10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from          to         

Commission File Number	Exact name of registrant as specified in its charter, state of incorporation, address of principal executive offices, and telephone number	I.R.S. Employer Identification Number
333-84334	RFS Partnership, L.P. A Tennessee Partnership 450 South Orange Avenue Orlando, Florida 32801 Telephone (407) 650-1000	62-1541639

Securities registered pursuant to Section 12(b) of the Act:  None.

Securities registered pursuant to Section 12(g) of the Act:  None.

Indicate by check mark whether the Registrant (i) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days.  ý Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether RFS Partnership, L.P. is an accelerated filer (as defined in Exchange Act Rule 12b-2).  o Yes ý No

The number of units of RFS Partnership, L.P. outstanding on March 30, 2004 was 31,941,852 (99.9% of which were held by CNL Rose Acquisition Corp. and 0.1% were held by CNL Rose GP Corp.).  There is no market for the Registrant’s units.

On August 14, 2003, RFS Partnership, L.P. (the “Operating Partnership”), filed with the Securities and Exchange Commission (the “Commission”) a Certification and Notice of Termination of Registration on Form 15 (the “Form 15”), terminating the Operating Partnership’s obligation to file reports with the Commission under the Securities Exchange Act of 1934, as amended (the “Act”).  Although the filing of the Form 15 terminates the Operating Partnership’s obligation to file reports under the Act, the Operating Partnership is filing this Annual Report on Form 10-K, in accordance with its obligation to do so set forth in that certain Indenture, by and among the Operating Partnership, RFS 2002 Financing, Inc., CNL Rose Acquisition Corp., RFS Leasing VII, Inc. and U.S. Bank, N.A., dated as of February 26, 2002.

PART I

Item 1. Business

RFS Partnership, L.P. (the “Operating Partnership”) is a Tennessee limited partnership which, at December 31, 2003, owned interests in 62 hotels with 9,399 rooms located in 26 states (collectively the “Hotels”). On July 10, 2003, RFS Hotel Investors, Inc. (“RFS”) and the Operating Partnership were acquired by subsidiaries of CNL Hospitality Properties, Inc. (“CNL”) for approximately $383 million in cash ($12.35 per share or limited partnership unit) (“RFS-CNL Transaction”), excluding the 1.0 million shares of RFS stock acquired by CNL prior to July 10, 2003.  Upon consummation of this transaction, RFS was merged with and into a subsidiary of CNL and RFS ceased to exist as a separate corporate entity.  Further, upon consummation of this transaction, a subsidiary of CNL was merged with and into the Operating Partnership and the Operating Partnership continues to exist as a separate entity and as an indirect wholly owned subsidiary of CNL.  Prior to the closing of this transaction the common stock of RFS was publicly traded on the New York Stock Exchange under the symbol “RFS.”  The common stock of RFS has since been removed from listing on the New York Stock Exchange.  RFS filed a Form 15 on July 14, 2003, terminating its filing requirements with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  On August 14, 2003, the Operating Partnership filed with the SEC a Form 15, terminating the Operating Partnership’s obligation to file reports with the SEC.  Although the filing of the Form 15 terminates the Operating Partnership’s obligation to file reports under the Exchange Act, the Operating Partnership is filing this Annual Report on Form 10-K, in accordance with its obligation to do so set forth in that certain indenture, by and among the Operating Partnership, RFS 2002 Financing, Inc., CNL Rose Acquisition Corp., RFS Leasing VII, Inc. and U.S. Bank, N.A., dated as of February 26, 2002, as amended July 10, 2003, the notes issued pursuant to which are hereinafter referred to as the “Senior Notes”.

The Operating Partnership has grown from owning seven hotels with 1,118 rooms in five states in August 1993 to owning interests in 62 hotels with 9,399 rooms in 26 states at December 31, 2003. Many of the Operating Partnership’s hotels are located in attractive metropolitan areas or growing secondary markets and are well located within these markets. All but two of the Operating Partnership’s hotels are operated under franchises from nationally recognized franchisors such as Marriott International, Inc., Hilton Hotels Corporation, Starwood Hotels & Resorts, Inc., Wyndham Hotels and Resorts and Six Continents PLC.

For the year ended December 31, 2003, the Operating Partnership generated revenue of $184.8 million and a net loss of $17.1 million. In 2003, the Operating Partnership received 47.5% of its revenue from full service hotels, 26.5% from extended stay hotels and 26.0% from limited service hotels. The Operating Partnership received 57% of its revenue in five states (California (30%), Texas (8%), Florida (7%), Michigan (6%) and Missouri (6%)).

The following summarizes additional information for the 62 hotels owned at December 31, 2003:

Franchise Affiliation	Hotel Properties	Rooms/Suites
Full Service Hotels:
Holiday Inn	5	954
Sheraton	3	659
Hilton	2	439
Sheraton Four Points	2	412
Wyndham	2	390
Independent	2	331
Hyatt Regency	1	242
Doubletree	1	221
Homewood Suites by Hilton	1	83
	19	3,731
Extended Stay Hotels:
Residence Inn by Marriott	15	2,201
TownePlace Suites by Marriott	3	285
	18	2,486
Limited Service Hotels:
Hampton Inn	17	2,113
Holiday Inn Express	5	637
Courtyard by Marriott	2	248
Comfort Inn	1	184
	25	3,182
Total	62	9,399

1

The following summarizes the number of hotels owned for the periods presented:

	2003	2002		2001
Hotels owned at beginning of year	57	58		60
Contribution of hotels from CNL	5
Sales of hotels		(1	)	(2	)
Hotels owned at end of year	62	57		58

Concurrent with the consummation of the RFS-CNL Transaction, CNL contributed five hotels to the Operating Partnership with net assets of approximately $131.6 million. The five hotels are a Residence Inn in Orlando, Florida, a Marriott Courtyard in Edison, New Jersey, a Hyatt Regency in Coral Gables, Florida, a Wyndham in Billerica, Massachusetts and a Wyndham in Denver, Colorado.  The two Wyndham properties are triple net lease properties, while the other three properties are leased to taxable REIT subsidiaries owned by CNL, but not owned by the Operating Partnership. The Operating Partnership includes rental income from these leases and depreciation on these hotels in our consolidated results of operations.

In connection with the acquisition of RFS, six non-strategic hotels were identified for sale and are carried at a cost of approximately $29.6 million.

At December 31, 2003, the Operating Partnership leased seven hotels to three third-party lessees and three hotels to taxable REIT subsidiaries owned by CNL, but not owned by the Operating Partnership. In October 2003, the Operating Partnership began terminating existing management agreements with Flagstone Hospitality Management LLC (“Flagstone”), which managed 50 of the 57 RFS properties prior to its acquisition, and franchise licenses for most of its portfolio of hotels, and entering into new management and franchise license agreements with internationally recognized hotel brand managers. At December 31, 2003, thirteen hotels are managed by Hilton Hotels Corporation (“Hilton”), ten hotels are managed by Marriott International (“Marriott”), 28 hotels are managed by Interstate Hotels and Resorts (“Interstate”), and eleven other hotels are managed by six other independent management companies.  On January 31, 2004, the management of five hotels was transferred from Interstate to Hilton (two hotels) and Marriott (three hotels).

Termination of Leases and Related Agreements with Hilton

Under the REIT Modernization Act (the “RMA”) that became effective January 1, 2001, the Operating Partnership is permitted to lease its hotels to wholly-owned taxable REIT subsidiaries of the Operating Partnership (“TRS Lessees”), provided that the TRS Lessees engage a third-party management company to manage the hotels. On January 1, 2001, the Operating Partnership terminated its operating leases, management contracts and related ancillary agreements with a wholly-owned subsidiary of Hilton Hotels Corporation (“Hilton”) for approximately $65.5 million. This transaction represented the cancellation of executory contracts that extended through 2012 and substantially all of the termination payment was recorded as an expense on January 1, 2001.

In connection with the termination of the leases and related agreements, the Operating Partnership redeemed 973,684 shares of its Series A Preferred Units owned by a subsidiary of Hilton for $13 million, which resulted in a gain on redemption of $5.1 million that was included in net income available to unitholders in the first quarter of 2001.

The aggregate $73 million of payments to Hilton ($60 million lease termination expense plus $13 million to repurchase the Series A Preferred Units, plus related expenses), were financed by:

•the sale of two hotels in 2000 for approximately $25 million;

•net proceeds from the sale of a new issue of non-convertible mandatorily redeemable preferred units (the “Series B Preferred Units”) for $25 million (before fees and expenses); and

•borrowings under the Operating Partnership’s line of credit.

In conjunction with the new management and franchise license agreements entered into during the fourth quarter of 2003, the Operating Partnership terminated the existing leases with its TRS Lessees and entered into new leases with the either the same or a different TRS Lessee. The duration of the leases coincides with the duration of the new management and franchise license agreements. The leases provide for the payment of base and percentage rent from the TRS Lessees to the owner subsidiary based on the total hotel revenue of the TRS Lessees.

2

Competitive Strengths

The Operating Partnership believes that it is distinguished by the following competitive strengths:

Diversified Asset Base.  The Operating Partnership’s hotel portfolio is diversified by brand, geography and market segment. The Operating Partnership’s hotels are operated under leading brands including Sheraton, Residence Inn by Marriott, Hilton, Doubletree, Holiday Inn, Wyndham, Hyatt, Courtyard by Marriott, Hampton Inn, and Homewood Suites by Hilton. The Operating Partnership owns hotels in 26 states. For the year ended December 31, 2003, the Operating Partnership generated 57% of its revenue in five states (California (30%), Texas (8%), Florida (7%), Michigan (6%) and Missouri (6%)), and the remaining 43% in 21 other states, and the Operating Partnership generated 47.5% of its revenue from full service hotels, 26.5% from extended stay hotels and 26.0% from limited service hotels. No single hotel accounted for more than 5% of the Operating Partnership’s revenue for the year ended December 31, 2003.

Favorable Corporate Structure.  As a result of the RMA, effective January 1, 2001, the Operating Partnership terminated its operating leases and management contracts with subsidiaries of Hilton, and established the TRS Lessees, which currently lease 52 of our hotels. This TRS structure enables us to directly oversee the management of these hotels without an intermediate third-party lessee. The new TRS structure also allows the Operating Partnership to retain the operating profits or losses from the hotels in the TRS lessee structure and provides the Operating Partnership with the following advantages when compared to the Operating Partnership’s prior third-party lessee structure:

•more control over the daily operations of these hotels;

•benefits from cost efficiencies or ancillary revenues generated at these hotels;

•benefits from hotels no longer being encumbered by long-term third-party leases; and

•financial statements that more clearly depict the Operating Partnership’s hotel operations.

Business Strategy

The principal features of the Operating Partnership’s business strategy are outlined below:

Actively Manage the Portfolio of Assets.  The Operating Partnership seeks to increase operating cash flows through active asset management. The Operating Partnership applies its asset management and investing expertise to the renovation, redevelopment and rebranding of its existing hotels and the maintenance of strong strategic relationships with its brand owners and managers. The Operating Partnership has spent approximately $42.1 million, or 7.4% of hotel revenue, excluding lease revenue and other revenue, in order to enhance its hotels’ competitive position and improve cash flow over the past three years.

Maintain Strong Brand Affiliations.  All but two of the Operating Partnership’s hotels operate under franchises from national hotel brands. Franchised hotels typically have higher levels of occupancy and average daily rates than non-franchised hotels due to access to the national reservation systems and marketing provided by these franchisors. For the year ended December 31, 2003, the Operating Partnership generated 93% of its revenue from hotels under franchise by four of the largest and most well-respected hotel franchisors: Marriott (Residence Inn, Courtyard by Marriott, TownePlace Suites by Marriott), Hilton (Hilton, Doubletree, Hampton Inn, Homewood Suites by Hilton), Starwood (Sheraton and Four Points by Sheraton) and Six Continents (Holiday Inn and Holiday Inn Express).

Divest Non-Core Properties.  The Operating Partnership continues to modify its portfolio by selectively divesting hotels that are not consistent with its long-term investment objectives, particularly limited service hotels located in smaller markets. The Operating Partnership intends to continue to selectively divest hotels that:

•may offer limited earnings growth;

•may suffer adverse changes in their local markets; or

•may not offer attractive returns on required additional capital investments.

In connection with the acquisition of RFS, six non-strategic hotels were identified for sale and are carried at a cost of approximately $29.6 million.  Over the past three years, the Operating Partnership has sold three non-core properties for approximately $15.4 million.

3

Competition

The hotel industry is generally characterized as being intensely competitive. The Operating Partnership’s hotels compete with independently owned hotels, hotels which are part of local or regional chains, and hotels in other well-known national chains, including those offering different types of accommodations. The principal competitive factors affecting the Operating Partnership’s hotels are brand recognition, location, range of services and guest amenities offered, the quality of the hotel and services provided, and price.

The Operating Partnership competes with other persons and entities to locate suitable properties to acquire interests in and to locate purchasers for its properties. The Operating Partnership also will compete with other financing sources such as banks, mortgage lenders, and sale/leaseback companies for suitable properties, tenants and mortgage loan borrowers.

Available Information

The Operating Partnership’s former internet website, www.rfshotel.com, is no longer operational. CNL’s internet website is www.cnlonline.com.  CNL makes available free of charge through its website the Operating Partnership’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Operating Partnership electronically files such material with, or furnishes it to, the Securities and Exchange Commission (“Commission”). The information on the CNL website is not, and shall not be deemed to be, a part of this report or incorporated into any other filings that the Operating Partnership makes with the Commission.

Employees

The Operating Partnership has no employees other than our officers who are not compensated by the Operating Partnership. We have retained CNL Hospitality Corp. as our advisor to provide management, acquisition, development, advisory and some administrative services and have retained other affiliates to provide additional administrative services. All persons employed in the day-to-day operations of the hotels are employees of the management companies engaged to operate the hotels and are not the Operating Partnership’s employees. Should there be an employee disruption at any of the third party management companies, i.e. a strike, this could have a significant impact on the Operating Partnership’s operations.

Tax Status

The Operating Partnership may own up to 100% of its TRS Lessees. A TRS Lessee is a taxable corporation that may lease hotels under certain circumstances, provide services to the Operating Partnership, and perform activities unrelated to the Operating Partnership’s tenants, such as third-party management, development, and other independent business activities. Overall, no more than 20% of the value of the Operating Partnership’s assets may consist of securities of one or more of its TRS Lessees.

A TRS is permitted to lease hotels from the Operating Partnership as long as the hotels are operated on behalf of the TRS by a third-party hotel manager who satisfies the following requirements:

•such manager is, or is related to a person who is, actively engaged in the trade or business of operating “qualified lodging facilities” for any person unrelated to the Operating Partnership and its TRS Lessees;

•such manager does not own, directly or indirectly, more than 35% of the Operating Partnership’s units;

•no more than 35% of such manager is owned, directly or indirectly, by one or more persons owning 35% or more of the Operating Partnership’s units; and

•the Operating Partnership does not directly or indirectly derive any income from such manager.

The deductibility of interest paid or accrued by a TRS Lessee to the Operating Partnership is limited. The RMA also imposes a 100% excise tax on transactions between a TRS Lessee and the Operating Partnership or its tenants that is limited not conducted on an arm’s-length basis.

4

Risk Factors

Risks Related to the Operating Partnership and the Conduct of Business

Current geo-political uncertainty as well as the weak economy have adversely impacted the hotel industry generally, and the Operating Partnership has experienced an adverse effect on its results of operations and financial condition. These trends may continue to impact the Operating Partnership into the foreseeable future.

Prior to September 11, 2001, revenue per available room began to decline as a result of the slowing economy, particularly the Operating Partnership’s hotels in San Francisco and Silicon Valley. The terrorist attacks of September 11, 2001, the current geo-political uncertainty related to conflicts with Iraq and potential conflicts with North Korea, the continued terrorist threats, and the effects of a weak economy have led to a substantial reduction in business and leisure travel throughout the United States and industry revenue per available room generally. 2002 marked the second consecutive year in which revenue per available room declined year over year. In 2003, revenue per available room increased only 0.2%, as determined by Smith Travel Research. Even though revenue per available room increased slightly in 2003, and the industry is projecting RevPAR growth in 2004 of approximately 5% (as estimated by both Smith Travel Research and PricewaterhouseCoopers), revenue per available room may ultimately continue to decline. The Operating Partnership cannot predict the extent to which the current geo-political uncertainty will continue to directly or indirectly impact the hotel industry or the Operating Partnership’s operating results in the future. Continued lower revenue per available room at the Operating Partnership’s hotels could have an adverse effect on its results of operations and financial condition, including the Operating Partnership’s ability to remain in compliance with debt covenants, and the ability to fund capital improvements and renovations at its hotels. Additional terrorist attacks or war could have further material adverse effects on the hotel industry and the Operating Partnership’s operations.

TRS lessee structure subjects the Operating Partnership to the risk of increased hotel operating expenses.

