payments by each Guarantor hereunder shall be paid in full, without setoff or counterclaim or any deduction or withholding whatsoever, including, without limitation, for any and all present and future taxes. If each Guarantor must make a payment under this Guaranty, each Guarantor represents and warrants that it will make the payment from one of its U.S. resident offices to Administrative Agent or each Lender so that no withholding tax is imposed on the payment. If notwithstanding the foregoing, each Guarantor makes a payment under this Guaranty to which withholding tax applies, or any taxes (other than taxes on net income (a) imposed by the country or any subdivision of the country in which the principal office or actual lending office of Administrative Agent or any Lender is located and (b) measured by the United States taxable income of Administrative Agent or any Lender would have received if all payments under or in respect of this Guaranty were exempt from taxes levied by such Guarantor's country) are at any time imposed on any payments under or in respect of this Guaranty including, but not limited to, payments made pursuant to this Paragraph 2, each Guarantor shall pay all such taxes to the relevant authority in accordance with applicable law such that Administrative Agent or any Lender receives the sum it would have received had no such deduction or withholding been made and shall also pay to Administrative Agent or any Lender, on demand, all additional amounts which Administrative Agent or any Lender specifies as necessary to preserve the after-tax yield Administrative Agent or such Lender would have received if such taxes had not been imposed. Each Guarantor shall promptly provide Administrative Agent or any Lender with an original receipt or certified copy issued by the relevant authority evidencing the payment of any such amount required to be deducted or withheld. 3. NO TERMINATION. This Guaranty is a continuing and irrevocable guaranty of all Guaranteed Obligations now or hereafter existing and shall remain in full force and effect until all Guaranteed Obligations and any other amounts payable under this Guaranty are indefeasibly 2 paid and performed in full and any commitments of the Lender or facilities provided by the Lender with respect to the Guaranteed Obligations are terminated. At Administrative Agent or any Lender's option, all payments under this Guaranty shall be made to an office of Administrative Agent or any Lender located in the United States and in Dollars. 4. WAIVER OF NOTICES. Each Guarantor waives notice of the acceptance of this Guaranty and of the extension or continuation of the Guaranteed Obligations or any part thereof. Each Guarantor further waives presentment, protest, notice, dishonor or default, notice of intention to accelerate, notice of acceleration, demand for payment and any other notices to which each Guarantor might otherwise be entitled. 5. SUBROGATION. Each Guarantor shall exercise no right of subrogation, contribution or similar rights with respect to any payments it makes under this Guaranty until all of the Guaranteed Obligations and any amounts payable under this Guaranty are indefeasibly paid and performed in full and any commitments of Lenders or facilities provided by Lenders with respect to the Guaranteed Obligations are terminated. If any amounts are paid to any Guarantor in violation of the foregoing limitation, then such amounts shall be held in trust for the benefit of Lenders and shall forthwith be paid to Lenders to reduce the amount of the Guaranteed Obligations, whether matured or unmatured. 6. WAIVER OF SURETYSHIP DEFENSES. Each Guarantor agrees that Lenders may, at any time and from time to time, and without notice to any Guarantor, make any agreement with Borrowers or with any other person or entity liable on any of the Guaranteed Obligations or providing collateral as security for the Guaranteed Obligations, for the extension, renewal, payment, compromise, discharge or release of the Guaranteed Obligations or any Collateral (in whole or in part), or for any modification or amendment of the terms thereof or of any instrument or agreement evidencing the Guaranteed Obligations or the provision of Collateral Properties, all without in any way impairing, releasing, discharging or otherwise affecting the obligations of Guarantors under this Guaranty. Each Guarantor waives any defense arising by reason of any disability or other defense of Borrowers or any other guarantor, or the cessation from any cause whatsoever of the liability of Borrowers, or any claim that each Guarantor's obligations exceed or are more burdensome than those of Borrowers and waives the benefit of any statute of limitations affecting the liability of each Guarantor hereunder to the fullest extent permitted by law. Each Guarantor waives any right to enforce any remedy which Administrative Agent or any Lender now has or may hereafter have against Borrowers and waives any benefit of and any right to participate in any security now or hereafter held by Administrative Agent for the benefit of Lenders. Further, each Guarantor consents to the taking of, or failure to take, any action which might in any manner or to any extent vary the risks of each Guarantor under this Guaranty or which, but for this provision, might operate as a discharge of each Guarantor. 7. EXHAUSTION OF OTHER REMEDIES NOT REQUIRED. The obligations of each Guarantor hereunder are those of primary obligor, and not merely as surety, and are independent of the Guaranteed Obligations. Each Guarantor waives diligence by Administrative Agent or any Lender and action on delinquency in respect of the Guaranteed Obligations or any part thereof, including, without limitation any provisions of law requiring Administrative Agent or any Lender to exhaust any right or remedy or to take any action against Borrowers, any other 3 guarantor or any other person, entity or property before enforcing this Guaranty against each Guarantor. 8. REINSTATEMENT. Notwithstanding anything in this Guaranty to the contrary, this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any portion of the Guaranteed Obligations is revoked, terminated, rescinded or reduced or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of Borrowers or any other person or entity or otherwise, as if such payment had not been made and whether or not the Lender is in possession of or has released this Guaranty and regardless of any prior revocation, rescission, termination or reduction. 9. SUBORDINATION. Each Guarantor hereby subordinates the payment of all obligations and indebtedness of Borrowers owing to each Guarantor, whether now existing or hereafter arising, including but not limited to any Obligation of Borrowers to any Guarantor as subrogee of Administrative Agent or any Lender or resulting from each Guarantor's performance under this Guaranty, to the indefeasible payment in full of all Guaranteed Obligations. If Administrative Agent or any Lender so requests, any such obligation or indebtedness of Borrowers to each Guarantor shall be enforced and performance received by each Guarantor as trustee for Administrative Agent or any Lender and the proceeds thereof shall be paid over to Administrative Agent or any Larder on account of the Guaranteed Obligations, but without reducing or affecting in any manner the liability of each Guarantor under this Guaranty. 10. INFORMATION. Each Guarantor agrees to furnish promptly to Administrative Agent or any Lender any and all financial or other information regarding such Guarantor or its property as Administrative Agent or any Lender may reasonably request in writing. 11. STAY OF ACCELERATION. In the event that acceleration of the time for payment of any of the Guaranteed Obligations is stayed, upon the insolvency, bankruptcy or reorganization of Borrowers or any other person or entity, or otherwise, all such amounts shall nonetheless be payable by each Guarantor immediately upon demand by Administrative Agent or any Lender. 12. EXPENSES. Each Guarantor shall pay on demand all out-of-pocket expenses (including reasonable attorneys' fees and expenses and the allocated cost and disbursements of internal legal counsel) in any way relating to the enforcement or protection of the rights of Administrative Agent or any Lender under this Guaranty including any incurred in the preservation, protection or enforcement of any rights of Administrative Agent or any Lender in any case commenced by or against any Guarantor under the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute. The obligations of Guarantor under the preceding sentence shall survive termination of this Guaranty. 13. AMENDMENTS. No provision of this Guaranty may be waived, amended, supplemented or modified, except by a written instrument executed by Administrative Agent for the benefit of the Lender and each Guarantor. 14. NO WAIVER; ENFORCEABILITY. No failure by Administrative Agent or any Lender to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy or power hereunder 4 preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or in equity. The unenforceability or invalidity of any provision of this Guaranty shall not affect the enforceability or validity of any other provision herein. 15. ASSIGNMENT; GOVERNING LAWS; JURISDICTION. This Guaranty shall (a) bind each Guarantor and its successors and assigns, provided that each Guarantor may not assign its rights or obligations under this Guaranty without the prior written consent of Administrative Agent and Lenders (and any attempted assignment without such consent shall be void), (b) inure to the benefit of Administrative Agent and Lenders and its successors and assigns and Administrative Agent or any Lender may, without notice to any Guarantor and without affecting any Guarantor's obligations hereunder, assign or sell participations in the Guaranteed Obligations and this Guaranty, in whole or in part, and (c) be governed by the internal laws of the State of New York without application of its conflicts of laws principles. Each Guarantor hereby irrevocably (i) submits to the non-exclusive jurisdiction of any United States Federal or State court sitting in New York, New York in any action or proceeding arising out of or relating to this Guaranty, and (ii) waives to the fullest extent permitted by law any defense asserting an inconvenient forum in connection therewith. Service of process by Administrative Agent or any Lender in connection with such action or proceeding shall be binding on each Guarantor if sent to such Guarantor by registered or certified mail at its address specified in Schedule [ ] of the Credit Agreement. Each Guarantor agrees that Administrative Agent or any Lender may disclose to any prospective purchaser and any purchaser of all or part of the Guaranteed Obligations any and all information in the possession of Administrative Agent or any Lender concerning each Guarantor, this Guaranty and any security for this Guaranty. 16. CONDITION OF BORROWERS. Each Guarantor acknowledges and agrees that it has the sole responsibility for, and has adequate means of, obtaining from Borrowers such information concerning the financial condition, business and operations of Borrowers as such Guarantor requires, and that neither Administrative Agent nor any Lender has any duty, and each Guarantor is not relying on Administrative Agent or any Lender at any time, to disclose to each Guarantor any information relating to the business, operations or financial condition of Borrowers. 17. SETOFF. If and to the extent any payment is not made when due hereunder, Administrative Agent and each Lender may setoff and charge from time to time any amount so due against any or all of Guarantors' accounts or deposits with Administrative Agent or such Lender. 18. OTHER GUARANTEES. Unless otherwise agreed by Administrative Agent and Lenders and Guarantors in writing, this Guaranty is not intended to supersede or otherwise affect any other guaranty now or hereafter given by Guarantors for the benefit of the Lender or any term or provision thereof. 19. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and warrants that (a) it is duly organized and in good standing under the laws of the jurisdiction of its organization and has full capacity and right to make and perform this Guaranty, and all necessary authority has been obtained; (b) this Guaranty constitutes its legal, valid and binding obligation 5 enforceable in accordance with its terms; (c) the making and performance of this Guaranty does not and will not violate the provisions of any applicable law, regulation or order, and does not and will not result in the breach of, or constitute a default or require any consent under, any material agreement, instrument, or document to which it is a party or by which it or any of its property may be bound or affected, (d) all consents, approvals, licenses and authorizations of, and filings and registrations with, any governmental authority required under applicable law and regulations for the making and performance of this Guaranty have been obtained or made and are in full force and effect; (e) by virtue of its relationship with Borrowers, the execution, delivery and performance of this Guaranty is for the direct benefit of each Guarantor and each has received adequate consideration for this Guaranty; and (f) the financial information that has been delivered to Lenders by or on behalf of each Guarantor is complete and correct in all respects and accurately presents the financial condition and the operational results of such Guarantor and since the date of the most recent financial statements delivered to Lenders, there has been no material adverse change in the financial condition or operational results of such Guarantor. 