Prior to January 1, 2001, substantially all of the Operating Partnership’s hotels were leased to third-parties under leases providing for the payment of rent based, in part, on revenues from the Operating Partnership’s hotels. Accordingly, operating risks were essentially limited to changes in hotel revenues and to the lessees’ ability to pay the rent due under the leases. In addition to the ownership expenses previously borne by the Operating Partnership, the Operating Partnership is now subject to the risks of increased hotel operating expenses for the 52 hotels now in the Operating Partnership’s TRS lessee structure, including but not limited to:

•wage and benefit costs;

•repair and maintenance expenses;

•energy costs, which have increased in recent months, especially at the California hotels;

•the costs of liability insurance; and

•other operating expenses.

Increases in these operating expenses can have a significant adverse impact on the Operating Partnership’s earnings and cash flow.

The formation of the TRS Lessees will increase the Operating Partnership’s overall tax liability.

Effective January 1, 2001, the Operating Partnership formed the TRS Lessees, which currently lease 52 of our hotels. The TRS Lessees are subject to federal and state income tax on their taxable income, which consists of the revenues from the hotels leased by the TRS Lessees net of the operating expenses for such hotels and rent payments. Accordingly, although the formation of the TRS Lessees allows the Operating Partnership to participate in the operating income from the hotels in addition to receiving rent, that operating income is fully subject to income tax. The after-tax net income of the TRS Lessees is available for distribution to CNL as distributions.

5

Uninsured and underinsured losses might have an adverse effect on the Operating Partnership’s financial condition.

The Operating Partnership maintains comprehensive insurance on each of its hotels, including liability, fire and extended coverage, of the type and amount the Operating Partnership believes is customarily obtained for or by hotel owners. Some of the Operating Partnership’s insurance policies are written, implemented and monitored by the third party companies who manage the Operating Partnership’s hotels and the Operating Partnership does not have the ability to actively monitor these programs and claims thereon. All 10 of the Operating Partnership’s hotels in California are located in areas that are typically subject to more earthquake activity than in other locations in the United States. These hotels are located in areas of high seismic risk and some were constructed under building codes which were less stringent with regard to earthquake related requirements. An earthquake could render significant uninsured damage to the hotels. Additionally, areas in Florida, where eight of the Operating Partnership’s hotels are located, may experience hurricane or high-wind activity. The Operating Partnership has earthquake and windstorm insurance policies on its hotels. However, various types of catastrophic losses, like earthquakes and floods may not be fully insurable or may not be economically insurable. With respect to the earthquake insurance policies, in addition to the applicable deductibles under the earthquake insurance policies, the Operating Partnership is self-insured for any losses in excess of $40 million per earthquake. The windstorm insurance policies are of the type and amount the Operating Partnership believes is customarily obtained for or by hotel owners.  The Operating Partnership also maintains terrorism insurance, which the Operating Partnership believes currently insures against losses resulting from a terrorist attack. In the event of a substantial loss, insurance coverage may not be able to cover the full current market value or replacement cost of the Operating Partnership’s lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also affect the Operating Partnership’s ability to replace or renovate a hotel after it has been damaged or destroyed.

Hotel concentration in certain states, particularly California, subjects the Operating Partnership to operating risks.

For the year ended December 31, 2003, approximately 57% of the Operating Partnership’s revenue came from its hotels located in California (30%), Texas (8%), Florida (7%), Michigan (6%) and Illinois (6%). Adverse events in these areas, such as economic recessions or natural disasters, could cause a loss of revenues from these hotels, which could have a greater adverse effect on the Operating Partnership as a result of its concentration of assets in these areas. The Operating Partnership’s geographic concentration also exposes it to risks of oversupply and competition in its principal markets. Each of the Operating Partnership’s hotels competes with other hotels in its market area. A number of additional hotel rooms will continue to be built in the markets in which the Operating Partnership’s hotels are located, which could result in too many hotel rooms in those regions. Significant increases in the supply of hotel rooms without corresponding increases in demand can have a severe adverse effect on the Operating Partnership’s business, financial condition and results of operations.

The San Francisco Bay Area, including Silicon Valley, has suffered an economic downturn related to the decline in the technology and Internet related markets. In particular, revenues at the Operating Partnership’s four hotels in Silicon Valley and two hotels in San Francisco have been adversely impacted by the weak economy and by recent job reductions in the technology and Internet sectors. As a result of the continued weak economy and geo-political uncertainty, while the Operating Partnership’s entire hotel portfolio was adversely impacted, the northern California hotels were particularly affected. Revenue per available room at the Operating Partnership’s five comparable hotels in northern California (excludes the Hotel Rex in San Francisco which was closed for earthquake retrofit and renovation during the fourth quarter of 2002 and the first quarter of 2003), consisting of one hotel in San Francisco and four hotels in Silicon Valley, experienced an average decline in revenue per available room of 9.2% for the year. Excluding the six northern California hotels and the non-comparable Residence Inns in Sacramento, CA and Fishkill, NY, revenue per available room declined 2.3% for the year. For the year ended December 31, 2003, the Operating Partnership received approximately 30% of its revenue from hotels in portions of California, including Silicon Valley (12%), Los Angeles (6%), Sacramento (2%), San Diego (4%) and San Francisco (6%).

Also, California faced an energy crisis during 2001 that significantly increased energy costs at the 10 California hotels, although the impact was somewhat offset through the Operating Partnership’s ability to collect energy surcharges in California. While this energy crisis was resolved, if California experiences another energy crisis, and the Operating Partnership cannot adequately pass its increased costs to customers through energy surcharges or otherwise, or the state’s economy, particularly Northern California, continues to experience decreasing occupancy rates, revenue per available room, average daily rate (“ADR”) or other industry fundamentals, it could have a material adverse effect on the Operating Partnership’s business, financial condition and results of operation.

6

Reliance on third-party management companies to operate the Operating Partnership’s hotels and a change in these management companies may be costly and disruptive to the Operating Partnership’s operations.

Under the REIT Modernization Act, in order for CNL to continue to qualify as a REIT, the Operating Partnership’s hotels must be managed by third-parties. Under the terms of the management agreements, the Operating Partnership’s ability to participate in operating decisions regarding the hotels is limited. Nine unrelated third-parties currently manage all of the Operating Partnership’s hotels. These property managers presently control the daily operations of the hotels. The Operating Partnership depends on these managers to adequately operate its hotels as provided in the management agreements. Even if the Operating Partnership believes that its hotels are not being managed efficiently or in a manner that results in satisfactory occupancy rates, revenue per available room or ADR, the Operating Partnership may not be able to force the management company to change the way it operates the Operating Partnership’s hotels in a timely manner. Additionally, in the event that the Operating Partnership needs to replace any of its management companies, like it did with Flagstone in 2003, which managed 50 of the 57 hotels it then owned, the Operating Partnership may experience significant disruptions at its hotels and in its operations and decreased occupancy. During 2003, the Operating Partnership terminated a substantial portion of the management agreements with Flagstone. Furthermore, because the Operating Partnership must have third-party managers to maintain CNL’s REIT status, it may be forced to enter into new management agreements on terms that the Operating Partnership believes are unfavorable or less favorable than the terms of the Operating Partnership’s current agreements. Any of the foregoing, may result in a material adverse effect on the Operating Partnership’s business, financial condition and results of operations.

Compliance with requirements of franchise agreements.

Most of the Operating Partnership’s hotels are operated under a franchise license. Each license agreement requires that the licensed hotel be maintained and operated in accordance with certain standards and requires the Operating Partnership to pay a variety of franchise related fees to the franchisors. The franchisors also may require substantial improvements to the Operating Partnership’s hotels, for which the Operating Partnership would be responsible, as a condition to the renewal or continuation of these franchise licenses. In connection with the RFS-CNL Transaction, the Operating Partnership is required, as part of the new franchise licenses, to make approximately $40 million of improvements to its hotels over the next three years.

If a franchise license terminates due to the Operating Partnership’s failure to make required improvements or to otherwise comply with its terms, the Operating Partnership may be liable to the franchisor for a termination payment. These termination payments would vary by franchise agreement and by hotel. Although the Operating Partnership has never had a franchise agreement terminated by a franchisor, the loss of a substantial number of franchise licenses and the related termination payments could have a material adverse effect on its business, financial condition and results of operations.

The Operating Partnership may not be able to successfully implement its acquisition and disposition strategy or realize the benefit of its strategy.

One of the Operating Partnership’s key strategies includes the acquisition of attractive hotel properties. However, the Operating Partnership competes for hotel acquisitions with other entities. These entities generally may be able to accept more risk than the Operating Partnership can manage wisely and may be able to pay higher acquisition prices than the Operating Partnership is willing to pay. This competition may generally limit the number of suitable investment opportunities offered to the Operating Partnership. This competition may also increase the bargaining power of property owners seeking to sell to the Operating Partnership, making it more difficult for the Operating Partnership to acquire new properties on attractive terms. Furthermore, in recent years, the Operating Partnership believes that acquisition prices were not attractive by historical standards and the Operating Partnership reduced its acquisition activity accordingly. While the Operating Partnership believes that the hotel acquisition market has recently become more favorable, there can be no assurance that a sufficient number of attractive properties, both in terms of price and quality, will be available for acquisition or that the Operating Partnership will ultimately be able to acquire those hotel properties on favorable terms.

Additionally, the Operating Partnership’s strategy includes continually shifting its portfolio by selectively divesting limited service hotels which are not consistent with the Operating Partnership’s long-term investment horizon, particularly those in smaller markets. As with acquisitions, the Operating Partnership faces competition for buyers of its hotel properties. Other sellers of hotels may have the financial resources to dispose of their hotels on unfavorable terms that the Operating Partnership would be unable to accept. If the Operating Partnership cannot find buyers for its non-core properties, it will not be able to implement its divestiture strategy.

7

In the event that the Operating Partnership cannot fully execute its acquisition and divestiture strategy or realize the benefits therefrom, it may not be able to grow its business, EBITDA or cash flow.

The Operating Partnership may be unable to adequately finance or fully realize the anticipated benefits of its renovations.

As part of the Operating Partnership’s internal growth strategy, it regularly renovates, redevelops and, in certain cases, re-brands its hotels. In addition, the franchisors require the Operating Partnership to make periodic capital improvements as a condition to keeping the franchise licenses. During 2003, 2002 and 2001, the Operating Partnership spent approximately $11.3 million, $14.6 million and $18.0 million, respectively, on capital improvements to its hotels. The Operating Partnership expects to spend approximately $17.7 million dollars on capital improvements in 2004, which includes amounts required under the product improvement plans planned for 2004.  As stated previously, as a result of the RFS-CNL Transaction, the Operating Partnership is required, as part of the new franchise licenses, to make approximately $40 million of improvements to its hotels over the next three years, which includes the amount budgeted to spend in 2004.  The Operating Partnership’s current indebtedness, as well as its Senior Notes, may restrict its ability to finance proposed capital expenditures, which may cause the Operating Partnership to delay, alter materially or abandon planned capital improvements and renovations. In addition to the difficulties with financing these projects discussed above, renovations also give rise to the following risks:

•possible environmental problems;

•construction cost overruns and delays;

•uncertainties as to market demand or a loss of market demand after renovations have begun; and

•displacement of room revenues due to rooms being out of order.

If the completion of renovation projects is significantly delayed, operating results could be adversely affected. In addition, no assurance can be given that recently completed and ongoing improvements will achieve the results anticipated when the Operating Partnership made the decision to invest in the improvements.

Risks Related to the Hotel Industry

The Operating Partnership is subject to the risks of hotel operations.

The Operating Partnership has invested only in hotel-related assets, and its hotels are subject to all of the risks common to the hotel industry. These risks could adversely affect hotel occupancy and the rates that can be charged for hotel rooms as well as hotel operating expenses, and generally include:

•competition from other hotels;

•increases in supply of hotel rooms that exceed increases in demand;

•increases in energy costs and other travel expenses that reduce business and leisure travel;

•reduced business and leisure travel due to continued geo-political uncertainty, including terrorism;

•adverse effects of declines in general and local economic activity;

•adverse effects of a downturn in the hotel industry; and

•risks generally associated with the ownership of hotels and real estate, as discussed below.

An industry downturn could adversely affect results of operations.

According to Smith Travel Research, for all U.S. hotels, industry revenue per available room experienced a year over year increase of approximately 0.2% in 2003 versus year over year decreases of 2.0% and 6.9% in 2002 and 2001, respectively, and is expected to increase approximately 5% in 2004.

If the Operating Partnership is unable to sustain appropriate levels of revenue per available room, its operating margins may deteriorate, and it may be unable to execute its business plan, including the selective acquisition of hotel properties. In addition, if this downward trend continues, the Operating Partnership may be unable to continue to meet its debt service obligations as they become due or to obtain necessary additional financing.

8

Seasonality of the hotel business can be expected to cause quarterly fluctuations in revenues.

Demand in the lodging industry is affected by recurring seasonal patterns.  For hotel properties which are not tourism oriented, hotel revenues are generally greater in the second and third calendar quarters, and for hotel properties in tourist areas, including resorts, revenues are generally greater for the third and fourth calendar quarters than other times of the year.  Seasonal variations in revenue at the Operating Partnership’s hotels can be expected to cause quarterly fluctuations in revenues and earnings.  Hotel operations also may be adversely affected by events beyond the Operating Partnership’s control, such as extreme weather conditions, poor economic factors and/or cycles, and other factors affecting travel.  Historically, to the extent that cash flows from operations has been insufficient during any quarter, due to temporary or seasonal fluctuations in revenues, the Operating Partnership has utilized borrowings under its line of credit to fund a portion of its distributions to equity and debt holders.

The Operating Partnership will also encounter risks that may adversely affect real estate ownership in general.

The Operating Partnership’s investments in hotels are subject to the numerous risks generally associated with owning real estate, including among others:

•adverse changes in general or local economic or real estate market conditions;

•changes in zoning laws;

•changes in traffic patterns and neighborhood characteristics;

•increases in assessed valuation and tax rates;

•increases in the cost of property insurance;

•governmental regulations and fiscal policies;

•the potential for uninsured or underinsured property losses;

•the impact of environmental laws and regulations; and

•other circumstances beyond our control.

Moreover, real estate investments are relatively illiquid, and the Operating Partnership may not be able to vary its portfolio in response to changes in economic and other conditions.

Compliance with environmental laws may adversely affect the Operating Partnership’s financial condition.

The Operating Partnership’s hotel properties are subject to various federal, state and local environmental laws. Under these laws, courts and government agencies have the authority to require the owner of a contaminated property to clean up the property, even if the owner did not know of or was not responsible for the contamination. These laws also apply to persons who owned a property at the time it became contaminated. In addition to the costs of cleanup, contamination can affect the value of a property and, therefore, an owner’s ability to borrow funds using the property as collateral. Under the environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, like a landfill or an incinerator, pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. Furthermore, decisions by courts have established that third-parties may recover damages for injury caused by property contamination. For instance, a person exposed to asbestos while staying in a hotel may seek to recover damages if he suffers injury from the asbestos.

The Operating Partnership could be responsible for the costs discussed above, if one or more of its properties are found to be contaminated. The costs to clean up a contaminated property, to defend against a claim, or to comply with environmental laws could be material and could affect the funds available for distribution to CNL and our debt holders. To determine whether any costs of this nature may be incurred, the Operating Partnership commissioned Phase I environmental site assessments, or ESA’s, before it acquired hotels. These studies typically include a review of historical information and a site visit but not soil or groundwater testing. The Operating Partnership obtained the ESA’s to help identify whether it might be responsible for cleanup costs or other environmental liabilities. The ESA’s on the Operating Partnership’s hotels did not reveal any environmental conditions that are likely to have a material adverse effect on the Operating Partnership’s business, assets, results of operations or liquidity. However, ESA’s do not always identify all potential problems or environmental liabilities. Consequently, the Operating Partnership may have material environmental liabilities of which it is unaware.

9

The Phase I ESA for the Hampton Inn—Airport in Indianapolis, indicated that the hotel disposes of approximately 10% of its solid waste at a facility that is a state Superfund site. Such a site may be subject to investigation and remediation under the federal and state Superfund laws, and persons that sent hazardous substances to the site may be jointly and severally liable for the costs of the work. The Phase I ESA report states that solid waste from the Indianapolis hotel was disposed into a domestic waste cell of the facility. A state official informed the engineering firm conducting the Phase I ESA that this domestic waste cell is segregated by a containment structure and is adjacent to, but not part of, the Superfund site. The Phase I audit did not indicate that the Indianapolis hotel has arranged for the disposal of any hazardous substances at this facility. If the Indianapolis hotel in fact arranged for such disposal, however, it could be found liable for at least a part of any response costs.

Compliance with the Americans with Disabilities Act may adversely affect our financial condition.

Under the Americans with Disabilities Act of 1990, all public accommodations, including hotels, are required to meet certain federal requirements for access and use by disabled persons. The Operating Partnership believes that its hotels substantially comply with the requirement of the Americans with Disabilities Act. However, a determination that the hotels are not in compliance with that Act could result in liability for both governmental fines and damages to private parties. If the Operating Partnership were required to make unanticipated major modifications to the hotels to comply with the requirements of the Americans with Disabilities Act, it could adversely affect the Operating Partnership’s ability to pay distributions to CNL and our debt holders.

Item 2. Properties

As of December 31, 2003, the Operating Partnership had interests in 62 hotels located in 26 states, generally consisting of land, buildings and equipment. Of the 62 hotels, the Operating Partnership currently leases 52 hotels to TRS Lessees, three hotels to TRS subsidiaries owned by CNL, but not owned by the Operating Partnership, and seven hotels to third-party operators.

Generally, hotels acquired consist of land, building and equipment; although in one case, the Operating Partnership owns the building and equipment only with the land owned by a third party. The lot sizes generally range up to 10 acres depending on product, market and design considerations, and are available at a broad range of pricing.  The hotel sites are generally in primary or secondary urban, suburban, airport, highway or resort markets which have been evaluated for past and future anticipated lodging demand trends.

The hotel buildings generally are mid-rise construction. The hotels consist of limited service, extended stay or full service hotels. Limited service hotels generally minimize non-guest room space and offer limited food service such as complimentary breakfasts and do not have restaurant or lounge facilities on-site. Extended stay hotels generally contain guest suites with a kitchen area and living area separate from the bedroom. Extended stay hotels vary with respect to providing on-site restaurant facilities.  Full service hotels generally have conference or meeting facilities and on-site food and beverage facilities. The hotels include equipment and most conform to national hotel brand approved design concepts.

Tenants of the hotels have established reserve funds which are used for the replacement and renewal of furniture, fixtures and equipment, and routine capital expenditures (“FF&E Reserve”). FF&E Reserve funds, any interest earned thereon and any replacement furniture, fixtures, or equipment purchased with such funds are owned by the Operating Partnership. However, there is no guarantee that these reserve funds will be adequate to meet future capital expenditures. In addition, leases with third parties generally require the tenant to make a security deposit relating to the hotel, which is retained as security for the tenant’s obligations under the lease.

As of December 31, 2003, most of the hotels owned were pledged as collateral under the Operating Partnership’s financing arrangements.

The following table sets forth information regarding the Operating Partnership’s hotels as of, and for the year ended December 31, 2003. Those properties that are encumbered by mortgages are identified in Schedule III, which is filed herewith.

10

Full Service	Date Opened	Number of Rooms
Beverly Heritage
Milpitas, California	1988	237
Doubletree
San Diego, California	1990	221
Hilton
Birmingham, Alabama	1984	205
San Francisco, California	1976	234
Holiday Inn
Crystal Lake, Illinois	1988	197
Louisville, Kentucky	1970	169
Lafayette, Louisiana	1983	242
Flint, Michigan	1990	171
Columbia, South Carolina	1969	175
Homewood Suites by Hilton
Chandler, Arizona	1998	83
Hotel Rex
San Francisco, California	1912	94
Hyatt
Coral Gables, Florida (2)	1987	242
Four Points by Sheraton
Bakersfield, California	1983	198
Pleasanton, California	1985	214
Sheraton
Milpitas, California	1988	229
Sunnyvale, California	1980	173
Clayton, Missouri	1965	257
Wyndham
Billerica, Massachusetts (1)	1999	210
Denver, Colorado (1)	1999	180
Full Service Total		3,731

Extended Stay	Date Opened	Number of Rooms
Residence Inn by Marriott
Sacramento, California	1987	176
Torrance, California	1984	247
Wilmington, Delaware	1989	120
Jacksonville, Florida (1)	1997	120
Orlando, Florida (International Drive)	1984	176
Orlando, Florida (Sea World) (2)	2002	349
West Palm Beach, Florida (1)	1998	78
Atlanta, Georgia	1987	128
Ann Arbor, Michigan	1985	114
Kansas City, Missouri	1987	96
Charlotte, North Carolina	1984	116
Fishkill, New York	1988	137
Warwick, Rhode Island	1989	96
Ft. Worth, Texas	1983	120
Tyler, Texas	1985	128
TownePlace Suites by Marriott
Miami Lakes, Florida (1)	1999	95
Miami West, Florida (1)	1999	95
Fort Worth, Texas	1998	95
Extended Stay Total		2,486

11

Limited Service	Date Opened	Number of Rooms
Comfort Inn
Marietta, Georgia	1989	184
Courtyard
Edison, New Jersey (2)	2002	147
Flint, Michigan	1996	102
Hampton Inn
Chandler, Arizona	1997	101
Sedona, Arizona	1997	56
Denver, Colorado	1985	138
Lakewood, Colorado	1987	150
Ft. Lauderdale, Florida	1986	122
Jacksonville, Florida (1)	1998	118
Indianapolis, Indiana	1994	131
Bloomington, Minnesota	1994	135
Minnetonka, Minnesota	1990	127
Hattiesburg, Mississippi	1988	154
Lincoln, Nebraska	1983	111
Omaha, Nebraska	1985	129
Oklahoma City, Oklahoma	1986	134
Tulsa, Oklahoma	1986	148
Memphis, Tennessee	1992	120
Laredo, Texas	1995	119
Houston, Texas	1996	119
Holiday Inn Express
Arlington Heights, Illinois	1989	125
Downers Grove, Illinois	1984	123
Bloomington, Minnesota	1987	142
Austin, Texas	1992	125
Wauwatosa, Wisconsin	1984	122
Limited Service Total		3,182
Portfolio Total/		9,399

(1)This hotel is leased to a third party lessee pursuant to a long-term percentage lease which provides for fixed base rent and percentage rent based on the revenue of the hotels.

(2)This hotel is leased to a taxable REIT subsidiary owned by CNL, but not owned by the Operating Partnership.

12

Item 3. Legal Proceedings

On May 13, 2003, A. Bruce Chasen, as class representative, filed a putative class action lawsuit in the Circuit Court of Shelby County, Tennessee, 30^th Judicial District against RFS, RFS’s directors and CNL (the “Chasen Complaint”).   On June 6, 2003, the Chasen Complaint was amended.  The amended Chasen Complaint alleges, among other things, that (i) the merger consideration to be received by RFS’s shareholders is significantly less than the intrinsic value of RFS, (ii) the RFS directors breached their fiduciary duties due to shareholders on a variety of grounds including failing to ascertain the true value of RFS, failing to determine whether there were any other bidders for RFS, and failing to avoid certain alleged conflicts of interest shared by members of the RFS board of directors and its financial advisor, (iii) CNL aided and abetted the RFS board of directors in connection with their breach of fiduciary duties, (iv) the RFS board of directors violated portions of the Tennessee Investor Protection Act, and (v) the RFS proxy statement is false and misleading.  Among other relief, the amended Chasen Complaint seeks certification of the class action, an injunction enjoining RFS and CNL from completing the merger, monetary damages in an unspecified amount, the payment of attorney’s fees, and rescissory damages.  On July 1, 2003, RFS and CNL filed an answer to the amended Chasen Complaint setting forth an affirmative defense and its general denials of the allegations set forth therein.  The plaintiff’s motion for a temporary restraining order for purposes of enjoining the transaction was denied by the Circuit Court of Shelby County, Tennessee, 30^th Judicial District on July 8, 2003. Based upon the information currently available to the Operating Partnership and CNL, the Operating Partnership believes the allegations contained in the amended Chasen Complaint are without merit and it is the Operating Partnership’s understanding that CNL intends to vigorously defend the action, and therefore, a liability was not accrued.  The Operating Partnership and CNL are planning to file a motion to dismiss the allegations in the amended Chasen Complaint. If the motion is not successful, it is expected that the case will proceed to trial.

On August 26, 2002, Carmel Valley, LLC filed a lawsuit against RFS and some of its subsidiaries in the Superior Court of the State of California, for the County of San Diego (the “Carmel Valley Complaint”).  The Operating Partnership is a party to a Carmel Valley Complaint which claims damages relating to a dispute over a parcel of land located adjacent to one of its hotels.  The Operating Partnership has unsuccessfully attempted to mediate this case.  At this time, we believe that the damages claimed lack sufficient factual support and will continue to vigorously defend the action, and therefore, a liability was not accrued. However, it is possible that the Operating Partnership could incur losses if the plaintiff ultimately prevails.  The plaintiff is seeking monetary damages of up to $0.7 million.  The Operating Partnership and CNL have recently filed certain motions to dismiss which are being considered by the Court.  If the motions are not successful, it is expected that the case will proceed to trial.

From time to time the Operating Partnership may be exposed to litigation arising from the operations of its business.  At this time, management does not believe that resolution of these matters will have a material adverse effect of the Operating Partnership’s financial condition or results of operation.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter covered by this report.

13

PART II

Item 5. Market for Registrant’s Common Equity and Related Unitholder Matters

(a) Market Information

The Series B Preferred units and the Operating Partnership units are not publicly traded, and accordingly, there is no established public trading market for such securities. The following table sets forth, for the indicated periods, the payment of distributions by the Operating Partnership on its units and Series B Preferred units for the years ended December 31, 2003 and 2002:

	Distribution Paid per Unit		Distribution Paid per Series B Preferred Unit
2003
First Quarter	$	0.25	$	—
Second Quarter	—		—
Third Quarter (Note 1)	1.38		—
Fourth Quarter (Note 1)	0.94		—
2002
First Quarter	$	0.25	$	3.125
Second Quarter	0.25		3.125
Third Quarter	0.25		—
Fourth Quarter	0.25		—

Note 1 – The Operating Partnership made a $44.0 million (or $1.38 per unit) and a $30.0 million (or $0.94 per unit) distribution to CNL during the third and fourth quarter of 2003, respectively.

(b) Holders

The number of units outstanding was 31,941,852 as of March 30, 2004 (99.9% of which were held by CNL Rose Acquisition Corp. and 0.1% were held by CNL Rose GP Corp.).

(c) Distributions

Prior to the RFS-CNL Transaction, the Operating Partnership paid regular quarterly distributions on its units to RFS and the limited partners. Subsequent to the RFS-CNL Transaction, there are no regular quarterly distributions paid, but the Operating Partnership will make distributions to CNL as they are declared.  During the third and fourth quarters of 2003, the Operating Partnership made a $44.0 million, or $1.38 per unit, and a $30.0 million distribution, or $0.94 per unit, respectively, to CNL.

Item 6. Selected Financial Data

The following tables set forth selected historical financial data for the Operating Partnership that has been derived from the financial statements of the Operating Partnership and the notes thereto. Such data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and all of the financial statements and notes thereto.

14

SELECTED FINANCIAL DATA

(in thousands, except per unit and ratio amounts)

	2003			2002			2001			2000			1999
Operating Data (1):
Total revenue	$	184,792		$	185,937		$	206,273		$	106,786		$	98,809
Net (loss) income	(17,100		)	(4,432		)	(14,886		)	34,008			38,610
Net (loss) income applicable to unitholders	(17,100		)	(7,884		)	(12,870		)	32,596			37,198
Diluted (loss) earnings per unit	(0.54		)	(0.26		)	(0.47		)	1.20			1.35
Balance Sheet Data (1):
Investment in hotel properties, net	809,410			593,289			615,562			635,997			651,988
Total assets	928,749			642,655			668,862			673,467			687,242
Total debt	406,028			291,229			301,135			277,431			282,278
Redeemable limited partnership units, at redemption value	—			26,702			27,980			33,461			26,779
Partners’ capital	503,104			300,522			291,715			349,667			369,947
Cash Flows Data:
Cash provided by operating activities	2,869			36,526			10,466			65,223			66,884
Cash used by investing activities	(36,557		)	(8,139		)	(8,642		)	(10,843		)	(26,580		)
Cash provided (used) by financing activities	51,146			(32,184		)	230			(56,612		)	(36,405		)
Other Data:
Ratio of earnings to fixed charges(2)	0.4		x	0.8		x	0.4		x	2.4		x	2.7		x
Supplemental ratio of earnings to fixed charges(3)	1.1		x	1.2		x	2.0		x	N/A			N/A
Distributions paid per unit	2.57			1.00			1.255			1.54			1.54

QUARTERLY RESULTS OF OPERATIONS

(in thousands, except per unit amounts)

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
2003:
Operating Data:
Total revenue	$	41,967		$	45,290		$	50,716		$	46,819		$	184,792
Net (loss) income	(1,795		)	(383		)	(15,112		)	190			(17,100		)
Net (loss) income applicable to unitholders	(1,795		)	(383		)	(15,112		)	190			(17,100		)
Diluted (loss) earnings per unit	(0.06		)	(0.01		)	(0.48		)	0.01			(0.54		)
Other Data:
Distributions paid per unit	0.25			—			1.38			0.94			2.57
2002:
Operating Data:
Total revenue	$	43,916		$	49,418		$	48,787		$	43,816		$	185,937
Net (loss) income	(8,343		)	3,888			3,650			(3,627		)	(4,432		)
Net (loss) income applicable to unitholders	(9,124		)	1,217			3,650			(3,627		)	(7,884		)
Diluted (loss) earnings per unit	(0.32		)	0.04			0.12			(0.10		)	(0.26		)
Other Data:
Distributions paid per unit	0.25			0.25			0.25			0.25			1.00

(1)There is little comparability between 2003 data and prior years as a result of the RFS-CNL Transaction, including the application of purchase accounting and certain changes in operations, for example, the changes in hotel managers. Additionally, under the RMA, which became effective January 1, 2001, there is little comparability between the annual financial results for 2003, 2002 and 2001 versus prior years.

(2)For the purpose of computing the ratio of earnings to fixed charges, earnings consist of net income plus fixed charges, plus the amortization of capitalized interest and less capitalized interest. Fixed charges consist of interest, whether expensed or capitalized, and amortization of loan costs. For the years ended December 31, 2003, 2002 and 2001, the ratio of earnings to fixed charges was less than 1:1 and earnings were insufficient to cover fixed charges by $17.0 million, $4.3 million and $14.8 million, respectively. The computation of the ratio of earnings to fixed charges is included as Exhibit 12.1 to this Form 10-K.

15

(3)The supplemental ratio of earnings to fixed charges is computed the same as described in footnote (2) except that income from continuing operations is adjusted to add back the RFS-CNL Transaction costs of $20.6 million in 2003, debt extinguishments and swap termination costs of $10.1 million in 2002 and the Hilton lease termination expense, net of deferred income taxes in 2001. The computation of the supplemental ratio of earnings to fixed charges is included as Exhibit 12.1 to this Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

The following information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These statements generally are characterized by the use of terms such as “believe,” “expect” and “may.”  Although the Operating Partnership believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Operating Partnership’s actual results could differ materially from those set forth in the forward-looking statements.  Certain factors that might cause such a difference include the following: changes in general economic conditions, changes in local and national real estate conditions, terrorism, extended U.S. Military combat operations, availability of capital from borrowings, continued availability of proceeds from operations or CNL, the ability of the Operating Partnership to obtain additional permanent financing on satisfactory terms, the ability of the Operating Partnership to continue to identify suitable investments, the ability of the Operating Partnership to continue to locate suitable managers and tenants for its properties and borrowers for its mortgage notes payable, and the ability of such tenants and borrowers to make payments under their respective leases or mortgage notes payable.  Many of these factors are discussed in detail under “Business—Risk Factors” in this Form 10-K and should be carefully read. Except as required by the federal securities laws, the Operating Partnership disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this annual report on Form 10-K to reflect any change in the Operating Partnership’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Given these uncertainties, readers are cautioned not to place undue reliance on such statements.

General

RFS Partnership, L.P. (the “Operating Partnership”) is a Tennessee limited partnership which, at December 31, 2003, owned interests in 62 hotels with 9,399 rooms located in 26 states (collectively the “Hotels”). On July 10, 2003, RFS Hotel Investors, Inc. (“RFS”) and the Operating Partnership were acquired by subsidiaries of CNL Hospitality Properties, Inc. (“CNL”) for approximately $383 million in cash ($12.35 per share or limited partnership unit) (“RFS-CNL Transaction”), excluding the 1.0 million shares of RFS stock acquired by CNL prior to July 10, 2003.  Upon consummation of this transaction, RFS was merged with and into a subsidiary of CNL and RFS ceased to exist as a separate corporate entity.  Further, upon consummation of this transaction, a subsidiary of CNL was merged with and into the Operating Partnership and the Operating Partnership continues to exist as a separate entity and as an indirect wholly owned subsidiary of CNL.

For the year ended December 31, 2003, the Operating Partnership generated revenue of $184.8 million and a net loss of $17.1 million. In 2003, the Operating Partnership received 47.5% of its revenue from full service hotels, 26.5% from extended stay hotels and 26.0% from limited service hotels. The Operating Partnership received 57% of its revenue in five states (California (30%), Texas (8%), Florida (7%), Michigan (6%) and Missouri (6%)).