20. LOAN DOCUMENTS. By execution hereof, each Guarantor covenants and agrees that certain representations and warranties set forth in the Loan Documents are applicable to Guarantors, and each Guarantor reaffirms that each such representation and warranty is true and correct in every material respect. Each Guarantor acknowledges and agrees that this Guaranty is subject to the offset provisions of the Loan Documents in favor of Administrative Agent. If the Credit Agreement shall cease to remain in effect for any reason whatsoever during any period and any part of the Guaranteed Obligations remain unpaid, then the terms, covenants, and agreements incorporated herein by reference shall nevertheless continue in full force and effect as obligations of each Guarantor under this Guaranty. Each Guarantor shall take, or refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Event of Default is caused by the failure to take or refrain from taking such action, as the case may be. 21. AUTHORITY OF ADMINISTRATIVE AGENT. Each Guarantor acknowledges that the rights and responsibilities of Administrative Agent under this Guaranty with respect to any action taken by Administrative Agent or the exercise or non-exercise by Administrative Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guaranty shall, as between Administrative Agent and Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between Administrative Agent and such Guarantor, Administrative Agent shall be conclusively presumed to be acting as agent for Lenders with full and valid authority so to act or refrain from acting, and no Guarantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 22. WAIVER OF JURY TRIAL; AND FINAL AGREEMENT. TO THE EXTENT ALLOWED BY APPLICABLE LAW, EACH GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON OR ARISING OUT OF THIS GUARANTY. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN 6 THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 23. COUNTERPARTS. This Guaranty may be executed by one or more of the parties hereto on any number of separate counterparts and all of the said counterparts taken together shall be deemed to constitute one and the same instrument. REMAINDER OF PAGE INTENTIONALLY BLANK SIGNATURE PAGES FOLLOW. 7 IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of the date first above written. GUARANTORS: CNL HOSPITALITY PROPERTIES, INC. By: /s/ C. Brian Strickland --------------------------------------- Name: C. Brian Strickland Title: Executive Vice President CNL ROSE GP CORP. By: /s/ C. Brian Strickland --------------------------------------- Name: C. Brian Strickland Title: Executive Vice President CNL ROSE ACQUISITION CORP. By: /s/ C. Brian Strickland --------------------------------------- Name: C. Brian Strickland Title: Executive Vice President 8 EX-10.4 6 e902961.txt SECURITY AND PLEDGE AGT Exhibit 10.4 SECURITY AND PLEDGE AGREEMENT (STOCK) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by RFS Partnership, L.P. a limited partnership organized under the laws of the State of Tennessee ("PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. Pledgor and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Operating Company and Financing are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent, pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the sole shareholder of RFS TRS Holdings, Inc., a Tennessee corporation ("CORPORATION"); It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "ARTICLES OF INCORPORATION" means the Articles of Incorporation of Corporation dated as of November 13, 2000, as the same may be amended, modified or supplemented from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means the shares of capital stock of Corporation listed on Schedule I hereto. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, each Borrower and the Pledgor arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PLEDGED CERTIFICATES" means all stock certificates evidencing the Interests and all other stock certificates, options or rights of any nature whatsoever that may be issued or granted by Corporation to the Pledgor while this Agreement is in effect. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests and in any event, shall include, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Articles of Incorporation, as the case may be, to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Articles of Incorporation by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the 2 properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE II to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee 38120, and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is (i) the sole shareholder of Corporation; and (ii) a complete and correct copy of the Articles of Incorporation has been delivered to each Lender; (k) the Pledgor is a limited partnership duly organized and validly existing under the laws of the State of Tennessee; 3 (l) the Interests constitute all the issued and outstanding shares of capital stock of Corporation, and the shares of capital stock included in the Interests have been duly and validly issued and are fully paid and non-assessable; and (m) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Articles of Incorporation or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) If the Pledgor shall, as a result of its ownership of the Interests, become entitled to receive or shall receive any ownership interest or other share certificate (including, without limitation, any certificate representing a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any of the Interests, or otherwise in respect thereof, the Pledgor shall accept the same as the Administrative Agent's agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent hereunder as additional collateral security for the Obligations. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Corporation or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation 4 statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. STOCK POWERS. Concurrently with the delivery to the Administrative Agent of each certificate representing one or more shares of Pledged Certificates to the Administrative Agent, the Pledgor shall deliver an undated stock power covering such certificate, duly executed in blank by the Pledgor with, if the Administrative Agent so requests, signatures guaranteed. 7. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Corporation and to exercise all voting, member and manager rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement; PROVIDED, HOWEVER, that this restriction under this PARAGRAPH shall be void to the extent that same may constitute a default under that certain Indenture dated February 26, 2003, as amended, by RFS Partnership, L.P. and RFS Financing 2002, Inc., as Issuers, RFS Hotel Investors, Inc. and RFS Leasing VII, Inc., as Guarantors, and U.S. Bank, National Association, as Trustee. 8. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Interests shall be registered in the name of the Administrative Agent or its nominee, and (whether or not so registered) the Administrative Agent or its nominee may thereafter exercise (A) all voting, membership and other rights pertaining to the Interests and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Interests as if it were the 5 absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of Corporation, or upon the exercise by the Pledgor or the Administrative Agent of any right, privilege or option pertaining to such shares or certificates of or evidencing the Interests, and in connection therewith, the right to deposit and deliver any and all of the Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 9. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts 6 against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other shareholder of Corporation or owner of any ownership interest in Corporation, for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 10 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 10. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Corporation or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of 7 redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 11. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 10 hereof, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Interests, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Pledgor will cause Corporation to (i) execute and deliver, and cause the officers of Corporation to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Interests, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Interests, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause Corporation to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 1l (a) of the Securities Act. (b) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 10 hereof, the Administrative Agent may resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Administrative Agent than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a 8 commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Interests. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Interests pursuant to this Section valid and binding and in compliance with any and all other applicable Laws. The Pledgor further agrees that a continuing breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. 12. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Corporation shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 13. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any Loan Party or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Corporation and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 9 14. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 15. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 16. SEVERABILITY. Any provision of this Agreement which is 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. 17. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 18. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 19. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 20. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN 10 RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 21. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 20, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 22. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 23. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 24. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 25. THE ADMINISTRATIVE AGENT NOT A SHAREHOLDER. Nothing contained in this Agreement shall be construed or interpreted to transfer to the Administrative Agent any of the obligations of a shareholder of Corporation; or (b) to 11 constitute the Administrative Agent or any of the Lenders a shareholder of Corporation. 26. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 27. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. 12 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: RFS PARTNERSHIP, L.P. By: CNL ROSE GP CORP., its General Partner By: /s/ Marcel Verbaas -------------------------------------- Name: Marcel Verbaas Title: Senior Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------ Ansel McDowell Principal Signature Page to Security and Pledge Agreement RFS Partnership, L.P./RFS TRS Holdings, Inc. SCHEDULE I DESCRIPTION OF INTERESTS STOCK CERTIFICATE ISSUER CLASS OF STOCK NO. NO. OF SHARES RFS TRS Holdings, Inc. Common 2 1000 14 SCHEDULE I UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Tennessee Secretary of State Financing Statement 15 EX-10.5 7 e902962.txt SECURITY AND PLEDGE AGT (GP/LP) Exhibit 10.5 SECURITY AND PLEDGE AGREEMENT (GP/LP) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by CNL ROSE ACQUISITION CORP., a Delaware corporation (the "PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. RFS Partnership, L.P., a Tennessee limited partnership ("PARTNERSHIP"), and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Partnership and Financing are each a "BORROWER" and collectively, "BORROWERS") are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the limited partner of Partnership; It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may from time to time be amended, supplemented or otherwise modified from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means all distributions, allocations, proceeds, fees, preferences, payments, and other economic benefits which Pledgor now is or may become entitled to receive with respect to its partnership interests in Partnership. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, Partnership, the Pledgor, and each Borrower arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PARTNERSHIP AGREEMENT" means the 6th Amended and Restated Partnership Agreement of Partnership, dated as of July 10, 2003, as the same may be further amended, modified or supplemented from time to time. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests, including, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Partnership Agreement to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Partnership Agreement by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor or Borrowers), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; 2 (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE I to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 450 South Orange Avenue, Orlando, FL, 32801 and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is a limited partner of Partnership and its percentage interests in Partnership as limited partner is 99.9%; and a complete and correct copy of the Partnership Agreement has been delivered to each Lender; (k) the Pledgor is a Corporation duly organized and validly existing under the laws of the State of Delaware; and (l) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Partnership Agreement or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Partnership or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to 3 be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Partnership and to exercise all voting and partnership rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement. 7. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which 4 may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and 5 things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other partner of Partnership for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 9 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 9. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Borrowers or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale 6 or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 10. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Borrowers shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 11. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of either Borrower or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Borrowers and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 12. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 13. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 14. SEVERABILITY. Any provision of this Agreement which is 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. 7 15. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 16. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 18. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 19. WAIVERS. 8 (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 19, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 20. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 21. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 22. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 23. THE ADMINISTRATIVE AGENT NOT A PARTNER. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to the Administrative Agent any of the obligations of a partner of Partnership, (b) to constitute the Administrative Agent or any of the Lenders a partner of Partnership, or (c) to enable Administrative Agent (or any purchaser of the Collateral pursuant to the exercise of any remedies hereunder) to become a partner of Partnership or acquire any ownership interests in Partnership. 24. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 25. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. 9 REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. 10 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: CNL ROSE ACQUISITION CORP., a Delaware corporation By:/s/ C. Brian Strickland --------------------------------------- Name: C. Brian Strickland Title: Executive Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------- Ansel McDowell Principal Signature Page to Security and Pledge Agreement CNL Rose Acquisition Corp./RFS Partnership, L.P. SCHEDULE I UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Delware Secretary of State Financing Statement 12 EX-10.6 8 e902964.txt SECURITY AND PLEDGE AGREEMENT (STOCK) Exhibit 10.6 SECURITY AND PLEDGE AGREEMENT (STOCK) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by CNL Hospitality Properties, Inc. a corporation organized under the laws of the State of Maryland ("PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. RFS Partnership, L.P., a Tennessee limited partnership ("OPERATING COMPANY"), and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Operating Company and Financing are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent, pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the sole shareholder of CNL Rose Acquisition Corp., a Delaware corporation ("Corporation"); It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "ARTICLES OF INCORPORATION" means the Articles of Incorporation of Corporation dated as of May 5, 2003, as the same may be amended, modified or supplemented from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means all right, title, and interest with respect to all distributions, allocations, proceeds, fees, preferences, payments, and other economic benefits which Pledgor now is or may become entitled to receive with respect to its ownership of the capital stock of Corporation listed on Schedule I hereto. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, each Borrower and the Pledgor arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests and in any event, shall include, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Articles of Incorporation, as the case may be, to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Articles of Incorporation by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; 2 (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE I to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 450 South Orange Avenue, 12th Floor, Orlando, Florida 32801-3336 and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is (i) the sole shareholder of Corporation; and (ii) a complete and correct copy of the Articles of Incorporation has been delivered to each Lender; (k) the Pledgor is a corporation duly organized and validity existing under the laws of the State of Maryland; and 3 (l) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Articles of Incorporation or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) In connection with the execution hereof, the Pledgor shall deliver to the Administrative Agent all stock certificates evidencing Pledgor's ownership of the capital stock of Corporation listed on Schedule I, and shall from time to time deliver to Administrative Agent any additional stock certificates received by Pledgor evidencing its ownership of capital stock in Corporation. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Corporation or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. 4 (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Corporation and to exercise all voting, member and manager rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement. 7. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, the Administrative Agent shall have the right to receive and shall receive any and all cash distributions or other payments paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to 5 take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other shareholder of Corporation or owner of any ownership interest in Corporation, for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 10 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 6 9. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Corporation or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 10. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Corporation shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 11. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand 7 for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any Loan Party or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Corporation and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 12. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 13. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 14. SEVERABILITY. Any provision of this Agreement which is 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. 15. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 16. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or 8 concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 18. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 19. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 20, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 9 20. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 21. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 22. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 23. THE ADMINISTRATIVE AGENT NOT A SHAREHOLDER. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to the Administrative Agent any of the obligations of a shareholder of Corporation, (b) to constitute the Administrative Agent or any of the Lenders a shareholder of Corporation, or (c) to enable Administrative Agent (or any purchaser of the Collateral pursuant to the exercise of any remedies hereunder) to become a shareholder of Corporation or to acquire an other ownership interest in Corporation. 24. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 25. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. 10 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: CNL HOSPITALITY PROPERTIES, INC. By:/s/ C. Brian Strickland --------------------------------------- Name: C. Brian Strickland Title:Executive Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------- Ansel McDowell Principal Signature Page to Security and Pledge Agreement CNL Hospitality Properites, Inc./CNL Rose Acquisition Corp. SCHEDULE I DESCRIPTION OF CAPITAL STOCK OF COPORPATION STOCK CERTIFICATE ISSUER CLASS OF STOCK NO. NO. OF SHARES CNL Rose Acquisition Corp. Common 3 100 CNL Rose Acquisition Corp. Common 7 244.04174 CNL Rose Acquisition Corp. Common 8 655.95826 12 SCHEDULE II UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Maryland Department of Assessments and Financing Statement Taxation 13 EX-10.7 9 e902966.txt SECURITY AND PLEDGE AGT Exhibit 10.7 SECURITY AND PLEDGE AGREEMENT (GP/LP) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by CNL ROSE GP CORP., a Delaware corporation (the "PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. RFS Partnership, L.P., a Tennessee limited partnership ("PARTNERSHIP"), and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Partnership and Financing are each a "BORROWER" and collectively, "BORROWERS") are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the general partner of Partnership; It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may from time to time be amended, supplemented or otherwise modified from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means all distributions, allocations, proceeds, fees, preferences, payments, and other economic benefits which Pledgor now is or may become entitled to receive with respect to its partnership interests in Partnership. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, Partnership, the Pledgor, and each Borrower arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PARTNERSHIP AGREEMENT" means the 6th Amended and Restated Partnership Agreement of Partnership, dated as of July 10, 2003, as the same may be further amended, modified or supplemented from time to time. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests, including, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Partnership Agreement to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Partnership Agreement by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor or Borrowers), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; 2 (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE I to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 450 South Orange Avenue, Orlando, FL 32801 and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is a limited partner of Partnership and its percentage interests in Partnership as limited partner is 99.9%; and a complete and correct copy of the Partnership Agreement has been delivered to each Lender; (k) the Pledgor is a corporation duly organized and validly existing under the laws of the State of Delaware; and (l) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Partnership Agreement or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Partnership or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. 3 (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Partnership and to exercise all voting and partnership rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement. 7. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part 4 of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. 5 The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other partner of Partnership for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 9 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 9. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Borrowers or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 6 10. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Borrowers shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 11. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of either Borrower or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Borrowers and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 12. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 13. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 14. SEVERABILITY. Any provision of this Agreement which is 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. 15. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 7 16. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 18. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 19. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 19, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. 8 (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 20. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 21. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 22. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 23. THE ADMINISTRATIVE AGENT NOT A PARTNER. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to the Administrative Agent any of the obligations of a partner of Partnership, (b) to constitute the Administrative Agent or any of the Lenders a partner of Partnership, or (c) to enable Administrative Agent (or any purchaser of the Collateral pursuant to the exercise of any remedies hereunder) to become a partner of Partnership or acquire any ownership interests in Partnership. 24. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 25. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. 