The following summarizes additional information for the 62 hotels owned at December 31, 2003:

16

Franchise Affiliation	Hotel Properties	Rooms/Suites
Full Service Hotels:
Holiday Inn	5	954
Sheraton	3	659
Hilton	2	439
Sheraton Four Points	2	412
Wyndham	2	390
Independent	2	331
Hyatt Regency	1	242
Doubletree	1	221
Homewood Suites by Hilton	1	83
	19	3,731
Extended Stay Hotels:
Residence Inn by Marriott	15	2,201
TownePlace Suites by Marriott	3	285
	18	2,486
Limited Service Hotels:
Hampton Inn	17	2,113
Holiday Inn Express	5	637
Courtyard by Marriott	2	248
Comfort Inn	1	184
	25	3,182
Total	62	9,399

The following summarizes the number of hotels owned for the periods presented:

	2003	2002		2001
Hotels owned at beginning of year	57	58		60
Contribution of hotels from CNL	5
Sales of hotels		(1	)	(2	)
Hotels owned at end of year	62	57		58

Concurrent with the consummation of the RFS-CNL Transaction, CNL contributed five hotels to the Operating Partnership with net assets of approximately $131.6 million. The five hotels are a Residence Inn in Orlando, Florida, a Marriott Courtyard in Edison, New Jersey, a Hyatt Regency in Coral Gables, Florida, a Wyndham in Billerica, Massachusetts and a Wyndham in Denver, Colorado.  The two Wyndham properties are triple net lease properties, while the other three properties are leased to taxable REIT subsidiaries owned by CNL, but not owned by the Operating Partnership.

In connection with the acquisition of RFS, six non-strategic hotels were identified for sale and are carried at a cost of approximately $29.6 million.

At December 31, 2003, the Operating Partnership leased seven hotels to three third-party lessees and three hotels to taxable REIT subsidiaries owned by CNL, but not owned by the Operating Partnership. In October 2003, the Operating Partnership began terminating existing management agreements with Flagstone Hospitality Management LLC (“Flagstone”), which managed 50 of the 57 RFS properties prior to its acquisition, and franchise licenses for most of its portfolio of hotels, and entering into new management and franchise license agreements with internationally recognized hotel brand managers. At December 31, 2003, thirteen hotels are managed by Hilton Hotels Corporation (“Hilton”), ten hotels are managed by Marriott International (“Marriott”), 28 hotels are managed by Interstate Hotels and Resorts (“Interstate”), and eleven other hotels are managed by six other independent management companies.  On January 31, 2004, the management of five hotels was transferred from Interstate to Hilton (two hotels) and Marriott (three hotels).

17

Results of Operations

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenue

For purposes of the following discussion, the “Company” shall be deemed to include RFS (prior to July 10, 2003), the Operating Partnership and their subsidiaries, as such discussions relate to events that occurred on or prior to December 31, 2003. In addition, for comparison purposes, the results of operations for the Pre-Merger Partnership (RFS and its wholly owned subsidiaries prior to July 10, 2003) and the Post-Merger Partnership (subsequent to July 10, 2003) should be combined to compare with the results of operations for the comparable period in 2002. The five hotels that were contributed to the Operating Partnership from CNL on July 11, 2003 had net lease revenue and FF&E reserve revenue of approximately $5.2 million and $0.8 million, respectively, from July 11 to December 31, 2003.  The FF&E reserve income is included in other income on the Consolidated Statements of Operations. Both the lease and FF&E reserve revenue are excluded from the following revenue discussion as it is not comparable.

Revenue decreased 3.9% for the year from $185.9 million to $178.8 million due primarily to a decline in revenue per available room at our 54 comparable hotels of 3.6%.  Although there have been recent positive travel trends in the fourth quarter of 2003 with revenue per available room increasing 3.6%, as reported by Smith Travel Research, business travel demand was weak for most of the year as a result of the sluggish economy coupled with the travel fears resulting from the continued military activity in Iraq and Severe Acute Respiratory Syndrome (“SARS”). The RFS-CNL Transaction also had its effect on the Company’s operations due to disruptions from employee turnover at key hotel level positions as well as the transition of management to new management companies. The Company’s revenues have also decreased due to substantial renovations at three hotels in the first two quarters of 2003: the Hotel Rex in San Francisco, CA, and the Residence Inns in Sacramento, California and Fishkill, New York.  These three hotels are excluded from the year to date comparable statistics.  These three hotels accounted for approximately 26% of the decline in revenue for the year.  Excluding these three hotels, revenue per available room declined 3.6% due to a decline in occupancy of 1.0 percentage points and a 2.3% decline in average daily rate. This compares to the industry’s performance with revenue per available room increasing 0.2% on an increase in occupancy of 0.1 percentage points and a 0.1% decrease in average daily rate, as reported by Smith Travel Research. Revenue per available room at the Company’s comparable hotels for the full service, extended stay and limited service hotel portfolios showed year over year decreases in revenue per available room of 4.9%, 3.9% and 1.8%, respectively.

The Company’s comparable northern California properties (excludes the Hotel Rex in San Francisco, California) experienced an average decline in revenue per available room of 9.2% for the year.  The Hotel Rex was closed for a majority of the first quarter while undergoing an earthquake retrofit and renovation.  At the Company’s four Silicon Valley hotels, revenue per available room decreased 10.5% for the year, which compares favorably to the decline in revenue per available room within the San Jose/Santa Cruz Metropolitan Service Area (“MSA”) of approximately 14.5%, as reported by Smith Travel Research. The decline in year over year revenue per available room in both the San Francisco/San Mateo MSA and the San Jose/Santa Cruz MSA in Silicon Valley was due to the continued downturn in the technology and telecommunications industries, a weak convention calendar and a lack of business travelers, both domestic and international. Excluding the six northern California properties as well as the non-comparable Residence Inns in Sacramento, CA and Fishkill, NY, revenue per available room declined approximately 2.3% for the year, which compares to the industry’s increase of 0.2% for the year, as reported by Smith Travel Research.

The Company hopes to benefit in the future from the continuing decline in new supply growth, which has been forecasted by Smith Travel Research, and combined with an economic turnaround, this decline may create increased lodging demand for the Company’s hotels. This may lead to growth in revenue per available room and net income.

The following shows hotel operating statistics for the 54 comparable hotels for the year. The hotels excluded in the comparison are the Residence Inns in Fishkill, New York and Sacramento, California, which were undergoing substantial renovations resulting in meaningful rooms out of service, and the Hotel Rex in San Francisco, California, which closed in November 2002 and did not fully reopen until June 2003 after undergoing an earthquake retrofit and renovation. In addition, the five hotels that were contributed by CNL to the Operating Partnership in 2003 are also excluded.

18

COMPARABLE HOTELS OPERATING STATISTICS

For The Year Ended December 31, 2003

	ADR				OCCUPANCY				Revenue Per Available Room
Hotel Type	2003		Variance vs. 2002		2003		Variance vs. 2002		2003		Variance vs. 2002
Full Service	$	92.69	(4.2	)%	65.1	%	(0.5	)pts	$	60.34	(4.9	)%
Extended Stay	87.85		(3.0	)%	75.2	%	(0.7	)pts	66.08		(3.9	)%
Limited Service	70.25		0.6	%	64.8	%	(1.6	)pts	45.51		(1.8	)%
Total	$	83.11	(2.3	)%	67.3	%	(1.0	)pts	$	55.96	(3.6	)%

The Company’s comparable full service hotels experienced a year over year decrease in revenue per available room of 4.9%.  This decrease was caused by a decline in average daily rate of 4.2% and occupancy of 0.5 percentage points. The five comparable northern California hotels previously mentioned constitute a substantial portion of these decreases. Excluding the northern California properties, revenue per available room at the Company’s other full service hotels decreased 1.6% for the year.  The following five comparable full service hotels located in Silicon Valley and San Francisco had decreases in revenue per available room averaging 9.2% for the year ending December 31, 2003.

Hotel	Location	Variance vs. 2002
173-room Sheraton	Sunnyvale, CA	(9.7	)%
235-room Beverly Heritage	Milpitas, CA	(17.1	)%
229-room Sheraton	Milpitas, CA	(14.9	)%
214-room Sheraton Four Points	Pleasanton, CA	0.1	%
234-room Hilton	San Francisco, CA	(6.0	)%

In Silicon Valley, where the Company has four full service hotels that experienced a decrease in revenue per available room of 10.5% for the year, the hotel guests are predominantly domestic and international business travelers. These hotels have been among the most adversely affected by the decrease in business travel due to the continued weakness in the technology and telecommunications industries, the threat of SARS on international travelers and the effects of the continued military activity in Iraq. Furthermore, there is little leisure demand for hotels in the Silicon Valley market that would mitigate the significant decrease in business travel.  However, the analysis of the four Silicon Valley properties does show that the hotels are performing better over the last three months of 2003 as compared to the full year.  Increases in business travel associated with an economic turnaround in the technology and communications industries may benefit the Company in growth of revenue per available room and net income.

Conversely, within San Francisco, occupancy at the Hilton Fisherman’s Wharf is driven predominantly by leisure travelers, with business travelers and groups making up the balance in room demand. In the past, San Francisco has been host to a large number of citywide conventions, but there have not been many such conventions in 2003, thus reducing the amount of business travelers into the San Francisco market.  Accordingly, the market remains depressed.  Demand varies widely in this market as evidence by the fact that throughout the year, revenue per available room increased 10.1% in January and 16.2% in February, but decreased 11.7% in March, 10.2% in April, 20.0% in May, 15.6% in June, 2.8% in July, 8.6% in August, increased 2.7% in September, then decreased 5.7% in October, 1.0% in November and 3.8% in December.

The Hotel Rex at Union Square was not open for most of the first quarter of 2003 due to the $1.5 million earthquake retrofit and renovation of the hotel that were not completed until June 2003.  The retrofit was required to be performed by early 2005 in order to comply with existing building codes.  Based on its location within San Francisco at Union Square, this hotel is more reliant on business travelers and citywide conventions, and the Company believes the Hotel Rex is well positioned to attract travelers.  The Company hopes that the recent renovations at this boutique hotel will increase revenue per available room, and ultimately net income. In fact, during the quarter ended September 30, 2003, the only full comparable quarter that the hotel was open subsequent to the retrofit and renovation, the Hotel Rex experienced an increase in revenue per available room of 8.4% driven by an increase in occupancy of 8.7 percentage points, but partially offset by a decrease in average daily rate of 5.2%. The 2003 fourth quarter is not comparable to the prior year as the hotel was closed for the majority of the fourth quarter in 2002.

19

The Company’s rebranding of its Hilton Hotel in Birmingham, Alabama, has so far been successful in generating increased revenue per available room.  The hotel, the only full service Hilton in the Birmingham market, which was converted from a Sheraton to a Hilton on January 1, 2003, has experienced increases in revenue per available room of 6.9% for the year, driven by increases in both occupancy of 0.7 percentage points and average daily rate of 5.6%.

The comparable extended stay hotels, which excludes the Residence Inns in Sacramento, California and Fishkill, New York in the year to date comparison that were undergoing substantial renovations, experienced a year over year decline in revenue per available room of 3.9% for the year.  Most of our extended stay hotels, with the exception of the 176-room Residence Inn in Orlando, Florida, are in markets that can best be categorized as “drive to” markets. These hotels are typically less affected by the current geo-political unrest, the continued military activity in Iraq, with revenue per available room declining 3.1% for the year. The Orlando Residence Inn experienced a decline in revenue per available room of nearly 8.2% in 2003 due primarily to its reliance on tourism, which has been impacted by the geo-political unrest and continued military activity. Fourteen of the eighteen extended stay properties are Residence Inns by Marriott.  Revenue per available room is typically less volatile as these hotels benefit from longer duration stays that include the typically slower weekend days. The twelve comparable Residence Inns by Marriott experienced a decrease in revenue per available room of 3.8% in 2003, slightly better than the Company’s portfolio of extended stay hotels.

The Company’s limited service hotels experienced a decrease in revenue per available room of 1.8% in 2003, the best performance among the Company’s portfolio in terms of revenue per available room versus the prior year.  The Company believes this is attributable to cost conscious travelers, both business and leisure, who stayed at limited service hotels to save money during the economic downturn.  Seventeen of the Company’s twenty-five limited service hotels are Hampton Inns which the Company currently believes has the strongest rewards program among its limited service hotels and which experienced an increase in revenue per available room of 0.1% for the year.

Expenses

Total operating expenses increased $25.4 million to $178.9 million in 2003 versus $153.5 million in 2002 This increase is primarily attributable to non-recurring costs related to the RFS-CNL Transaction of approximately $20.6 million and increased depreciation of $2.6 million primarily attributable to the five hotels contributed by CNL to the Operating Partnership on July 11, 2003.  The non-recurring costs related to the RFS-CNL Transaction are comprised of severance of $11.6 million, amortization of $1.5 million related to the acceleration of unvested restricted stock, advisory fees of $4.5 million, additional management fees of $1.9 million and miscellaneous other costs of $1.1 million.  Operating margins (operating income as a percentage of total hotel revenue, excluding the $20.6 million of non-recurring acquisition costs and income from properties contributed by CNL of $3.6 million) decreased 1.2 points to 16.2% from 17.4% for the year, driven by the decrease in revenue of 3.9% during 2003 as well as escalated operational costs during the transition from RFS to CNL and the transition of new managers at some of our hotels.  Individual line items comprising hotel operating expenses are discussed below.

Hotel operating expenses for rooms, food and beverage and other operating departments increased 2.4% in 2003 to $47.5 million from $46.4 million; additionally, as a percentage of total hotel revenue, excluding revenue from properties contributed by CNL in 2003, hotel operating expenses increased to 26.6% in 2003 versus 25.0% in 2002. The increased percentage was caused primarily by the decline in revenue year over year in relationship to significant fixed costs as the decreases in occupancy continue to be less than the decrease in average daily rate, resulting in deteriorating margins as the costs to service hotel guests have not decreased as much as the room rental rates.

Property operating costs increased $2.1 million or 10.5% in 2003 due primarily to an increase in marketing and energy costs across most of the portfolio.  Marketing costs increased $1.2 million or 13.0% in 2003 as a result of the reclassification of certain brand marketing costs that were classified by the Company as franchise costs prior to the RFS-CNL Transaction. Energy costs have increased $0.6 million or 7.1% due to the well-publicized oil and gas price increases caused primarily by the continued military activity in Iraq and shortages in production in South America.  The Company also incurred approximately $0.2 million in costs associated with water damage at the Holiday Inn in Lafayette, Louisiana and a burst pipe at the Sheraton in Pleasanton, California.

Property taxes, insurance and other expenses increased $0.5 million or 4.1% in 2003, due primarily to real estate tax refunds of $0.4 million obtained in the third quarter of 2002 related to taxes paid on prior years at several of the Company’s California properties.  The remaining increase of $0.1 million is due to increased insurance costs as a result of the Company reducing its self-insurance level on its earthquake policies from $7.5 million to $5.0 million.

20

Franchise costs decreased $2.2 million or 14.5% in 2003 due to the new management and franchise license agreements entered into during the fourth quarter for most of the Company’s Marriott hotels.  Prior to the RFS-CNL Transaction, the Marriott hotel brands did not manage any of the Company’s hotels. Under the terms of the new agreements in which Marriott is managing some of the Company’s hotels, there are no franchise fees as Marriott is only collecting management fees. In addition, franchise costs decreased as a result of the reclassification of certain brand marketing costs that were classified by the Company as franchise costs prior to the RFS-CNL Transaction.

Maintenance and repair costs increased $1.0 million or 11.9% in 2003. This increase is associated with the costs incurred in connection with the renovations at the Hotel Rex and Residence Inns in Fishkill, NY and Sacramento, California, the completion of product improvement plans at seven of our Hampton Inns, the collapse of a canopy at the Hampton Inn in Denver, Colorado, a major pipe burst at the Sheraton in Pleasanton, California, and water damage at the Holiday Inns in Columbia, South Carolina and Lafayette, Louisiana.

Management fees have increased $2.6 million in 2003 mainly due to costs associated with the acquisition of the Company by CNL.  The Company was required to pay $1.9 million in additional management fees to Flagstone as a result of the acquisition of the Company by CNL.  The remainder of the increase of $0.7 million results from additional management fees from the new management and franchise license agreements entered into in the fourth quarter of 2003 with Marriott. In addition, there were redundant costs of approximately $0.3 million incurred during the fourth quarter of 2003 resulting from Flagstone winding down its operations.

Depreciation increased $2.6 million in 2003 due primarily to depreciation on the five properties contributed by CNL of $2.4 million. The remainder of the increase is attributable to the increase in the asset basis resulting from the application of purchase accounting.

Amortization of franchise fees and unearned compensation increased $0.8 million for the year due to accelerated amortization resulting from the immediate vesting of all restricted stock grants as a result of the RFS-CNL Transaction.

General and administrative expenses increased $16.8 million for the year due to costs associated with the RFS-CNL Transaction: severance of $11.6 million, advisory fees of $4.5 million and miscellaneous fees of $1.1 million.  These costs could not be accrued in purchase accounting as they were contractual obligations of RFS to its employees, advisor and other vendors for performance prior to and culminating with the RFS-CNL Transaction. This was offset by a decrease in compensation of approximately $1.1 million during the second half of the year as there are no employees of the Operating Partnership under CNL ownership.  CNL Hospitality Corp. and other CNL affiliates provide management, advisory and administrative services to the Operating Partnership.

Debt extinguishment and swap termination costs of $10.1 million in 2002 are comprised of a yield maintenance premium of $5.5 million to pay off the 1996 CMBS debt, $3.2 million to terminate two interest rate swaps and $1.4 million to write-off the unamortized debt issuance costs related to the 1996 CMBS debt.   All of these transactions were completed in connection with the issuance of the $125 million Senior Notes.

Amortization on loan origination costs decreased $0.2 million for the year due to the write-off of issuance costs on the Company’s borrowings as a result of the RFS-CNL Transaction, which resulted in a $0.8 million year over year positive variance, offset by amortization of approximately $0.7 million related to issuance costs on the Company’s new financing issued in December, 2003. Issuance costs associated with the new financings were approximately $6.7 million, and will be amortized over three years.

Interest expense increased $0.8 million in 2003.  The increase in the weighted average borrowings of $35.4 million from $298.2 million to $333.6 million was offset by the decrease in the average interest rate on borrowings outstanding from 8.6% in 2002 to 7.9% in 2003.  The increase in weighted average borrowings resulted from the Company borrowing $35 million under the 2003 Mezzanine Loan, of which $30.0 million of the proceeds were distributed to CNL.  The decrease in the average interest rate results primarily from the Company borrowing $44.0 million under the Bridge Loan, at an approximate 4.0% interest rate, to repurchase $41.8 million of Senior Notes that were carrying a 9.75% interest rate.

Benefit from income taxes increased $2.9 million in 2003 due to the increase in losses in the taxable REIT subsidiaries.

Excluding the loss on sale of the Comfort Inn in Fort Mill, South Carolina of $3.8 million, income from discontinued operations decreased 16.4% to $1.8 million in 2003 from $2.2 million in 2002 due primarily to the sale of the Comfort Inn in November 2002.

The loss on sale of assets in 2003 relates to the sale of hotel vans and the gain in 2002 relates primarily to the gain on the sale of the Company’s interest in an unconsolidated partnership of approximately $1.0 million in the first quarter of 2002.

21

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenue

Revenue decreased 9.9% from $206.2 million to $185.9 million primarily due to the softness in business travel resulting from the lagging economy and the geo-political uncertainty. The continued impact from the economic recession, the geo-political uncertainty and the decline in corporate profits have forced corporations to reduce business travel which has a significant impact on lodging demand. Revenue per available room at our 56 comparable hotels (excludes the Hotel Rex in San Francisco, California which is currently closed for earthquake retrofit and renovation) declined 8.5% due to a 6.1% decline in average daily rate and a decline in occupancy of 1.7 percentage points. The decline in revenue per available room has improved incrementally each quarter of 2002 as compared to 2001 with revenue per available room declining 16.6% in the first quarter, 10.6% in the second quarter, 4.1% in the third quarter and 1.6% in the fourth quarter. Revenue per available room for the full service, extended stay and limited service hotel portfolios showed decreases in revenue per available room of 13.9%, 4.6% and 5.0%, respectively.

As reported by Smith Travel Research, for the year, the San Francisco/San Mateo Metropolitan Service Area (“MSA”) was the worst performing MSA of the top 25 markets in the United States in terms of the change in revenue per available room as compared to the prior year with a decline of approximately 17.4%. Furthermore, the San Jose/Santa Cruz MSA in Silicon Valley, which is not one of the top 25 markets as defined by Smith Travel, performed even worse with a change in revenue per available room of approximately 22.0%. The Operating Partnership’s five comparable northern California properties experienced an average decline in revenue per available room of 22.3%. In San Francisco, the Hilton Fisherman’s Wharf experienced a decline in revenue per available room of 9.3% for the year, while at our four Silicon Valley hotels, revenue per available room decreased 26.2% for the year. The continued deterioration in year over year revenue per available room in both MSA’s was due to the downturn in the technology and telecommunications industries, a weak convention calendar and a lack of business travelers, both domestic and international. Excluding the five comparable northern California properties, revenue per available room declined approximately 5.1%, which compares to the industry’s decline of 2.5%, as reported by Smith Travel Research.

The Operating Partnership hopes to benefit in the future from the expected decline in new supply growth as predicted by Smith Travel Research, which combined with an economic turnaround may create increased lodging demand for our hotels. This may lead to growth in revenue per available room, net income and dividends. The following shows hotel operating statistics for the 56 comparable hotels for the year ended December 31, 2002.

COMPARABLE HOTELS OPERATING STATISTICS

For The Year Ended December 31, 2002

	ADR				OCCUPANCY				Revenue Per Available Room
Hotel Type	2002		Variance vs. 2001		2002		Variance vs. 2001		2002		Variance vs. 2001
Full Service	$	97.16	(11.6	)%	65.4	%	(1.7	)pts	$	63.51	(13.9	)%
Extended Stay	94.05		(2.6	)%	76.9	%	(1.6	)pts	72.31		(4.6	)%
Limited Service	69.82		(2.3	)%	66.4	%	(1.9	)pts	46.34		(5.0	)%
Total	$	86.43	(6.1	)%	68.9	%	(1.7	)pts	$	59.53	(8.5	)%

The Operating Partnership’s full service hotels, which comprised approximately 45.7% of revenue, experienced an average decrease in revenue per available room of 13.9%. This decrease was caused by a year to date decrease in occupancy of 1.7 percentage points and an 11.6% decline in average daily rate. The five comparable northern California hotels previously mentioned make up a substantial portion of these decreases. Excluding the five northern California properties, revenue per available room at the Operating Partnership’s other full service hotels decreased approximately 5.8% for the year. The following six full service hotels located in Silicon Valley and San Francisco had decreases in revenue per available room for 2002 averaging approximately 22% (data for the Hotel Rex is through October 31, 2002 as it was closed in November, 2002 for the earthquake retrofit and renovation).

22

Hotel	Location	Variance vs. 2001
173-room Sheraton	Sunnyvale, CA	(23.3	)%
235-room Beverly Heritage	Milpitas, CA	(41.8	)%
229-room Sheraton	Milpitas, CA	(23.4	)%
214-room Sheraton Four Points	Pleasanton, CA	(14.4	)%
234-room Hilton	San Francisco, CA	(9.3	)%
94-room Hotel Rex	San Francisco, CA	(22.9	)%

In Silicon Valley, where the Operating Partnership has four full service hotels, the hotel guests are predominantly domestic and international business travelers. These hotels have been hit the hardest of all hotels in the Operating Partnership’s portfolio because of the lack of business travel. Furthermore, there is little leisure demand for hotels in the Silicon Valley market that would temper the significant drop-off in business travel.

Conversely, within San Francisco, the Hilton Fisherman’s Wharf is driven predominantly by leisure demand, with business travelers and groups making up the balance in room demand. Accordingly, this hotel experienced the smallest decline in revenue per available room among all of the Operating Partnership’s northern California hotels in terms of revenue per available room, as seen above.

The Hotel Rex at Union Square has shown less improvement in 2002 than the Hilton Fisherman’s Wharf. Because of its location within San Francisco at Union Square, this hotel is more reliant on business travelers and citywide conventions and so it has performed worse than the Hilton Fisherman’s Wharf. As such, the Operating Partnership decided to accelerate the timing of its $1.5 million earthquake retrofit and renovation and closed the hotel in November, 2002. Originally, the Operating Partnership anticipated performing this renovation in late 2003. The work is required to be performed by early 2005 in order to comply with existing building codes. The Hotel Rex was completely closed from November 2002 to February 2003. The full hotel renovation and retrofit was not completed until June 2003. The re-opening will coincide with the re-opening of the Moscone Center, where the Convention and Visitors Bureau has begun booking large events into the Center in May 2003. The Operating Partnership believes that accelerating the renovation to this slow period has enabled it to decrease the Operating Partnership’s renovation and retrofit costs as the lost revenue that will occur due to the hotel’s closure is at typically the hotel’s slowest period. Also, the Operating Partnership believes it has been able to aggressively negotiate the terms of the retrofit since the Operating Partnership feels the costs to complete this type of work will rise as the deadline nears and demand for retrofit work increases.

The extended stay hotels, which comprised approximately 27.9% of revenue, experienced a decline in revenue per available room of 4.6%. In 2002 this market segment performed the best in terms of revenue per available room versus the prior year. Fourteen of the eighteen extended stay properties are Residence Inns by Marriott, which experienced a decrease in revenue per available room of 5.0%. The Operating Partnership believes that Residence Inns by Marriott is the extended stay brand of choice for consumers as these hotels benefit from longer duration stays that include the typically slower weekend days. Similarly most of the extended stay portfolio, with the exception of the 176-room Residence Inn in Orlando, are in markets that can best be categorized as drive to markets. These hotels have been less affected by the events of the slowing economy and the geo-political uncertainty with revenue per available room declining 4.2%. The Orlando Residence Inn has experienced a decline in revenue per available room of 12.7%.

The limited service hotels, which comprised approximately 26.4% of revenue, experienced a decrease in revenue per available room of 5.0%. Seventeen of the twenty-six limited service hotels are Hampton Inns, which experienced a decline in revenue per available room of 3.3%. System-wide revenue per available room at Hampton Inns increased 0.4% for the year, which was the only Hilton brand to show an improvement in revenue per available room from 2001. During the fourth quarter of 2002 and early 2003, the Operating Partnership completed product improvement plans on sixteen Hampton Inns in our portfolio, which should well position these hotels to better compete for existing business as well as the potential rebound in the hotel industry. Five of the limited service hotels are Holiday Inn Express’, which experienced a decline in revenue per available room of 9.4% for the year.

Expenses

Total operating expenses decreased $70.2 million due primarily to the lease termination expense of $65.5 million in 2001. Excluding lease termination expense, total operating expenses decreased $4.7 million or 3.0% and operating margins (operating income as a percentage of total hotel revenue) decreased 5.8 points to 17.4% from 23.2%, driven by the decrease in revenue of 9.7%. Individual line items comprising hotel operating expenses are discussed below.

23

Hotel operating expenses for rooms, food and beverage and other operating departments decreased 5.8% to $46.4 million from $49.3 million; however, as a percentage of total hotel revenue, hotel operating expenses increased to 25.0% in 2002 versus 23.9% in 2001. As occupancy has decreased only slightly, the hotels must incur costs to service these rooms and since this occupancy is now booked at reduced room rates over the prior year, the operating margins continue to deteriorate. Cost reductions that were implemented in 2001 and which continued in 2002 have not fully offset the loss in revenue.

Property operating costs, which includes complimentary guest services, marketing, energy, operating leases, and other operating costs, decreased $0.4 million or 2.0% due primarily to a decrease in energy costs of $0.4 million or 4.4%. Energy costs have decreased across the portfolio with a substantial portion of the decrease coming from our California properties. Energy costs at the ten California properties decreased $0.2 million or 6.2% for the year. Energy costs in California were higher in the first half of 2001 due to the well-publicized energy crisis in that state.

Property taxes, insurance and other expenses decreased $0.2 million or 1.8% driven primarily by a decrease in real estate taxes of approximately $0.9 million resulting from reduced assessments through appeals made by the Operating Partnership and assessor adjustments reflecting the lagging hotel industry. Offsetting the decrease in real estate taxes of $0.9 million are increases in earthquake and property insurance of $0.5 million. Insurance costs continue to rise as a result of rate hardening in the market, modifications of insurance coverage to include terrorist activities and other changes in insurance pricing out of the Operating Partnership’s control. The increase is not due to a deterioration of claims experience or an increase in the value of insured losses, which have been stable.

Franchise costs decreased $0.5 million or 3.4% due to the decrease in occupied rooms of 55,298 rooms or 2.6%.

Maintenance and repair costs decreased $0.1 million or 1.1% due to the decreased occupancy.

Management fees have decreased $0.8 million or 14.7% due primarily to the decrease in revenues. Management fees have remained flat at 2.5% to 2.7% of total hotel revenue in 2002 and 2001.

Depreciation increased to $27.7 million from $27.3 million. The Operating Partnership expected depreciation to increase and level off after the substantial capital expenditures made in prior years.

Lease termination costs of $65.5 million in 2001 represented the expenditures incurred in connection with the termination of the leases, management contracts and related ancillary agreements with Hilton. For accounting purposes, this transaction represented the cancellation of executory contracts and was required to be expensed as incurred.

Amortization of franchise fees and unearned compensation is down $0.1 million due to the decrease in the amortization of certain employee restricted stock awards that fully vested in October 2001.

General and administrative expenses have decreased $0.1 million or 0.7% due primarily to austerity programs implemented in the second and third quarters of 2001 at both the hotels and corporate headquarters aimed at reducing these expenses.

Debt extinguishment and swap termination costs of $10.1 million are comprised of a yield maintenance premium of $5.5 million to pay off the 1996 CMBS debt, $3.2 million to terminate two interest rate swaps and $1.4 million to write-off the unamortized debt issuance costs related to the 1996 CMBS debt. These costs were incurred in conjunction with the issuance of $125 million Senior Notes in February 2002.

Amortization on loan origination costs have increased $0.3 due to the incremental amortization of costs associated with issuance of the $125 million Senior Notes in February 2002 as compared to the amortization of debt issuance costs related to the 1996 CMBS debt for the same periods in 2001.

Interest expense increased $0.8 million or 3.2% due to the increase in the year to date weighted average interest rate from approximately 7.9% in 2001 to 8.5% in 2002 and offset by a decrease in the weighted average borrowings outstanding of $15.4 million from $313.6 million in 2001 to $298.2 million in 2002.

Benefit from income taxes decreased $23.6 million as a result of the Hilton lease termination in the first quarter of 2001.

Earnings (losses) from discontinued operations decreased $4.5 million from income of $2.8 million in 2001 to a loss of $1.7 million in 2002. The loss is due solely to the loss recognized on the sale of the Fort Mill hotel of $3.8 million

24

The 2002 gain on sale of assets relates to the sale of an interest in an unconsolidated partnership of $0.9 million. The 2001 gain relates to the sale of the Comfort Inn in Farmington Hills, Michigan.

Liquidity and Capital Resources

The Operating Partnership’s principal source of liquidity to meet its cash requirements, including distributions to CNL and repayments of indebtedness, is its cash flow. For the year ended December 31, 2003 and 2002, respectively, cash flow provided by operating activities was $2.9 million and $36.5 million. The decrease in cash flow provided by operating activities was due primarily to non-recurring costs related to the RFS-CNL Transaction of approximately $20.6 million and the net cash outflows from accounts receivable and accounts payable of approximately $14.6 million, due primarily to cash flow requirements associated with the transition to the new management companies.  The Operating Partnership believes that cash provided by operating activities will meet its liquidity needs. If cash provided by operating activities is insufficient to cover the Operating Partnership’s liquidity needs, the Operating Partnership expects to fund these other liquidity needs via contributions from CNL or possibly accessing the debt capital markets as market conditions permit. The Operating Partnership does not have a facility in place for short-term borrowings.  If CNL were unable to fund the Operating Partnership on short notice, the Operating Partnership may have to seek alternative financing, some of which could negatively impact net income.  At December 31, 2003, the Operating Partnership had $19.4 million of cash and cash equivalents.

In connection with the RFS-CNL Transaction, the Operating Partnership entered into a $320 million Credit Agreement with Bank of America dated July 10, 2003 (“Bridge Loan”).  On July 10, 2003, as part of the RFS-CNL Transaction, the Line of Credit was terminated and replaced with the Bridge Loan, of which only $101.0 million was drawn by the Operating Partnership to help fund the merger. During the third quarter of 2003, the Operating Partnership borrowed $88.0 million under the Bridge Loan to repurchase $41.8 million of Senior Notes ($42.2 million book value) and to make a distribution of $44.0 million to CNL.  On September 29, 2003, CNL contributed approximately $78.0 million to the Operating Partnership to fund a majority of the repayment of $88.0 million under the Bridge Loan.  The Operating Partnership refinanced the Bridge Loan with the issuance of a $130.0 million, long-term Commercial Mortgage Backed Security facility on December 4, 2003 (“2003 CMBS”).  A portion of the proceeds from issuance of the 2003 CMBS were used to repay in full the outstanding balance under the Bridge Loan of approximately $101.0 million.

On December 4, 2003, a new wholly owned subsidiary of the Operating Partnership, Rose SPE 1, L.P. issued the 2003 CMBS.  The 2003 CMBS is collateralized by 26 hotels with a net book value of approximately $297.3 million at December 31, 2003. The 2003 CMBS has a variable interest rate of thirty-day LIBOR plus 189 basis points.  The interest rate was approximately 3.0% at December 31, 2003. The 2003 CMBS matures in December, 2006.  Monthly payments of approximately $0.9 million include interest charges, reserves for the replacement of equipment, and reserves for real estate taxes and insurance. There are no regular monthly principal payments. The 2003 CMBS contain provisions restricting the sale of collateral, and is prepayable subject to various prepayment penalties, yield maintenance, or defeasance obligations.