9 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: CNL ROSE GP CORP., a Delaware corporation By:/s/ C. Brian Strickland --------------------------------------- Name: C. Brian Strickland Title: Executive Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------- Ansel McDowell Principal Signature Page to Security and Pledge Agreement CNL Rose GP Corp./RFS Partnerhship, L.P. SCHEDULE I UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Delaware Secretary of State Financing Statement 11 EX-10.8 10 e902967.txt SECURITY AND PLEDGE AGT (STOCK - CNL HOSPITALITY) Exhibit 10.8 SECURITY AND PLEDGE AGREEMENT (STOCK) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by CNL Hospitality Properties, Inc. a corporation organized under the laws of the State of Maryland ("PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. RFS Partnership, L.P., a Tennessee limited partnership ("OPERATING COMPANY"), and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Operating Company and Financing are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent, pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the sole shareholder of CNL Rose GP Corp., a Delaware corporation ("CORPORATION"); It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "ARTICLES OF INCORPORATION" means the Articles of Incorporation of Corporation dated as of May 5, 2003, as the same may be amended, modified or supplemented from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means all right, title, and interest with respect to all distributions, allocations, proceeds, fees, preferences, payments, and other economic benefits which Pledgor now is or may become entitled to receive with respect to its ownership of the capital stock of Corporation listed on Schedule I hereto. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, each Borrower and the Pledgor arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests and in any event, shall include, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Articles of Incorporation, as the case may be, to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Articles of Incorporation by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; 2 (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE I to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 450 South Orange Avenue, 12th Floor, Orlando, Florida 32801-3336 and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is (i) the sole shareholder of Corporation; and (ii) a complete and correct copy of the Articles of Incorporation has been delivered to each Lender; (k) the Pledgor is a corporation duly organized and validity existing under the laws of the State of Maryland; and 3 (l) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Articles of Incorporation or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) In connection with the execution hereof, the Pledgor shall deliver to the Administrative Agent all stock certificates evidencing Pledgor's ownership of the capital stock of Corporation listed on Schedule I, and shall from time to time deliver to Administrative Agent any additional stock certificates received by Pledgor evidencing its ownership of capital stock in Corporation. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Corporation or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. 4 (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Corporation and to exercise all voting, member and manager rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement. 7. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, the Administrative Agent shall have the right to receive and shall receive any and all cash distributions or other payments paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to 5 take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other shareholder of Corporation or owner of any ownership interest in Corporation, for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 10 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 6 9. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Corporation or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 10. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Corporation shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 11. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against 7 the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any Loan Party or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Corporation and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 12. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 13. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 14. SEVERABILITY. Any provision of this Agreement which is 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. 15. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 16. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or 8 concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 18. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 19. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 20, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 9 20. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 21. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 22. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 23. THE ADMINISTRATIVE AGENT NOT A SHAREHOLDER. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to the Administrative Agent any of the obligations of a shareholder of Corporation, (b) to constitute the Administrative Agent or any of the Lenders a shareholder of Corporation, or (c) to enable Administrative Agent (or any purchaser of the Collateral pursuant to the exercise of any remedies hereunder) to become a shareholder of Corporation or to acquire an other ownership interest in Corporation. 24. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 25. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. 10 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: CNL HOSPITALITY PROPERTIES, INC. By:/s/ C. Brian Strickland --------------------------------------- Name: C. Brian Strickland Title:Executive Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------- Ansel McDowell Principal Signature Page to Security and Pledge Agreement CNL Hospitality Properties, Inc./CNL Rose GP Corp. SCHEDULE I DESCRIPTION OF CAPITAL STOCK OF CORPORATION STOCK CERTIFICATE ISSUER CLASS OF STOCK NO. NO. OF SHARES CNL Rose GP Corp. Common 2 100 12 SCHEDULE II UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Maryland Dept. of Assessments and Financing Statement Taxation 13 EX-10.9 11 e902953.txt SECURITY AND PLEDGE AGREEMENT Exhibit 10.9 SECURITY AND PLEDGE AGREEMENT (GP/LP) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by RFS PARTNERSHIP, L.P., a Tennessee limited partnership (the "PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. Pledgor and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Pledgor and Financing are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the limited partner of Ridge Lake L.P., a Tennessee limited partnership ("PARTNERSHIP"); It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may from time to time be amended, supplemented or otherwise modified from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means (a) all of Pledgor's limited partnership interests in Partnership including, without limitation, all of Pledgor's right, title and interest, now existing or hereafter acquired, under the Partnership Agreement with respect to any interest now owned or hereafter acquired or owned by Pledgor in Partnership as a partner, but not any of its obligations from time to time as a partner (unless the Administrative Agent shall become a partner as a result of its exercise of remedies pursuant to the terms hereof) in Partnership; (b) any and all moneys due and to become due to the Pledgor now or in the future by way of a distribution made to the Pledgor in its capacity as a limited partner in Partnership or otherwise in respect of the Pledgor's interest as a limited partner in Partnership; (c) any other property of Partnership to which the Pledgor now or in the future may be entitled in its capacity as a limited partner in Partnership by way of distribution, return of capital or otherwise; (d) any other claim which the Pledgor now has or may in the future acquire in its capacity as a limited partner in Partnership against Partnership and its property; and (e) to the extent not otherwise included, all Proceeds of any or all of the foregoing. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, Partnership, the Pledgor, and each Borrower arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PARTNERSHIP AGREEMENT" means the Limited Partnership Agreement of Partnership, dated as of September 22, 1997, as the same may be further amended, modified or supplemented from time to time. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests, including, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Partnership Agreement to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Partnership Agreement by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, 2 reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor or Borrowers), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE I to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee 38120 and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is a limited partner of Partnership and its percentage interests in Partnership as limited partner is 99%; and a complete and correct copy of the Partnership Agreement has been delivered to each Lender; 3 (k) the Pledgor is a limited partnership duly organized and validly existing under the laws of the State of Tennessee; and (l) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Partnership Agreement or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) If the Pledgor shall, as a result of its ownership of the Interests, become entitled to receive or shall receive any limited partnership interest or other certificate (including, without limitation, any certificate representing a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any of the Interests, or otherwise in respect thereof, the Pledgor shall accept the same as the Administrative Agent's agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent hereunder as additional collateral security for the Obligations. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Partnership or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be 4 or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Partnership and to exercise all voting and partnership rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement; PROVIDED, HOWEVER, that this restriction under this PARAGRAPH shall be void to the extent that same may constitute a default under that certain Indenture dated February 26, 2003, as amended, by RFS Partnership, L.P. and RFS Financing 2002, Inc., as Issuers, RFS Hotel Investors, Inc. and RFS Leasing VII, Inc., as Guarantors, and U.S. Bank, National Association, as Trustee. 7. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Interests shall be registered in the name of the Administrative Agent or its nominee, and (whether or not so registered) the Administrative Agent or its nominee may thereafter exercise (A) all voting, partnership and other rights pertaining to the Interests and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Interests as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the partnership structure of Partnership, or upon the exercise by the Pledgor or the Administrative Agent of any right, privilege or option pertaining to such shares or certificates of or evidencing the Interests, and in connection therewith, the right to deposit and deliver any and all of the Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be 5 liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's 6 security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other partner of Partnership for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 9 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 9. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Borrowers or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations 7 and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 10. REGISTRATION RIGHTS: PRIVATE SALES. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 9 hereof, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Interests, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Pledgor will cause Partnership to (i) execute and deliver, and cause the officers of Partnership to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Interests, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Interests, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause Partnership to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 1l (a) of the Securities Act. (b) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 9 hereof, the Administrative Agent may resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Administrative Agent than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Interests. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Interests pursuant to this Section valid and binding and in compliance with any and all other applicable Laws. The Pledgor further agrees that a continuing breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. 11. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with 8 respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Borrowers shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 12. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of either Borrower or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Borrowers and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 13. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 14. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 15. SEVERABILITY. Any provision of this Agreement which is 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. 16. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 17. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, 9 nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 18. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 20. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 19, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY 10 ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 21. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 22. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 23. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 24. THE ADMINISTRATIVE AGENT NOT A PARTNER. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to the Administrative Agent any of the obligations of a partner of Borrowers or (b) to constitute the Administrative Agent or any of the Lenders a partner of Borrowers. 25. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 26. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. 11 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: RFS PARTNERSHIP, L.P. By: CNL ROSE GP CORP., its General Partner By:/s/ Marcel Verbaas --------------------------------------- Name: Marcel Verbaas Title: Senior Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------ Ansel McDowell Principal Signature Page to Security and Pledge Agreement RFS Partnership, L.P./Ridge Lake L.P. SCHEDULE I UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Tennessee Secretary of State Financing Statement EX-10.10 12 e902954.txt SECURITY AND PLEDGE ARREEMENT Exhibit 10.10 SECURITY AND PLEDGE AGREEMENT (STOCK) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by RFS Partnership, L.P. a limited partnership organized under the laws of the State of Tennessee ("PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. Pledgor and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Operating Company and Financing are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent, pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the sole shareholder of RFS 2002 Financing, Inc., a Tennessee corporation ("CORPORATION"); It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "ARTICLES OF INCORPORATION" means the Articles of Incorporation of Corporation dated as of February 8, 2002, as the same may be amended, modified or supplemented from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means the shares of capital stock of Corporation listed on Schedule I hereto. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, each Borrower and the Pledgor arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PLEDGED CERTIFICATES" means all stock certificates evidencing the Interests and all other stock certificates, options or rights of any nature whatsoever that may be issued or granted by Corporation to the Pledgor while this Agreement is in effect. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests and in any event, shall include, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Articles of Incorporation, as the case may be, to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Articles of Incorporation by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE II to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee 38120, and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is (i) the sole shareholder of Corporation; and (ii) a complete and correct copy of the Articles of Incorporation has been delivered to each Lender; (k) the Pledgor is a limited partnership duly organized and validly existing under the laws of the State of Tennessee; (l) the Interests constitute all the issued and outstanding shares of capital stock of Corporation, and the shares of capital stock included in the Interests have been duly and validly issued and are fully paid and non-assessable; and (m) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Articles of Incorporation or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) If the Pledgor shall, as a result of its ownership of the Interests, become entitled to receive or shall receive any ownership interest or other share certificate (including, without limitation, any certificate representing a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any of the Interests, or otherwise in respect thereof, the Pledgor shall accept the same as the Administrative Agent's agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent hereunder as additional collateral security for the Obligations. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Corporation or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. STOCK POWERS. Concurrently with the delivery to the Administrative Agent of each certificate representing one or more shares of Pledged Certificates to the Administrative Agent, the Pledgor shall deliver an undated stock power covering such certificate, duly executed in blank by the Pledgor with, if the Administrative Agent so requests, signatures guaranteed. 7. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Corporation and to exercise all voting, member and manager rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement; PROVIDED, HOWEVER, that this restriction under this PARAGRAPH shall be void to the extent that same may constitute a default under that certain Indenture dated February 26, 2003, as amended, by RFS Partnership, L.P. and RFS Financing 2002, Inc., as Issuers, RFS Hotel Investors, Inc. and RFS Leasing VII, Inc., as Guarantors, and U.S. Bank, National Association, as Trustee. 8. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Interests shall be registered in the name of the Administrative Agent or its nominee, and (whether or not so registered) the Administrative Agent or its nominee may thereafter exercise (A) all voting, membership and other rights pertaining to the Interests and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Interests as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of Corporation, or upon the exercise by the Pledgor or the Administrative Agent of any right, privilege or option pertaining to such shares or certificates of or evidencing the Interests, and in connection therewith, the right to deposit and deliver any and all of the Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 9. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other shareholder of Corporation or owner of any ownership interest in Corporation, for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 10 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 10. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Corporation or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 11. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 10 hereof, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Interests, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Pledgor will cause Corporation to (i) execute and deliver, and cause the officers of Corporation to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Interests, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Interests, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause Corporation to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 1l (a) of the Securities Act. (b) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 10 hereof, the Administrative Agent may resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Administrative Agent than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Interests. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Interests pursuant to this Section valid and binding and in compliance with any and all other applicable Laws. The Pledgor further agrees that a continuing breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. 12. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Corporation shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 13. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any Loan Party or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Corporation and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 14. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 15. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 16. SEVERABILITY. Any provision of this Agreement which is 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. 17. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 18. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 19. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 20. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 21. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 20, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 22. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 23. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 24. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 25. THE ADMINISTRATIVE AGENT NOT A SHAREHOLDER. Nothing contained in this Agreement shall be construed or interpreted to transfer to the Administrative Agent any of the obligations of a shareholder of Corporation; or (b) to constitute the Administrative Agent or any of the Lenders a shareholder of Corporation. 26. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 27. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: RFS PARTNERSHIP, L.P. By: CNL ROSE GP CORP., its General Partner By: /s/ C. Brian Strickland -------------------------------------- Name: C. Brian Strickland Title: Executive Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------ Ansel McDowell Principal Signature Page to Security and Pledge Agreement RFS Partnership, L.P./RFS 2002 Financing, Inc. SCHEDULE I DESCRIPTION OF INTERESTS STOCK CERTIFICATE ISSUER CLASS OF STOCK NO. NO. OF SHARES RFS 2002 Financing, Inc. Common 1 1000 SCHEDULE I UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Tennessee Secretary of State Financing Statement EX-10.11 13 e902959.txt SECURITY AND PLEDGE AGREEMENT Exhibit 10.11 SECURITY AND PLEDGE AGREEMENT (LLC) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by RFS PARTNERSHIP, L.P., a Tennessee limited partnership ("PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent ("ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. Pledgor and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Pledgor and Financing are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent, pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the sole member and owner of 100% of the member interests in RFS Financing 2002, LLC, a Tennessee limited liability company ("LLC"); It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "CERTIFICATE OF FORMATION" means the Certificate of Formation of LLC dated as of May 2, 2002, as the same may be amended, modified or supplemented from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means (a) all of Pledgor's member and ownership interests in LLC, including, without limitation, all of Pledgor's right, title and interest, now existing or hereafter acquired, under the Operating Agreement with respect to any interest now owned or hereafter acquired or owned by Pledgor in LLC as a member, but not any of its obligations from time to time as a member (unless the Administrative Agent shall become a member as a result of its exercise of remedies pursuant to the terms hereof) in LLC, together with all certificated securities issued by LLC as described on Schedule II hereto; (b) any and all moneys due and to become due to the Pledgor now or in the future by way of a distribution made to the Pledgor in its capacity as a member of or the owner of any limited liability company interest in LLC or otherwise in respect of the Pledgor's interest as a member of LLC or the owner of any limited liability company interest in LLC; (c) any other property of LLC to which the Pledgor now or in the future may be entitled in its capacity as a member of or the owner of any limited liability company interest in LLC by way of distribution, return of capital or otherwise; (d) any other claim which the Pledgor now has or may in the future acquire in its capacity as a member of or the owner of any limited liability company interest in LLC against LLC and its respective property; and (e) to the extent not otherwise included, all Proceeds of any or all of the foregoing. "LLC DOCUMENTS" means, collectively, the Certificate of Formation and the Operating Agreement. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, each Borrower and the Pledgor arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "OPERATING AGREEMENT" means the Limited Liability Company Agreement of LLC dated as of May 2, 2002, as the same may be amended, modified or supplemented from time to time. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests and in any event, shall include, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the LLC Documents, as the case may be, to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the LLC Documents by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE I to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee, 38120 and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) (i) the Pledgor is the sole member of LLC and its percentage ownership interests in LLC is 100%; and (ii) a complete and correct copy of the Operating Agreement has been delivered to each Lender; (k) the Pledgor is a limited partnership duly organized and validity existing under the laws of the State of Tennessee; and (l) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Operating Agreement or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) If the Pledgor shall, as a result of its ownership of the Interests, become entitled to receive or shall receive any limited liability company interest or ownership interest or other share certificate (including, without limitation, any certificate representing a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any of the Interests, or otherwise in respect thereof, the Pledgor shall accept the same as the Administrative Agent's agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent hereunder as additional collateral security for the Obligations. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of LLC or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of LLC and to exercise all voting, member and manager rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement; PROVIDED, HOWEVER, that this restriction under this PARAGRAPH shall be void to the extent that same may constitute a default under that certain Indenture dated February 26, 2003, as amended, by RFS Partnership, L.P. and RFS Financing 2002, Inc., as Issuers, RFS Hotel Investors, Inc. and RFS Leasing VII, Inc., as Guarantors, and U.S. Bank, National Association, as Trustee. 7. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Interests shall be registered in the name of the Administrative Agent or its nominee, and (whether or not so registered) the Administrative Agent or its nominee may thereafter exercise (A) all voting, membership and other rights pertaining to the Interests and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Interests as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the organizational structure of LLC, or upon the exercise by the Pledgor or the Administrative Agent of any right, privilege or option pertaining to such shares or certificates of or evidencing the Interests, and in connection therewith, the right to deposit and deliver any and all of the Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against LLC, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other member of LLC or owner of any limited liability company interest in LLC, for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 9 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 9. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, LLC or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 10. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 9 hereof, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Interests, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Pledgor will cause LLC to (i) execute and deliver, and cause the officers of LLC to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Interests, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Interests, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause LLC to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 1l (a) of the Securities Act. (b) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 9 hereof, the Administrative Agent may resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Administrative Agent than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Interests. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Interests pursuant to this Section valid and binding and in compliance with any and all other applicable Laws. The Pledgor further agrees that a continuing breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. 11. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor LLC shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 12. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any Loan Party or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between the LLC and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the LLC or the Pledgor with respect to the Obligations. 13. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 14. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 15. SEVERABILITY. Any provision of this Agreement which is 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. 16. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 17. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 18. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 20. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 20, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 21. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 22. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO LLC. The Pledgor hereby authorizes and instructs LLC to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that LLC shall be fully protected in so complying. 23. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 24. THE ADMINISTRATIVE AGENT NOT A MEMBER OR OWNER OR SHAREHOLDER. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to the Administrative Agent any of the obligations of a member or owner of LLC; or (b) to constitute the Administrative Agent or any of the Lenders a member of LLC. 25. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 26. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: RFS PARTNERSHIP, L.P. By: CNL ROSE GP CORP., its General Partner By:/s/ Marcel Verbaas --------------------------------------- Name: Marcel Verbaas Title: Senior Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------ Ansel McDowell Principal Signature Page to Security and Pledge Agreement RFS Partnership, L.P./RFS Financing 2002, Inc. SCHEDULE I UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Tennessee Secretary of State Financing Statement SCHEDULE II DESCRIPTION OF CERTIFIED SECURITY STOCK CERTIFICATE ISSUER CLASS OF SECURITY NO. NO. OF UNITS RFS Financing 2002, LLC Membership Interests 1 100 EX-10.12 14 e902956.txt SECURITY AND PLEDGE AGREEMENT Exhibit 10.12 SECURITY AND PLEDGE AGREEMENT (LP) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by RFS Partnership, L.P., a limited partnership organized under the laws of the State of Tennessee (the "PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. Pledgor and RFS Financing Partnership, L.P., a Tennessee limited partnership ("PARTNERSHIP;" Pledgor and Partnership are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; Pledgor is a limited partner of Partnership; It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may from time to time be amended, supplemented or otherwise modified from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means (a) all of Pledgor's limited partnership interests in Partnership including, without limitation, all of Pledgor's right, title and interest, now existing or hereafter acquired, under the Partnership Agreement with respect to any interest now owned or hereafter acquired or owned by Pledgor in Partnership as a partner, but not any of its obligations from time to time as a partner (unless the Administrative Agent shall become a partner as a result of its exercise of remedies pursuant to the terms hereof) in Partnership, together with all certificated securities issued by Partnership as described on Schedule II hereto; (b) any and all moneys due and to become due to the Pledgor now or in the future by way of a distribution made to the Pledgor in its capacity as a limited partner in Partnership or otherwise in respect of the Pledgor's interest as a limited partner in Partnership; (c) any other property of Partnership to which the Pledgor now or in the future may be entitled in its capacity as a limited partner in Partnership by way of distribution, return of capital or otherwise; (d) any other claim which the Pledgor now has or may in the future acquire in its capacity as a limited partner in Partnership against Partnership and its property; and (e) to the extent not otherwise included, all Proceeds of any or all of the foregoing. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, Partnership, the Pledgor, and each Borrower arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PARTNERSHIP AGREEMENT" means the Amended and Restated Partnership Agreement of Partnership, dated as of May 14, 2002, as the same may be further amended, modified or supplemented from time to time. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests, including, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Partnership Agreement to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Partnership Agreement by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor or Borrowers), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE I to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee, 38120, and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior writte n notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is a limited partner of Partnership and its percentage interests in Partnership as a limited partner is 99%; and a complete and correct copy of the Partnership Agreement has been delivered to each Lender; (k) the Pledgor is a limited partnership duly organized and validly existing under the laws of the State of Tennessee; and (l) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Partnership Agreement or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) If the Pledgor shall, as a result of its ownership of the Interests, become entitled to receive or shall receive any limited partnership interest or other certificate (including, without limitation, any certificate representing a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any of the Interests, or otherwise in respect thereof, the Pledgor shall accept the same as the Administrative Agent's agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent hereunder as additional collateral security for the Obligations. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Partnership or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Partnership and to exercise all voting and partnership rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement; PROVIDED, HOWEVER, that this restriction under this PARAGRAPH shall be void to the extent that same may constitute a default under that certain Indenture dated February 26, 2003, as amended, by RFS Partnership, L.P. and RFS Financing 2002, Inc., as Issuers, RFS Hotel Investors, Inc. and RFS Leasing VII, Inc., as Guarantors, and U.S. Bank, National Association, as Trustee. 7. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Interests shall be registered in the name of the Administrative Agent or its nominee, and (whether or not so registered) the Administrative Agent or its nominee may thereafter exercise (A) all voting, partnership and other rights pertaining to the Interests and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Interests as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the partnership structure of Partnership, or upon the exercise by the Pledgor or the Administrative Agent of any right, privilege or option pertaining to such shares or certificates of or evidencing the Interests, and in connection therewith, the right to deposit and deliver any and all of the Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other partner of Partnership for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 9 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 9. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Borrowers or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 10. REGISTRATION RIGHTS: PRIVATE SALES. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 9 hereof, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Interests, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Pledgor will cause Partnership to (i) execute and deliver, and cause the officers of Partnership to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Interests, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Interests, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause Partnership to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 1l (a) of the Securities Act. (b) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 9 hereof, the Administrative Agent may resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Administrative Agent than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Interests. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Interests pursuant to this Section valid and binding and in compliance with any and all other applicable Laws. The Pledgor further agrees that a continuing breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. 11. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Borrowers shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 12. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of either Borrower or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Borrowers and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 13. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 14. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 15. SEVERABILITY. Any provision of this Agreement which is 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. 16. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 17. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 18. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 20. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 19, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 21. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 22. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 23. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 24. THE ADMINISTRATIVE AGENT NOT A PARTNER. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to the Administrative Agent any of the obligations of a partner of Borrowers or (b) to constitute the Administrative Agent or any of the Lenders a partner of Borrowers. 25. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 26. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: RFS PARTNERSHIP, L.P. By: CNL ROSE GP CORP., its General Partner By:/s/ Marcel Verbaas --------------------------------------- Name: Marcel Verbaas Title: Senior Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------ Ansel McDowell Principal Signature Page to Security and Pledge Agreement RFS Partnership, L.P./RFS Financing Partnership, L.P. SCHEDULE I UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Tennessee Secretary of State Financing Statement SCHEDULE II DESCRIPTION OF INTERESTS STOCK CERTIFICATE ISSUER CLASS OF SECURITY NO. NO. OF UNITS RFS Financing Partnership,L.P. Partnership Interests 2 99 EX-10.13 15 e902957.txt SECURITY AND PLEDGE AGREEMENT Exhibit 10.13 SECURITY AND PLEDGE AGREEMENT (STOCK) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by RFS Partnership, L.P. a limited partnership organized under the laws of the State of Tennessee ("PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. Pledgor and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Operating Company and Financing are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent, pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the sole shareholder of Ridge Lake General Partner, Inc., a Tennessee corporation ("CORPORATION"); It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "ARTICLES OF INCORPORATION" means the Articles of Incorporation of Corporation dated as of September 22, 1997, as the same may be amended, modified or supplemented from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means the shares of capital stock of Corporation listed on Schedule I hereto. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, each Borrower and the Pledgor arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "PLEDGED CERTIFICATES" means all stock certificates evidencing the Interests and all other stock certificates, options or rights of any nature whatsoever that may be issued or granted by Corporation to the Pledgor while this Agreement is in effect. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests and in any event, shall include, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the Articles of Incorporation, as the case may be, to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the Articles of Incorporation by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE II to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee 38120, and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) the Pledgor is (i) the sole shareholder of Corporation; and (ii) a complete and correct copy of the Articles of Incorporation has been delivered to each Lender; (k) the Pledgor is a limited partnership duly organized and validly existing under the laws of the State of Tennessee; (l) the Interests constitute all the issued and outstanding shares of capital stock of Corporation, and the shares of capital stock included in the Interests have been duly and validly issued and are fully paid and non-assessable; and (m) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Articles of Incorporation or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) If the Pledgor shall, as a result of its ownership of the Interests, become entitled to receive or shall receive any ownership interest or other share certificate (including, without limitation, any certificate representing a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any of the Interests, or otherwise in respect thereof, the Pledgor shall accept the same as the Administrative Agent's agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent hereunder as additional collateral security for the Obligations. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of Corporation or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. STOCK POWERS. Concurrently with the delivery to the Administrative Agent of each certificate representing one or more shares of Pledged Certificates to the Administrative Agent, the Pledgor shall deliver an undated stock power covering such certificate, duly executed in blank by the Pledgor with, if the Administrative Agent so requests, signatures guaranteed. 7. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of Corporation and to exercise all voting, member and manager rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement; PROVIDED, HOWEVER, that this restriction under this PARAGRAPH shall be void to the extent that same may constitute a default under that certain Indenture dated February 26, 2003, as amended, by RFS Partnership, L.P. and RFS Financing 2002, Inc., as Issuers, RFS Hotel Investors, Inc. and RFS Leasing VII, Inc., as Guarantors, and U.S. Bank, National Association, as Trustee. 8. RIGHTS OF THE ADMINISTRATIVE AGENT. (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Interests shall be registered in the name of the Administrative Agent or its nominee, and (whether or not so registered) the Administrative Agent or its nominee may thereafter exercise (A) all voting, membership and other rights pertaining to the Interests and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Interests as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of Corporation, or upon the exercise by the Pledgor or the Administrative Agent of any right, privilege or option pertaining to such shares or certificates of or evidencing the Interests, and in connection therewith, the right to deposit and deliver any and all of the Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against Borrowers, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 9. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other shareholder of Corporation or owner of any ownership interest in Corporation, for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 10 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 10. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, Corporation or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 11. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 10 hereof, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Interests, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Pledgor will cause Corporation to (i) execute and deliver, and cause the officers of Corporation to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Interests, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Interests, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause Corporation to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 1l (a) of the Securities Act. (b) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 10 hereof, the Administrative Agent may resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Administrative Agent than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Interests. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Interests pursuant to this Section valid and binding and in compliance with any and all other applicable Laws. The Pledgor further agrees that a continuing breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. 12. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor Corporation shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 13. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any Loan Party or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between Corporation and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrowers or the Pledgor with respect to the Obligations. 14. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 15. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 16. SEVERABILITY. Any provision of this Agreement which is 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. 17. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 18. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 19. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 20. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 21. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 20, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 22. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 23. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO BORROWERS. The Pledgor hereby authorizes and instructs Borrowers to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that Borrowers shall be fully protected in so complying. 24. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 25. THE ADMINISTRATIVE AGENT NOT A SHAREHOLDER. Nothing contained in this Agreement shall be construed or interpreted to transfer to the Administrative Agent any of the obligations of a shareholder of Corporation; or (b) to constitute the Administrative Agent or any of the Lenders a shareholder of Corporation. 26. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 27. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: RFS PARTNERSHIP, L.P. By: CNL ROSE GP CORP., its General Partner By:/s/ C. Brian Strickland --------------------------------------- Name: C. Brian Strickland Title: Executive Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------ Ansel McDowell Principal SIGNATURE PAGE TO SECURITY AND PLEDGE AGREEMENT RFS PARTNERSHIP, L.P. / RIDGE LAKE GENERAL PARTNER, INC. SCHEDULE I DESCRIPTION OF INTERESTS STOCK CERTIFICATE ISSUER CLASS OF STOCK NO. NO. OF SHARES Ridge Lake General Partner, Inc. Common 1 500 Ridge Lake General Partner, Inc. Common 2 9500 SCHEDULE II UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Tennessee Secretary of State Financing Statement EX-10.14 16 e902960.txt SECURITY AND PLEDGE AGREEMENT Exhibit 10.14 SECURITY AND PLEDGE AGREEMENT (LLC) THIS SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of July 10, 2003, made by RFS PARTNERSHIP, L.P., a Tennessee limited partnership ("PLEDGOR"), in favor of BANK OF AMERICA, N.A., as administrative agent ("ADMINISTRATIVE AGENT") for the banks and other financial institutions ("LENDERS") parties to the Credit Agreement referred to below. Pledgor and RFS Financing Partnership, L.P., a Tennessee limited partnership ("FINANCING;" Pledgor and Financing are each a "BORROWER" and collectively, "BORROWERS"), are parties to the Credit Agreement, dated as of the date of this Agreement (as the same may be amended, supplemented or modified from time to time, the "CREDIT AGREEMENT"), among Borrowers, CNL Hospitality Properties, Inc., the Lenders, and the Administrative Agent, pursuant to which the Lenders have agreed, among other things, to make Loans to Borrowers; The Pledgor is the owner of 100% of the member interests in Ridge Lake, LLC, a Tennessee limited liability company ("LLC"); It is a condition precedent to the obligation of the Lenders to make Loans under the Credit Agreement that the Pledgor and the Administrative Agent shall have executed this Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. As used in this Agreement terms defined in the Credit Agreement or in the recitals hereto shall have their defined meanings when used herein, and the following terms shall have the following meanings: "AGREEMENT" means this Security and Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "CERTIFICATE OF FORMATION" means the Certificate of Formation of LLC dated as of February 2, 2000, as the same may be amended, modified or supplemented from time to time. "COLLATERAL" means the Interests and all Proceeds. "INTERESTS" means (a) all of Pledgor's member and ownership interests in LLC, including, without limitation, all of Pledgor's right, title and interest, now existing or hereafter acquired, under the Operating Agreement with respect to any interest now owned or hereafter acquired or owned by Pledgor in LLC as a member, but not any of its obligations from time to time as a member (unless the Administrative Agent shall become a member as a result of its exercise of remedies pursuant to the terms hereof) in LLC; (b) any and all moneys due and to become due to the Pledgor now or in the future by way of a distribution made to the Pledgor in its capacity as a member of or the owner of any limited liability company interest in LLC or otherwise in respect of the Pledgor's interest as a member of LLC or the owner of any limited liability company interest in LLC; (c) any other property of LLC to which the Pledgor now or in the future may be entitled in its capacity as a member of or the owner of any limited liability company interest in LLC by way of distribution, return of capital or otherwise; (d) any other claim which the Pledgor now has or may in the future acquire in its capacity as a member of or the owner of any limited liability company interest in LLC against LLC and its respective property; and (e) to the extent not otherwise included, all Proceeds of any or all of the foregoing. "LLC DOCUMENTS" means, collectively, the Certificate of Formation and the Operating Agreement. "OBLIGATIONS" means all advances to, and debts, liabilities, obligations, covenants and duties of, each Borrower and the Pledgor arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower, Pledgor, or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "OPERATING AGREEMENT" means the Limited Liability Company Agreement of LLC dated as of __________, 2003, as the same may be amended, modified or supplemented from time to time. "PROCEEDS" means all "proceeds" (as such term is defined in Section 9-102 of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Interests and in any event, shall include, without limitation, all income, gain, credit, distributions and similar items from or with respect to the Interests, collections thereon or distributions with respect thereto. "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time to time in effect in the State of New York. 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations and in order to induce the Lenders to make Loans in accordance with the terms of the Credit Agreement, the Pledgor hereby pledges and grants to the Administrative Agent (for the benefit of the Lenders), a first priority Lien on and security interest in and to, and agrees and acknowledges that Administrative Agent has and shall continue to have, a security interest in and to, and assigns, transfers, pledges and conveys to Administrative Agent (for the benefit of the Lenders) all of Pledgor's right, title, and interest in and to the Collateral. 3. PLEDGOR REMAINS LIABLE. Notwithstanding anything to the contrary contained herein, (a) Pledgor shall remain liable under the LLC Documents, as the case may be, to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights 2 hereunder shall not release Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Administrative Agent shall not have any obligation or liability under the LLC Documents by reason of this Agreement, nor shall the Administrative Agent 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. 