On December 23, 2003, Rose SPE 1, L.P. issued an additional $35.0 million long-term facility (“2003 Mezzanine Loan”). The 2003 Mezzanine Loan is also collateralized by the 26 2003 CMBS hotels. The 2003 Mezzanine Loan has a variable interest rate of thirty-day LIBOR plus 465 basis points with a floor rate of 6.65%.  The interest rate was approximately 6.65% at December 31, 2003 since the adjusted LIBOR rate was only 5.8% at December 31, 2003. The 2003 CMBS matures in December, 2006.  Interest only payments of approximately $0.2 million are made on a monthly basis. A portion of the proceeds from issuance of the 2003 Mezzanine Loan was used to make a $30.0 million distribution to CNL.

The 2003 CMBS and the 2003 Mezzanine Loan contain primarily one restrictive financial covenant, which stipulates that consolidated Partners’ Capital will not be less than the sum of $150.0 million plus the cost basis of the 26 hotels comprising the Collateral Pool, minus $165.0 million (representing the sum of the 2003 CMBS and the 2003 Mezzanine Loan borrowings).  At December 31, 2003, this base value was $287.7 million as compared to Partners’ Capital of approximately $503.1 million. At December 31, 2003, the Operating Partnership was in compliance with all financial covenants under the 2003 CMBS and 2003 Mezzanine Loan.

During 2003, the Operating Partnership paid approximately $15.5 million to affiliates of CNL in connection with reimbursements for acquisition costs related to the RFS-CNL Transaction.

25

From January 1 to July 10, 2003, the interest rate on the Line of Credit was 250 basis points above LIBOR. The Line of Credit was collateralized by first priority mortgages on 24 hotels that restricted the transfer, pledge or other hypothecation of the hotels.  The Line of Credit contained various covenants including the maintenance of a minimum net worth, minimum debt and interest coverage ratios, and total indebtedness and liability limitations. On July 10, 2003, the outstanding balance under the Line of Credit of $35.5 million was repaid and the Line of Credit was terminated in connection with the RFS-CNL Transaction.  At July 10, 2003, the Operating Partnership was in violation of certain financial covenants under the Line of Credit.  The covenant violations have no impact on the Operating Partnership because the Line of Credit was terminated in connection with the RFS-CNL Transaction. All debt issuance costs pertaining to the Pre-Merger Partnership of approximately $7.1 million were expensed under purchase accounting guidelines.

On February 26, 2002, the Operating Partnership sold $125 million of Senior Notes. The Senior Notes mature March 1, 2012 and bear interest at a rate of 9.75% per year, payable semi-annually, in arrears, on March 1 and September 1 of each year. The Senior Notes are unsecured obligations of the Operating Partnership and are guaranteed by certain of its subsidiaries. The Senior Notes contain covenants that could, among other things, restrict the Operating Partnership’s ability to borrow money, pay distributions to CNL, make investments, and sell assets or enter into mergers and consolidations. The Operating Partnership was in compliance with these covenants at December 31, 2003. During the first quarter of 2003, the Operating Partnership borrowed approximately $3.8 million under the Line of Credit to retire $3.8 million of Senior Notes. As a result of the redemption of the $3.8 million Senior Notes, the Operating Partnership expensed $122 thousand in unamortized debt issuance costs and $29 thousand of costs related to acquiring the Senior Notes.   During the third quarter of 2003, the Operating Partnership borrowed $88.0 million to repurchase $41.8 million of Senior Notes ($42.2 million book value) and to make a distribution of $44.0 million to CNL. 

The Operating Partnership’s other borrowings are nonrecourse to the Operating Partnership and contain provisions allowing for the substitution of collateral, upon satisfaction of certain conditions. Most of the mortgage borrowings are prepayable and subject to various prepayment penalties, yield maintenance, or defeasance obligations. At December 31, 2003 and 2002, approximately 59% and 98% of the Operating Partnership’s debt is fixed at an average interest rate of 8.6% and 8.7%, respectively.

The following details the Operating Partnership’s debt outstanding at December 31, 2003 (dollar amounts in thousands):

						Collateral
	Balance		Interest Rate		Maturity	# of Hotels	Net Book Value at December 31, 2003
	(Note A)
2003 CMBS	$	130,000	LIBOR + 189bp	Variable	December 2006	26	$	297,318
2003 Mezzanine	35,000		LIBOR + 465bp (B)	Variable	December 2006	Note B	Note B
Senior Notes	81,674		9.75%	Fixed	March 2012	—	—
Mortgage	90,566		7.83%	Fixed	December 2008	10	123,648
Mortgage	17,935		8.22%	Fixed	November 2007	1	17,115
Mortgage	50,853		8.00%	Fixed	August 2010	8	107,655
	$	406,028					$	545,736

Note A – In applying purchase accounting to the Operating Partnership’s debt instruments, each facility was adjusted to its fair value. Fair value is calculated based on discounted cash flows using a discount rate equal to the Operating Partnership’s new borrowing rate. Except for the 2003 CMBS and the 2003 Mezzanine Loan, these values include a “step-up” to the fair market value. This step-up is accreted over the term of the facility as a reduction of interest expense.

Note B – The minimum interest rate on the 2003 Mezzanine Loan is 6.65%, including the spread on LIBOR of 465 basis points. Also, the 26 hotels collateralizing the 2003 CMBS also serve as collateral on the 2003 Mezzanine Loan.

26

The following table represents our contractual cash obligations and the future potential commitments, and the related payment periods and estimated payment periods as of December 31, 2003 (in thousands):

Contractual Cash Obligations	Less than 1 Year		2-3 Years		4-5 Years		Thereafter		Fair Value Total
Mortgages and other notes payable	$	2,888	$	171,585	$	102,187	$	124,374	$	401,034

In addition to the above principal payment of debt obligations as of December 31, 2003, the Operating Partnership has a cash deposit of $3.0 million, held in escrow, that serves as collateral on the worker’s compensation plan for the former hotel employees of Flagstone. This cash deposit is included on the Consolidated Balance Sheet in Restricted Cash. This deposit is required by the insurance carrier to be maintained until the outstanding claims under the plan have developed and there are adequate reserves to cover the claims.  There have been no withdrawals made from the escrow deposit. The Operating Partnership is also committed to make future payments under various operating leases that are not significant.

The Operating Partnership’s borrowings contain various covenants including the maintenance of a minimum net worth, minimum fixed charge coverage ratios, restricted payment limitations, and total indebtedness and liability limitations. Violation of certain of these covenants could potentially trigger penalties, including cash management arrangements whereby the lenders or their designated loan servicers capture operating cash from certain hotels and administer the payment of property taxes, insurance, debt service and expenditures for other obligations. The Operating Partnership was in compliance with these covenants at December 31, 2003. A summary of the most restrictive covenants, along with the Operating Partnership’s corresponding value for each covenant, at December 31, 2003, are as follows:

Covenant Test	Covenant		Value
Fixed charge coverage ratio must be equal to or greater than 2.00:1.00	2.00		2.30
Secured debt must be not greater than 45% of total assets	45.0	%	34.1	%
Minimum net worth must be not less than the adjusted base worth	$287.7 million		$503.1 million
Restricted payments must be not greater than the restricted payments basket	$201.2 million		$129.6 million

Certain significant credit statistics at December 31, 2003 and 2002 are as follows:

Credit Statistic	December 31, 2003	December 31, 2002
Weighted average maturity of fixed rate debt	6.3 years	7.6 years
Ratio of fixed interest rate debt to total debt	59%	98%
Ratio of debt to investment in hotel properties, at cost	47%	37%

During the year ended December 31, 2003, the Operating Partnership spent approximately $11.3 million of capital improvements to its hotels versus an initial plan of $12.2 million. A substantial portion of the 2003 expenditures focused on projects at ten of the Operating Partnership’s hotels: 1) the earthquake retrofit and renovation at the Hotel Rex in San Francisco, CA; 2) the conversion of the Birmingham hotel to a Hilton from a Sheraton; 3) the completion of product improvement plans at six of the Hampton Inns; and 4) the renovation of the Residence Inns in Fishkill, NY and Sacramento, CA. As a result of the RFS-CNL Transaction, the respective hotel franchisors have issued product improvement plans on most of the Operating Partnership’s hotels and require that the Operating Partnership complete these product improvement plans over the next several years. The Operating Partnership expects the total cost of these product improvement plans will be approximately $40 million.  The Operating Partnership expects to fund these improvements out of cash generated from operations. The Operating Partnership expects to spend approximately $17.7 million dollars on capital improvements in 2004, which includes amounts required under the product improvement plans planned for 2004.

27

The Operating Partnership expects to be able to meet its short-term working capital, capital expenditure and debt service requirements through cash and restricted cash balances on hand at December 31, 2003, cash flow from operations or from contributions from CNL. As market conditions permit, the Operating Partnership may, from time to time, access the debt capital markets as a source of additional liquidity. Over the longer term, the Operating Partnership’s ability to generate sufficient cash flow from operations to make scheduled payments on its debt obligations will depend on its future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of the Operating Partnership’s control. If the Operating Partnership does not generate sufficient cash flow from operations to satisfy its debt obligations, the Operating Partnership may have to undertake alternative financing plans. The Operating Partnership cannot assume that completion of any such alternative financing plans will be possible. The Operating Partnership’s inability to generate sufficient cash flow to satisfy its debt obligations or to refinance its obligations on commercially reasonable terms would have an adverse effect on its business, financial condition and results of operations.

The Operating Partnership in the future may seek to increase further the amount of its credit facilities, negotiate additional credit facilities, or issue corporate debt instruments. The Operating Partnership has no restrictions in its Agreement of Limited Partnership on the amount of indebtedness the Operating Partnership may incur.

Inflation

Operators of hotels, in general, possess the ability to adjust room rates daily so the impact of higher inflation often can be passed onto customers. However, competitive pressures may limit the ability of the lessees and management companies to raise room rates to offset rising costs.

Critical Accounting Policies and Estimates

The Operating Partnership’s consolidated financial statements include accounts of the Operating Partnership and all consolidated subsidiaries. The discussion and analysis of the financial condition and results of operations is based upon the Operating Partnership’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”).  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosures.  The estimates are based on judgment and historical experience, and are believed to be reasonable based on current circumstances.  The Operating Partnership evaluates these estimates and assumptions on an on-going basis.

While the Operating Partnership does not believe that the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates under different assumptions or conditions. The Operating Partnership’s significant accounting policies are disclosed in Note 1 to the Consolidated Financial Statements (see Item 8, “Financial Statements and Supplementary Data”). The following represent certain critical accounting policies that require the use of business judgment or significant estimates to be made:

•Allowance for doubtful accounts receivable. The Operating Partnership maintains allowances for doubtful accounts for estimated losses resulting from the inability of customers or tenants to make required payments. The Operating Partnership monitors on a regular basis its outstanding receivables and actively seeks to collect all overdue balances by sending overdue notices to customers and tenants, speaking with customers and tenants, and seeks collection through the use of an agency or a court of law. If the Operating Partnership believes that a portion of a receivable or an entire receivable will not be collected, the Operating Partnership will provide an allowance for doubtful accounts against that receivable for the estimate of the uncollectible amount. If the financial condition of the Operating Partnership’s customers were to deteriorate, resulting in an impairment of the customers’ ability to make payments, additional allowances may be required.

•Depreciation and amortization expense. The Operating Partnership evaluates its estimates regarding the useful lives of the Operating Partnership’s assets and on the method used to calculate depreciation and amortization.  The life of the assets are based on a number of assumptions, including cost and timing of capital expenditures to maintain and refurbish the assets, and estimated holding periods. The Operating Partnership believes its estimates are reasonable; however, a change in the estimated lives of the assets or the method of depreciation could affect depreciation and amortization expense and net income or the gain or loss on the sale of any of the assets.

28

•Determination of fair value of long-lived assets.  The Operating Partnership reviews its hotels for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through operations. The Operating Partnership determines whether impairment in value has occurred by comparing the estimated future undiscounted cash flows, including the residual value of the hotel, with the carrying cost of the individual hotel. Although to date, no impairment has occurred, such an impairment would result in a reduction in the carrying value of the impaired hotel and an expense to the Operating Partnership for the amount of the impairment write-down. In estimating future undiscounted cash flows, the Operating Partnership must use historical cash flows, the expected growth rate of revenue and expenses, the effect of capital expenditures, remaining useful life of the hotel, holding periods, and future market and economic conditions. Variability of these and other assumptions could result in a difference in the estimated undiscounted future cash flows.

•Valuation of deferred tax assets.  The Operating Partnership accounts for federal and state income taxes with respect to its TRS subsidiaries using the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and respective tax bases and operating losses and tax-credit carry forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.   The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  In the event that these assumptions change the deferred taxes may change.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  The valuation allowance is based on the Operating Partnership’s estimates of future taxable income and ongoing prudent and feasible tax planning strategies. Should the Operating Partnership determine it would not be likely to realize in full the deferred tax asset in the future, the Operating Partnership would record a valuation allowance to reduce the deferred tax asset to an amount that is more likely than not to be realized. Such adjustment to the deferred tax asset would decrease income in the period such determination was made.

In estimating future taxable income, management must estimate future income using historical data, the expected growth rate of revenues and expenses, the effect of capital expenditures, and future market and economic conditions.  Variability of these and other assumptions could result in an inability to recover the carrying value of the deferred tax assets.

Recently Issued Accounting Pronouncements

In April 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“FASB 149”).  FASB 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  The Operating Partnership adopted FAS 149 in the year ended December 31, 2003, and it did not have a material impact on the Operating Partnership’s results of operations.

In May 2003, the FASB issued FASB Statement No.150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“FASB 150”).  FASB 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  FASB 150 requires issuers to classify certain financial instruments as liabilities (or assets in some circumstances) that previously were classified as equity.  FASB 150 requires that minority interests for majority owned finite lived entities be classified as a liability and recorded at fair market value.  Effective October 29, 2003, the FASB deferred implementation of FASB 150, as it applies to minority interests of finite lived Partnerships.

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003) (“FIN 46R”), “Consolidation of Variable Interest Entities”.  This Interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved.  The primary beneficiary of a variable interest entity is the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable interests, which are the ownership, contractual, or other pecuniary interests in an entity that change with changes in the fair value of the entity’s net assets excluding variable interests.  Prior to FIN 46R, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests.  Application of FIN 46R is required in financial statements of public entities that have interests in variable interest entities for periods ending after March 15, 2004.  The Operating Partnership has no unconsolidated variable interest entities.

29

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Operating Partnership is exposed to certain financial market risks, including fluctuations in interest rates. The Operating Partnership monitors interest rate fluctuations as an integral part of the Operating Partnership’s overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect of this unpredictability on the Operating Partnership’s results. The effect of interest rate fluctuations historically has been small relative to other factors affecting operating results, such as occupancy.

The Operating Partnership’s primary market risk exposure is to changes in interest rate as a result of its variable interest rate, long-term debt. At December 31, 2003, the Operating Partnership had outstanding total indebtedness of approximately $406.0 million. The Operating Partnership’s interest rate risk objective is to limit the impact of interest rate fluctuations on earnings and cash flows and to lower its overall borrowing costs. To achieve this objective, the Operating Partnership manages its exposure to fluctuations in market interest rates for its borrowings through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable with such arrangements and derivative financial instruments such as interest rate swaps or caps, to effectively lock the interest rate on a portion of its variable debt or to limit the maximum interest rate to be paid on an instrument.

The Operating Partnership purchased two interest rate caps that limit the LIBOR portion of the floating interest rates on the 2003 CMBS and the 2003 Mezzanine Loan to 5.0%, before the spread of 189 basis points and 465 basis points, respectively. The Operating Partnership paid a $1.5 million premium to enter into these agreements. At December 31, 2003, the Operating Partnership has net unrealized holding losses related to these two interest rate cap agreements of $0.4 million, which is included in other comprehensive income.

The Operating Partnership has not entered into any derivative or interest rate transactions for speculative purposes, nor does the Operating Partnership anticipate doing so in the future. Approximately 59% of the Operating Partnership’s outstanding debt was subject to fixed rates with a weighted average interest rate of 8.6% at December 31, 2003. The Operating Partnership regularly reviews interest rate exposure on its outstanding borrowings in an effort to minimize the risk of interest rate fluctuations. The Operating Partnership’s operating results have historically been affected by changes in interest rates primarily as a result of its variable interest rate borrowings. If interest rates increased by 25 basis points, interest expense would have increased by approximately $173 thousand for the year ended December 31, 2003, respectively, based on balances outstanding during the year.

The following table provides information about the Operating Partnership’s instruments that have been sensitive to changes in interest rates. For debt obligations outstanding at December 31, 2003, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Weighted average variable rates are based on implied forward rates in the yield curve as of December 31, 2003. The fair value of the Operating Partnership’s fixed rate debt at December 31, 2003, indicates the estimated principal amount of debt having similar debt service requirements, which could have been borrowed by the Operating Partnership at December 31, 2003. As part of purchase accounting, the debt was recorded at its fair value, which was approximately $5.8 million higher than its carrying value on the date of acquisition.  The rate assumed in the fair value calculation of fixed rate debt, excluding the Senior Notes, is equal to 7.00%. The fair value calculation of the Senior Notes is management’s estimate based on recent trade activity in the Operating Partnership’s Senior Notes and the recent repurchase of the Senior Notes.

Expected Principal Cash Flows

Liabilities	2004			2005			2006			2007			2008			Thereafter			Total		Fair Value Total
	(in thousands)
Long-Term Debt:
Fixed Rate (Note A)	$	2,888		$	3,161		$	3,424		$	19,662		$	82,525		$	124,374		$	236,034	$	236,965
Average Interest Rate	8.6		%	8.6		%	8.6		%	8.6		%	8.6		%	8.6		%
Variable Rate	—			—			$	165,000		—			—			—			$	165,000	$	165,000
Average Interest Rate							3.78		%

The table incorporates only those exposures that exist as of December 31, 2003 and does not consider exposures or positions that could arise after that date. In addition, because firm commitments are not represented in the table above, the information presented therein has limited predictive value. As a result, the Operating Partnership’s ultimate realized gain or loss with respect to interest rate fluctuations would depend on the exposures that arise during future periods, prevailing interest rates, and the Operating Partnership’s strategies at that time. There is inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and the Operating Partnership’s financing requirements.

30

Item 8. Financial Statements and Supplementary Data

Incorporated herein beginning at page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures

Quarterly Evaluation.  Management carried out an evaluation as of December 31, 2003 of the effectiveness of the design and operation of the Operating Partnership’s “disclosure controls and procedures,” which management refers to as the Operating Partnership’s disclosure controls.  This evaluation was done under the supervision and with the participation of management, including the Operating Partnership’s Principal Executive Officer and Principal Financial Officer.  Rules adopted by the Commission require that management present the conclusions of the Principal Executive Officer and Principal Financial Officer about the effectiveness of the Operating Partnership’s disclosure controls as of the end of the period covered by this annual report.

Principal Executive Officer and Principal Financial Officer Certifications.  Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are Certifications of the Operating Partnership’s Principal Executive Officer and Principal Financial Officer.  The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002. This section of the Annual Report on Form 10-K which you are currently reading is the information concerning the evaluation referred to in the Section 302 certifications.  This information should be read in conjunction with the Section 302 certifications for a more complete understanding of the topics presented.

Disclosure Controls and Procedures and Internal Control over Financial Reporting.  Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in the Operating Partnership’s reports filed or submitted under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.  Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to the Operating Partnership’s management, including the Operating Partnership’s Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Internal control over financial reporting is a process designed by, or under the supervision of, the Operating Partnership’s Principal Executive Officer and Principal Financial Officer, and effected by CNL’s Board of Directors, the Operating Partnership’s management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Operating Partnership’s receipts and expenditures are being made only in accordance with authorizations of our management and CNL’s Board; and

•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Operating Partnership’s assets that could have a material adverse effect on the Operating Partnership’s financial statements.

31

Limitations on the Effectiveness of Controls.  Management, including the Operating Partnership’s Principal Executive Officer and Principal Financial Officer, do not expect that the Operating Partnership’s disclosure controls and procedures or the Operating Partnership’s internal control over financial reporting will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Conclusions.  Based upon the evaluation, the Operating Partnership’s Principal Executive Officer and Principal Financial Officer have concluded that, as of December 31, 2003 and subject to the limitations noted above, the Operating Partnership’s disclosure controls and procedures were effective to ensure that material information relating to the Operating Partnership and the Operating Partnership’s consolidated subsidiaries is made known to management, including the Operating Partnership’s Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

During the three months ended December 31, 2003, there were no significant changes in the Operating Partnership’s internal control over financial reporting that has materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control for financial reporting.

32

PART III

Item 10. Directors and Executive Officers

The General Partner of the Operating Partnership is CNL Rose GP Corp. (the “General Partner”).  The directors of the General Partner are Thomas J. Hutchison III, James M. Seneff, Jr. and Robert A. Bourne. Each director is subject to election on an annual basis.

The table below sets forth the names, ages and positions of the General Partner’s directors and officers.

Name	Age	Position
Thomas J. Hutchison III	62	Director, Chairman of the Board and Chief Executive Officer
John A. Griswold	54	President
Robert A. Bourne	56	Director and Treasurer
James M. Seneff, Jr.	57	Director
C. Brian Strickland	41	Executive Vice President
Charles A. Muller	45	Executive Vice President
Tammie A. Quinlan	41	Senior Vice President
Barry A.N. Bloom	39	Senior Vice President
Paul H. Williams	39	Senior Vice President
Lynn E. Rose	55	Secretary

Set forth below is a brief description of the business experience during at least the past five years of each of the persons named above.

Thomas J. Hutchison III serves as the Director, Chairman of the Board and Chief Executive Officer of the General Partner.  He also serves as Chief Executive Officer of CNL Hospitality Properties, Inc., as co-Chief Executive Officer and a director of CNL Hospitality Corp., and as President of CNL Hotel Investors, Inc., a real estate investment trust majority owned by CNL Hospitality Properties, Inc.  From June 2002 through March 17, 2003, Mr. Hutchison served as President of CNL Hospitality Properties, Inc. and of CNL Hospitality Corp.  From 2000 to June 2002, Mr. Hutchison served as Executive Vice President of CNL Hospitality Properties, Inc. and of CNL Hospitality Corp., and from 2000 to July 2002, he served as Executive Vice President of CNL Hotel Investors, Inc.  In addition, Mr. Hutchison serves as President and Chief Operating Officer of CNL Real Estate Group, Inc., which is the parent company of CNL Hospitality Corp. and CNL Retirement Corp.  He also serves as the President and Chief Operating Officer of CNL Realty & Development Corp.  In addition, Mr. Hutchison serves as President and Chief Executive Officer of CNL Retirement Properties, Inc. and as a director, President and Chief Executive Officer of CNL Retirement Corp., its advisor.  Mr. Hutchison also serves as a director, Chairman and Chief Executive Officer of EMTG, LLC.  EMTG, LLC publishes the Mobil Travel Guide, a publication which features information about domestic hotels, resorts, restaurants, sites and attractions.  From 2000 to June 2002, Mr. Hutchison served as Executive Vice President of CNL Retirement Properties, Inc. and CNL Retirement Corp.  Mr. Hutchison joined CNL Financial Group, Inc. in January 2000 with more than 30 years of senior management and consulting experience in the real estate development and services industries.  He currently serves on the board of directors of Restore Orlando, a nonprofit community volunteer organization.  Prior to joining CNL, Mr. Hutchison was president and owner of numerous real estate services and development companies.  From 1995 to 2000, he was chairman and chief executive officer of Atlantic Realty Services, Inc. and TJH Development Corporation.  Since 1990, he has fulfilled a number of long-term consulting assignments for large corporations, including managing a number of large international joint ventures.  From 1990 to 1991, Mr. Hutchison was the court-appointed president and chief executive officer of General Development Corporation, a real estate community development company, where he assumed the day-to-day management of the $2.6 billion NYSE-listed company entering reorganization. From 1986 to 1990, he was

33

the chairman and chief executive officer of a number of real estate-related companies engaged in the master planning and land acquisition of forty residential, industrial and office development projects.  From 1978 to 1986, Mr. Hutchison was the president and chief executive officer of Murdock Development Corporation and Murdock Investment Corporation, as well as Murdock’s nine service divisions.  In this capacity, he managed an average of $350 million of new development per year for over nine years.  Additionally, he expanded the commercial real estate activities to a national basis, and established both a new extended care division and a hotel division that grew to 14 properties.  Mr. Hutchison was educated at Purdue University and the University of Maryland Business School.

John A. Griswold serves as the President of the General Partner.  He has over 30 years of experience in the hospitality industry.  Mr. Griswold also serves as President and Chief Operating Officer of CNL Hospitality Properties, Inc. and as a director, President and Chief Operating Officer of CNL Hospitality Corp.  From January 1999 to February 2003, Mr. Griswold served as one of CNL Hospitality Properties, Inc.’s directors.  From 1985 to March 2003, Mr. Griswold served as president of Tishman Hotel Corporation, an operating unit of Tishman Realty & Construction Co., Inc., founded in 1898.  Tishman Hotel Corporation is a hotel developer, owner and operator, and has provided such services for more than 85 hotels, totaling more than 30,000 rooms.  From 1981 to 1985, Mr. Griswold served as general manager of the Buena Vista Palace Hotel in The Walt Disney World Village.  From 1978 to 1981, he served as vice president and general manager of the Homestead Resort, a luxury condominium resort in Glen Arbor, Michigan.  In addition, Mr. Griswold served as an operations manager for The Walt Disney Company from 1971 to 1978.  He was responsible for operational, financial and future planning for multi-unit dining facilities in Walt Disney World Village and Lake Buena Vista Country Club.  He is a member of the board of directors of the Florida Hotel & Lodging Association, chairman elect of Orlando/Orange County Convention & Visitors Bureau, Inc. and chairman of the First Orlando Foundation.  Mr. Griswold received a B.S. from the School of Hotel Administration at Cornell University in Ithaca, New York.

Robert A. Bourneserves as a Director and Treasurer of the General Partner.  He also serves as a Director, Vice Chairman of the Board and Treasurer of CNL Hospitality Properties, Inc. and of CNL Hospitality Corp., and director and Treasurer of CNL Hotel Investors, Inc., a real estate investment trust majority owned by CNL Hospitality Properties, Inc.  Mr. Bourne served as President of CNL Hospitality Properties, Inc. and of CNL Hospitality Corp. from 1997 to June 2002, and served as President of CNL Hotel Investors, Inc. from 1999 to July 2002.  Mr. Bourne is also the President and Treasurer of CNL Financial Group, Inc.; a director, Vice Chairman of the Board and Treasurer of CNL Retirement Properties, Inc., a public, unlisted real estate investment trust; as well as, a director, Vice Chairman of the Board and Treasurer of CNL Retirement Corp., its advisor.  Mr. Bourne served as President of CNL Retirement Properties, Inc. and CNL Retirement Corp. from 1998 and 1997, respectively, to June 2002.  Mr. Bourne also serves as a director of CNLBank.  He serves as a director and Vice Chairman of the Board of Commercial Net Lease Realty, Inc., a public real estate investment trust listed on the New York Stock Exchange.  Mr. Bourne has served as a director since inception in 1994, President from 1994 through February 1999, Treasurer from February 1999 through August 1999, and Vice Chairman of the Board since February 1999, of CNL Restaurant Properties, Inc., a public, unlisted real estate investment trust.  Mr. Bourne also serves as a director, President and Treasurer for various affiliates of CNL Financial Group, Inc., including CNL Investment Company, CNL Securities Corp., and CNL Institutional Advisors, Inc., a registered investment advisor for pension plans.  As President of CNL Financial Group, Inc., Mr. Bourne has overseen CNL’s real estate and capital markets activities including the investment of over $3 billion in equity and the financing, acquisition, construction and leasing of restaurants, office buildings, apartment complexes, hotels, retirement properties and other real estate.  Mr. Bourne began his career as a certified public accountant employed by Coopers & Lybrand, Certified Public Accountants, from 1971 through 1978, where he attained the position of tax manager in 1975.  Mr. Bourne graduated from Florida State University in 1970 where he received a B.A. in Accounting, with honors.

James M. Seneff, Jr.serves as a Director of the General Partner.  He also serves as a Director and Chairman of the Board of CNL Hospitality Properties, Inc. Mr. Seneff served as Chief Executive Officer since inception through February 13, 2003 and he served as co-Chief Executive Officer from February 14, 2003 through May 1, 2003 of CNL Hospitality Properties, Inc.  Mr. Seneff serves as a director, Chairman of the Board and co-Chief Executive Officer of CNL Hospitality Corp. and CNL Hotel Investors, Inc.  Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial Group, Inc.,

34

a diversified real estate company, and has served as a director, Chairman of the Board and Chief Executive Officer of CNL Financial Group, Inc. and its subsidiaries since CNL’s formation in 1973.  CNL Financial Group, Inc. is the parent company, either directly or indirectly through subsidiaries, of CNL Real Estate Services, Inc., CNL Hospitality Corp., CNL Capital Markets, Inc., CNL Investment Company and CNL Securities Corp.  Mr. Seneff also serves as a director and Chairman of the Board of CNL Retirement Properties, Inc., a public, unlisted real estate investment trust, as well as CNL Retirement Corp., its advisor.  Since 1992, Mr. Seneff has served as a director, Chairman of the Board and Chief Executive Officer of Commercial Net Lease Realty, Inc., a public real estate investment trust that is listed on the New York Stock Exchange.  In addition, he has served as a director and Chairman of the Board since inception in 1994, served as Chief Executive Officer from 1994 through August 1999 and co-Chief Executive Officer from December 2000 through September 2003 of CNL Restaurant Properties, Inc., a public, unlisted real estate investment trust.  Mr. Seneff has also served as a director, Chairman of the Board and Chief Executive Officer of CNL Securities Corp. since 1979; CNL Investment Company since 1990; and CNL Institutional Advisors, Inc., a registered investment adviser for pension plans, since 1990.  Mr. Seneff formerly served as a director of First Union National Bank of Florida, N.A., and currently serves as the Chairman of the Board of CNLBank.  Mr. Seneff served on the Florida State Commission on Ethics and is a former member and past chairman of the State of Florida Investment Advisory Council, which recommends to the Florida Board of Administration investments for various Florida employee retirement funds.  The Florida Board of Administration is Florida’s principal investment advisory and money management agency and oversees the investment of more than $60 billion of retirement funds.  Mr. Seneff received his degree in Business Administration from Florida State University in 1968.

                C. Brian Stricklandserves as an Executive Vice President of the General Partner.  He also serves as Executive Vice President of CNL Hospitality Properties, Inc., CNL Hospitality Corp., CNL Hotel Development Company and CNL Hotel Investors, Inc.  Mr. Strickland supervises the companies’ financial reporting, financial control and accounting functions as well as forecasting, budgeting and cash management activities.  He is also responsible for regulatory compliance, equity and debt financing activities and insurance for the companies.  Mr. Strickland joined CNL Hospitality Corp. in April 1998 with an extensive accounting background.  Prior to joining CNL, he served as vice president of taxation with Patriot American Hospitality, Inc., where he was responsible for implementation of tax planning strategies on corporate mergers and acquisitions and where he performed or assisted in strategic processes in the REIT industry.  From 1989 to 1997, Mr. Strickland served as a director of tax and asset management for Wyndham Hotels & Resorts where he was integrally involved in structuring acquisitive transactions, including the consolidation and initial public offering of Wyndham Hotel Corporation and its subsequent merger with Patriot American Hospitality, Inc.  In his capacity as director of asset management, he was instrumental in the development and opening of a hotel and casino in San Juan, Puerto Rico.  Prior to 1989, Mr. Strickland was senior tax accountant for Trammell Crow Company where he provided tax consulting services to regional developmental offices.  From 1986 to 1988, Mr. Strickland was tax accountant for Ernst & Whinney where he was a member of the real estate practice group.  Mr. Strickland is a certified public accountant and holds a bachelor’s degree in Accounting.

                Charles A. Mullerserves as an Executive Vice President of the General Partner.  He also serves as an Executive Vice President of CNL Hospitality Properties, Inc. Mr. Muller joined CNL Hospitality Corp. in October 1996 and is primarily responsible for overseeing the investor relations functions and related activities of CNL Hospitality Properties, Inc.  From October 1996 through November 2003, Mr. Muller served as Chief Operating Officer of CNL Hospitality Properties, Inc. and CNL Hospitality Corp. and was primarily responsible for the planning and implementation of the interest in hotel industry investments, including acquisitions, development, project analysis and due diligence.  Mr. Muller currently serves as Executive Vice President of CNL Hospitality Corp., CNL Hotel Development Company and CNL Hotel Investors, Inc.  Mr. Muller joined CNL following more than 15 years of broad-based hotel industry experience with firms such as Tishman Hotel Corporation, Wyndham Hotels & Resorts, PKF Consulting and AIRCOA Hospitality Services.  Mr. Muller’s background includes responsibility for market review and valuation efforts, property acquisitions and development, capital improvement planning, hotel operations and project management for renovations and new construction.  Mr. Muller served on the former Market, Finance and Investment Analysis Committee of the American Hotel & Lodging Association, currently serves on the Urban Land Institute — Hotel Development Council, and is a founding member of the

35

Lodging Industry Investment Council.  He holds a bachelor’s degree in Hotel Administration from Cornell University.

                Tammie A. Quinlan serves as a Senior Vice President of the General Partner. She also serves as Senior Vice President of Corporate Finance and Treasury of CNL Hospitality Properties, Inc.  Ms. Quinlan joined CNL Hospitality Corp. in August 1999 and is responsible for all accounting and financial reporting requirements, and corporate finance functions. Prior to CNL, Ms. Quinlan was employed by KPMG LLP from 1987 to 1999, most recently as a senior manager, performing services for a variety of clients in the real estate, hospitality, and financial services industries. During her tenure at KPMG LLP, Ms. Quinlan assisted several clients through their initial public offerings, secondary offerings, securitizations and complex business and accounting issues. Ms. Quinlan is a certified public accountant and holds a B.S. in accounting and finance from the University of Central Florida.