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants that: (a) the Pledgor has the power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; (c) the execution, delivery and performance of this Agreement will not violate any provision of any Laws or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Laws or contractual obligation of the Pledgor, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any creditor of the Pledgor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of the Collateral with respect to this Agreement or any of the transactions contemplated hereby; (f) the Pledgor is the sole record and beneficial owner of, and has good and sole legal title to, the Interests, free of any and all Liens or options in favor of, or claims of, any other Person, except the Liens created by this Agreement; (g) no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent (for the benefit of the Lenders) pursuant to this Agreement or have otherwise been filed in favor of the Administrative Agent (for the benefit of the Lenders); (h) upon the execution of this Agreement and the filing of the financing statement in the appropriate office, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral, prior to all other Liens, which will be enforceable as such as against all creditors of the Pledgor and any Persons purporting to purchase any Collateral from the Pledgor, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or 3 similar laws affecting the enforcement of creditors' rights generally. All action necessary or desirable to perfect such security interest in each item of the Collateral requested by the Administrative Agent, including the filing of financing statements in the offices referred to on SCHEDULE I to this Agreement has been or will be duly taken; (i) the Pledgor's principal place of business, chief executive office and the place where its records concerning the Collateral are kept is at 850 Ridge Lake Boulevard, Suite 300, Memphis, Tennessee 38120 and the Pledgor will not change such principal place of business or chief executive office or remove such records without giving the Administrative Agent at least 30 days prior written notice thereof. The Pledgor will not change its name, identity or structure in any manner which might make any financing statement filed hereunder seriously misleading unless it shall have given the Administrative Agent at least 30 days prior written notice thereof and the Administrative Agent has provided its written consent with respect to such change; (j) (i) the Pledgor's percentage ownership interests in LLC is 100%; and (ii) a complete and correct copy of the Operating Agreement has been delivered to each Lender; (k) the Pledgor is a limited partnership duly organized and validity existing under the laws of the State of Tennessee; and (l) the execution and delivery of this Agreement will not result in any violation of or be in conflict with or constitute a default under any term of the Operating Agreement or of any agreement or instrument of Pledgor. 5. COVENANTS. The Pledgor covenants and agrees with the Administrative Agent that, from and after the date of this Agreement until the Obligations are paid in full: (a) If the Pledgor shall, as a result of its ownership of the Interests, become entitled to receive or shall receive any limited liability company interest or ownership interest or other share certificate (including, without limitation, any certificate representing a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any of the Interests, or otherwise in respect thereof, the Pledgor shall accept the same as the Administrative Agent's agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent hereunder as additional collateral security for the Obligations. In case any distribution of capital shall be made on or in respect of the Interests or any property shall be distributed upon or with respect to the Interests pursuant to the recapitalization or reclassification of the capital of LLC or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Interests shall be received by the Pledgor, the Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of the Pledgor, as additional collateral security for the Obligations. 4 (b) Except as expressly permitted by the Credit Agreement, without the prior written consent of the Administrative Agent, the Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Agreement. The Pledgor will defend the right, title and interest of the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. The Pledgor will not sell, transfer or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction with respect to the Liens granted hereby. The Pledgor also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged hereunder to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. (d) The Pledgor will advise the Administrative Agent promptly, in reasonable detail, of any Lien or claim made or asserted against any of the Collateral. (e) The Pledgor agrees to pay, and to save the Administrative Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 6. CASH DISTRIBUTIONS; VOTING RIGHTS. Unless an Event of Default shall have occurred and be continuing, the Pledgor shall be permitted to receive all cash distributions paid in the normal course of business of LLC and to exercise all voting, member and manager rights with respect to the Interests, PROVIDED HOWEVER, that no vote shall be cast or partnership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in a breach of any provision of the Credit Agreement, any other Loan Document or this Agreement. Notwithstanding any other provision hereof, Pledgor may make any distributions permitted under the Credit Agreement; PROVIDED, HOWEVER, that this restriction under this PARAGRAPH shall be void to the extent that same may constitute a default under that certain Indenture dated February 26, 2003, as amended, by RFS Partnership, L.P. and RFS Financing 2002, Inc., as Issuers, RFS Hotel Investors, Inc. and RFS Leasing VII, Inc., as Guarantors, and U.S. Bank, National Association, as Trustee. 7. RIGHTS OF THE ADMINISTRATIVE AGENT. 5 (a) If an Event of Default shall occur and be continuing, (i) the Administrative Agent shall have the right to receive and shall receive any and all cash distributions paid in respect of the Interests and make application thereof to the Obligations in such order as it may determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Interests shall be registered in the name of the Administrative Agent or its nominee, and (whether or not so registered) the Administrative Agent or its nominee may thereafter exercise (A) all voting, membership and other rights pertaining to the Interests and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Interests as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the organizational structure of LLC, or upon the exercise by the Pledgor or the Administrative Agent of any right, privilege or option pertaining to such shares or certificates of or evidencing the Interests, and in connection therewith, the right to deposit and deliver any and all of the Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against LLC, or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives the Administrative Agent the power and right, on behalf of the Pledgor without notice to or assent by the Pledgor to do the following: (i) upon the occurrence and continuation of an Event of Default to ask, demand, collect, receive and give acceptances and receipts for any and all moneys due and to become due with respect to the Collateral and, in the name of the Pledgor or its own name or otherwise, to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to the Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise as deemed appropriate by the Administrative Agent for the 6 purpose of collecting any and all such moneys due with respect to the Collateral or whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral; and (iii) upon the occurrence and during the continuance of an Event of Default, (A) to direct any party liable for any payment to the Pledgor with respect to the Collateral to make payment of any and all moneys due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; and (G) generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Pledgor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. (b) The powers conferred on the Administrative Agent (for the benefit of the Lenders) hereunder are solely to protect its interests (for the benefit of the Lenders) in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Pledgor or to any other member of LLC or owner of any limited liability company interest in LLC, for any act or failure to act. (c) The Pledgor also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in SECTION 9 of this Agreement, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 9. REMEDIES. If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured 7 party under the UCC. Without limiting the generality of the foregoing and to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, LLC or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable 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 the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent arising out of the exercise by the Administrative Agent of any of its rights hereunder except to the extent any thereof arise solely from the willful misconduct of the Administrative Agent. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. The Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. 10. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 9 hereof, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Interests, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Pledgor will cause LLC to (i) execute and deliver, and cause the officers of LLC to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Interests, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Interests, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause LLC to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as 8 practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 1l (a) of the Securities Act. (b) If the Administrative Agent shall determine to exercise its right to sell any or all of the Interests pursuant to SECTION 9 hereof, the Administrative Agent may resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Administrative Agent than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Interests. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Interests pursuant to this Section valid and binding and in compliance with any and all other applicable Laws. The Pledgor further agrees that a continuing breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. 11. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and neither the Pledgor nor LLC shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 12. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Liens granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any Loan Party or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Lenders (or the Required Lenders, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by 9 the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement; and all dealings between the LLC and the Pledgor, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the LLC or the Pledgor with respect to the Obligations. 13. LIMITATION ON DUTIES REGARDING COLLATERAL. Neither the Administrative Agent 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 the Pledgor or otherwise. 14. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 15. SEVERABILITY. Any provision of this Agreement which is 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. 16. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 17. NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. The Administrative Agent shall not by any act (except by a written instrument pursuant to this paragraph), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. This Agreement represents the agreement of the Pledgor and the Administrative Agent with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent relative to the subject matter hereof not reflected herein. 18. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent, PROVIDED that any provision of this Agreement that imposes an obligation solely on the Pledgor or provides a right in favor solely 10 of the Administrative Agent may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent in accordance with the Credit Agreement. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and its successors and assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES. 19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST IT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION. 20. WAIVERS. (a) THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH 20, OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT TO PLEAD OR CLAIM THE SAME. (b) EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT. 21. NOTICES. Any notices or other communications required or permitted to be given by this Agreement or any other documents and instruments referred to herein must be given in accordance with the Credit Agreement. 22. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO LLC. The Pledgor hereby authorizes and instructs LLC to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and describes such Event of Default and (b) is otherwise in accordance 11 with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that LLC shall be fully protected in so complying. 23. RELEASE OF LIENS. Upon payment and satisfaction in full of the Obligations, the Administrative Agent agrees, upon the written request of the Pledgor and at the Pledgor's sole expense, to execute, record and file such instruments and perform such acts as are necessary to release the Collateral from the Liens and security interest of this Agreement or any assignment or other security document entered into pursuant hereto. 24. THE ADMINISTRATIVE AGENT NOT A MEMBER OR OWNER OR SHAREHOLDER. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to the Administrative Agent any of the obligations of a member or owner of LLC; or (b) to constitute the Administrative Agent or any of the Lenders a member of LLC. 25. COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 26. ENTIRETY. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG PLEDGOR AND THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE AND ASSIGNMENT OF THE COLLATERAL AND THE OTHER MATTERS ADDRESSED HEREIN AND THEREIN, AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF, 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 HERETO. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOWS. 12 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: RFS PARTNERSHIP, L.P. By: CNL ROSE GP CORP., its General Partner By:/s/ Marcel Verbaas --------------------------------------- Name: Marcel Verbaas Title: Senior Vice President BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Ansel McDowell ------------------------------------------ Ansel McDowell Principal Signature Page to Security and Pledge Agreement RFS Partnership, L.P./Ridge Lake, LLC 13 SCHEDULE I UCC FILINGS STATE FILING OFFICE DOCUMENT FILED Tennessee Secretary of State Financing Statement 14 -----END PRIVACY-ENHANCED MESSAGE-----