                Barry A.N. Bloom serves as a Senior Vice President of the General Partner. He also serves as Senior Vice President of CNL Hospitality Properties, Inc. and of CNL Hospitality Corp. Mr. Bloom joined CNL Hospitality Corp. in May 2003 and he is responsible for the oversight of select hotel assets as well as directing efforts in management and franchise agreement administration, real estate ownership issues, hotel technology and integrating acquisitions into its existing portfolio management systems.  Immediately prior to joining CNL Hospitality Corp., Mr. Bloom served as Vice President — Investment Management for Hyatt Development Corporation for three years.  At Hyatt, he was responsible for providing ownership discipline and oversight for over 50 hotels and provided direction and decision making for capital expenditures and real estate issues.  Prior to serving as Vice President of Hyatt, Mr. Bloom was a Vice President at Tishman Hotel Corporation where he spent over 10 years in a variety of capacities including investment banking, asset management and property management.  Prior to joining Tishman, he worked for VMS Realty Partners and Pannell Kerr Forster. Mr. Bloom holds an MBA from the Johnson School at Cornell University and a bachelor’s degree from the School of Hotel Administration at Cornell University.

                Paul Williams serves as a Senior Vice President of the General Partner. He also serves as Senior Vice President of CNL Hospitality Properties, Inc. and Senior Vice President of Corporate Strategy and Capital Markets of CNL Hospitality Corp.  Mr. Williams joined CNL Hospitality Corp. in July 2003 and is responsible for developing corporate strategy, implementing financial plans and executing acquisitions.  Mr. Williams has over 17 years of experience in the areas of investment banking, finance and accounting, including mergers and acquisitions and capital markets.  Prior to joining CNL Hospitality Corp., Mr. Williams served six years as a Principal in Mergers and Acquisitions and Real Estate Investment Banking with Banc of America Securities LLC.  In doing so, he executed a variety of corporate and asset transactions specializing in the identification and execution of mergers, acquisitions, sales and financings for real estate investment trusts and real estate opportunity funds.  In addition, Mr. Williams spent 10 years with public accounting firms Price Waterhouse and Deloitte & Touche.  Mr. Williams holds a bachelor’s degree in accounting from the University of Florida.

                Lynn E. Rose serves as Secretary of the General Partner.  She also serves as Secretary of CNL Hospitality Properties, Inc. and its subsidiaries and as Secretary of CNL Hospitality Corp. Ms. Rose served as Treasurer of CNL Hospitality Properties, Inc. from 1996 through September 2001 and as Treasurer and a director of CNL Hospitality Corp. from 1997 through June 2001.  In addition, Ms. Rose serves as Secretary of CNL Hotel Investors, Inc., and served as Treasurer from 1999 through June 2001.  Ms. Rose is Secretary of CNL Retirement Properties, Inc. and serves as Secretary of its subsidiaries.  Ms. Rose served as Treasurer of CNL Retirement Properties, Inc. from 1998 through August 2001.  In addition, she serves as Secretary of CNL Retirement Corp., its advisor, and served as Treasurer and a director from 1997 through June 2001.  Ms. Rose served as Secretary of CNL Restaurant Properties, Inc., a public, unlisted real estate investment trust, from 1994 through August 1999, and served as Treasurer from 1994 through February 1999.  Ms. Rose, a certified public accountant, has served as Secretary of CNL Financial Group, Inc. since 1987, its Controller from 1987 to 1993 and its Chief Financial Officer from 1993 to present.  She also serves as Secretary of the subsidiaries of CNL Financial Group, Inc. and holds other offices in the subsidiaries as appropriate in the circumstances.  In addition, she serves as Secretary for approximately 75 additional corporations affiliated with CNL Financial Group, Inc. and its subsidiaries.  Ms. Rose has served as Chief Financial Officer and Secretary of CNL Securities Corp. since July 1994.  Ms. Rose oversees the

36

tax compliance for over 500 corporations, partnerships and joint ventures, and the accounting and financial reporting for CNL Holdings, Inc. and its subsidiaries.  Prior to joining CNL, Ms. Rose was a partner with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified Public Accountants.  Ms. Rose holds a B.A. in Sociology from the University of Central Florida.  She was licensed as a certified public accountant in 1979.

Audit Committee and Audit Committee Financial Expert

                The Operating Partnership does not have a standing audit committee.

Codes of Business Conduct and Ethics

                The Operating Partnership had a Code of Business Conduct and Ethics that applied to all of its employees. In addition, the Operating Partnership had a Code of Ethics for its Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer which was supplemented by the Code of Business Conduct and Ethics. These Codes were terminated in connection with the RFS-CNL Transaction. Subsequent to the RFS-CNL Transaction, CNL Hospitality Properties, Inc., the ultimate corporate parent of the Operating Partnership, adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions.  The code of ethics, which is entitled “Code of Business Conduct” is available on CNL’s Internet website http://www.cnlonline.com.

Item 11. Executive Compensation

No annual or long-term compensation was paid by the Operating Partnership to any executive officers of the General Partner for services rendered in all capacities to the Operating Partnership following the consummation of the RFS-CNL Transaction.  In addition, none of the executive officers received an annual salary or bonus from the Operating Partnership following the consummation of the RFS-CNL Transaction.  The executive officers of the General Partner are also employees and executive officers of CNL Hospitality Corp. or its affiliates and receive compensation from CNL Financial Group, Inc. and its affiliates in part for services provided to us. See “Item 13- Certain Relationships and Related Transactions” for a description of the fees payable and expenses reimbursed to the CNL Hospitality Corp. and its affiliates.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stock Matters

The number of units outstanding was 31,941,852 as of March 30, 2004 (99.9% of which were held by CNL Rose Acquisition Corp. and 0.1% were held by CNL Rose GP Corp.). The Operating Partnership has not issued any securities under equity compensation plans.

Item 13. Certain Relationships and Related Transactions

                The officers of the General Partner hold similar positions with CNL and its affiliates. These affiliates are by contract entitled to receive fees and compensation for services provided in connection with the acquisition, development, management and sale of the Operating Partnership’s assets. During 2003, the Operating Partnership paid approximately $15.5 million to affiliates of

37

CNL in connection with reimbursements for acquisition costs incurred by CNL related to the RFS-CNL Transaction.

                Affiliates of CNL provide various administrative services to the Operating Partnership, including services related to accounting; financial, tax and regulatory compliance reporting; due diligence and marketing; and investor relations, on a day to day basis. The Operating Partnership incurred costs of approximately $30 thousand for these services.

                Included in other assets on the Operating Partnership’s Consolidated Balance Sheets are amounts due from CNL and its affiliates of approximately $0.5 million for settlement of various operational items for the year ended December 31, 2003. These amounts are repaid in the ordinary course of business.

Item 14. Principal Accountant Fees and Services

	Fiscal Year		Fiscal Year
	2003		2002
Audit Fees (a)	$	170,000	$	163,000
Audit-Related Fees (b)	112,000		105,000
Tax Fees (c)	279,000		105,000
Other Fees (d)	58,000		114,000
Total Fees	$	619,000	$	382,000

(a) The Audit Fees represent the aggregate fees billed for professional services rendered by PricewaterhouseCoopers, LLP for the audits of the Operating Partnership’s annual financial statements and quarterly reviews of the financial statements contained in the Operating Partnership’s Forms l0-Q for the years ended December 31, 2003 and 2002.

(b) The Audit-Related Fees represent the fees billed for assurance and related services by PricewaterhouseCoopers, LLP that are reasonably related to the performance of the audit or review of our financial statements. These fees do not include fees reported under “Audit Fees”.  The fees paid in 2003 are for the audit of the Operating Partnership as of July 10, 2003 in connection with the RFS-CNL Transaction.

(c) Tax Fees represent the aggregate fees billed for professional services rendered by PricewaterhouseCoopers, LLP for tax compliance, tax advice, and tax planning. In 2003, the Operating Partnership paid $232,000 for compliance fees related to the 2003 annual tax returns and quarterly asset tests and $47,000 for advice pertaining to the RFS-CNL Transaction. The 2002 tax fees relate entirely to compliance work related to the completion and review of annual tax returns and quarterly asset tests.

(d) Other Fees represent the aggregate fees billed for products and services provided by PricewaterhouseCoopers, LLP, other than the services reported under Audit Fees, Audit-Related Fees and Tax Fees.  The primary component of other fees for 2003 is costs associated with the 2003 and 2002 audits of the Company’s sole joint venture, Wharf Associates. The primary component of other fees for 2002 is costs associated with the Company’s issuance of the Senior Notes.

38

PART IV

Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this report.

1.Consolidated Financial Statements

2.Financial Statement Schedules

All other schedules are omitted since the required information is not applicable or is presented in the consolidated financial statements or notes thereto.

(b) Reports on Form 8-K. The Operating Partnership made no filings on Form 8-K during the quarter ended December 31, 2003.

(c) Exhibits

2.1	Agreement by and among CNL Hospitality Properties, Inc., CNL Rose Acquisition Corp., RFS Hotel Investors, Inc., CNL Rose Acquisition OP, LP and RFS Partnership, L.P., dated May 8, 2003  (previously filed as Exhibit 2.1 to the Operating Partnership’s current report on Form 8-K filed May 9, 2003 and incorporated herein by reference.)
2.2	Amendment to Merger Agreement, dated May 27, 2003, among the Company, CNL Rose Acquisition Corp., RFS Hotel Investors, Inc., CNL Rose Acquisition OP, LP and RFS Partnership, L.P. (previously filed as Exhibit 2.2 to Post-Effective Amendment No. Two to CNL Hospitality Properties, Inc. ‘s Registration Statement on Form S-11 filed July 14, 2003 and incorporated herein by reference.)
2.3	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. (previously filed as Exhibit 2.1 to the Operating Partnership’s current report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
3.1	Certificate of Limited Partnership of RFS Partnership, L.P., filed with the State of Tennessee on August 3, 1993 (filed herewith.)
3.2	Amendment to the Certificate of Limited Partnership of RFS Partnership, L.P., filed with the State of Tennessee on June 27, 1997 (filed herewith.)
3.3	Amendment to the Certificate of Limited Partnership of RFS Partnership, L.P., dated July 10, 2003 (previously filed as Exhibit 3.17 to Post-Effective Amendment No. Two to CNL Hospitality Properties, Inc.’s Registration Statement on Form S-11 filed July 14, 2003 and incorporated herein by reference.)
3.4	Sixth Amended and Restated Agreement of Limited Partnership of RFS Partnership, L.P. dated July 10, 2003 (previously filed as Exhibit 3.2 to the Operating Partnership’scurrent report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)

39

4.1	Indenture, dated February 26, 2002, among RFS Partnership, L.P., RFS 2002 Financing, Inc., RFS Leasing VII, Inc., RFS Hotel Investors, Inc. and U.S. Bank National Association (previously filed as Exhibit 4.1 to the Operating Partnership’s Form S-4 Registration Statement filed March 15, 2002, and incorporated herein by reference.)
4.2	Supplemental Indenture, dated as of July 10, 2003, among CNL Rose Acquisition Corp. RFS Partnership, L.P., RFS 2002 Financing, Inc. and U.S. Bank National Association (filed herewith.)
4.3	Form of Global Note evidencing the 9.75% Series B Senior Notes due 2012 of RFS Partnership, L.P. and RFS 2002 Financing, Inc. (previously filed as Exhibit A to Exhibit 4.1 to the Operating Partnership’s form S-4 Registration Statement dated March 15, 2002, and incorporated herein by reference.)
4.4	Form of Guaranty by RFS Hotel Investors, Inc. and RFS Leasing VII, Inc. (previously filed as Exhibit A to Exhibit 4.1 to the Operating Partnership’s Form S-4 Registration Statement filed March 15, 2002, and incorporated herein by reference.)
4.5	Registration Rights Agreement dated February 26, 2002 among RFS Partnership, L.P., RFS 2002 Financing, Inc., RFS Leasing VII, Inc., RFS Hotel Investors, Inc., Credit Suisse First Boston Corporation and Banc of America Securities LLC (previously filed as Exhibit 4.4 to the Operating Partnership’s Form S-4 Registration Statement dated March 15, 2002, and incorporated herein by reference.)
10.1	Form of Percentage Lease with TRS Lessees (previously filed as Exhibit 10.1 to the Operating Partnership’s current report on Form 8-K dated January 16, 2001 and incorporated herein by reference).
10.2	Form of Management Agreement with Flagstone (previously filed as Exhibit 10.2 to the Operating Partnership’s current report Form 8-K dated January 16, 2001 and incorporated herein by reference).
10.3	Loan Agreement dated August 9, 2000 by and between Bank of America, N.A. (as lender) and RFS SPE 2000 LLC (as borrower), a wholly-owned subsidiary of RFS Hotel Investors, Inc. (previously filed as Exhibit 10.19 to the Operating Partnership’s Form 10-K for the year ended December 31, 2000 and incorporated herein by reference.)
10.4	Loan Agreement dated August 9, 2000 by and between Bank of America, N.A. (as lender) and RFS SPE 2 2000, LLC (as borrower), a wholly-owned subsidiary of RFS Hotel Investors, Inc. (previously filed as Exhibit 10.20 to the Operating Partnership’s Form 10-K for the year ended December 31, 2000 and incorporated herein by reference.)
10.5	Sixth Amended and Restated Revolving Credit Agreement dated October 31, 2002 (previously filed as Exhibit 10.1 to the Operating Partnership’s current Report on Form 8-K dated January 13, 2003 and incorporated herein by reference).
10.6	Credit Agreement dated as of July 10, 2003 among RFS Partnership, L.P. and RFS Financing Partnership, L.P. (as borrowers), CNL Hospitality Properties, Inc. (as parent to the borrowers), Bank of America, N.A. (as Administrative Agent) and the lenders named therein (previously filed as Exhibit 10.68 to Post-Effective Amendment No. Two to CNL Hospitality Properties, Inc.’s Registration Statement on Form S-11 filed July 14, 2003 and incorporated herein by reference.)
10.7	$320,000,000 Note between RFS Partnership, L.P. and RFS Financing Partnership, L.P. (as borrowers), and Banc of America Bridge LLC (as lender), dated as of July 10, 2003  (previously filed as Exhibit 10.69 to Post-Effective Amendment No. Two to CNL Hospitality Properties, Inc.’s Registration Statement on Form S-11 filed July 14, 2003 and incorporated herein by reference.)
10.8	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. (previously filed as Exhibit 10.3 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
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 common stock of RFS TRS Holdings, Inc.) (previously filed as Exhibit 10.4 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.10	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.) (previously filed as Exhibit 10.5 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)

40

10.11	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.) (previously filed as Exhibit 10.6 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.12	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.) (previously filed as Exhibit 10.7 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.13	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.) (previously filed as Exhibit 10.8 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
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 partner interest in Ridge Lake, L.P.) (previously filed as Exhibit 10.9 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.15	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.) (previously filed as Exhibit 10.10 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.16	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.) (previously filed as Exhibit 10.11 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.17	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.) (previously filed as Exhibit 10.12 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.18	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.) (previously filed as Exhibit 10.13 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.19	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.) (previously filed as Exhibit 10.14 to the Operating Partnership’s Current Report on Form 8-K filed July 25, 2003 and incorporated herein by reference.)
10.20	Commercial Mortgage Backed Security Facility, dated December 4, 2003, by and between Bank of America, N.A. (as lender) and Rose SPE 1, L.P. (as borrower), a wholly-owned subsidiary of RFS Partnership, L.P. (filed herewith.)
10.21	Mezzanine Loan Agreement, dated December 23, 2003, by and between Fleet National Bank (as lender) and Rose Mezzanine SPE, L.P. (as borrower), a wholly-owned subsidiary of RFS Partnership, L.P. (filed herewith.)
12.1	Statement regarding Computation of Ratio of Earnings to Fixed Charges of RFS Partnership, L.P. (filed herewith.)
21.1	List of Subsidiaries of the Registrant (filed herewith.)
31.1	Certification of Chief Executive Officer, Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith.)
31.2	Certification of Principal Financial Officer, Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith.)
32.1	Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith.)
32.2	Certification of Principal Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith.)

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RFS PARTNERSHIP, L.P.
	By: CNL ROSE GP CORP., its general partner
March 30, 2004	/s/ Thomas J. Hutchison
Date	Thomas J. Hutchison
	Title: Chief Executive Officer (Principal Executive Officer)
	By: CNL ROSE GP CORP., its general partner
March 30, 2004	/s/ C. Brian Strickland
Date	C. Brian Strickland
	Title: Executive Vice President (Authorized Signatory and Principal Financial and Accounting Officer)

42

Report of Independent Certified Public Accountants

To the Board of Directors and Stockholders

of CNL Hospitality Properties, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income (loss), of partners’ capital and of cash flows present fairly, in all material respects, the financial position of RFS Partnership, L.P. and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for the period from July 11 to December 31, 2003, the period from January 1 to July 10, 2003, and for each of the years ended December 31, 2002 and 2001 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  These financial statements and the financial statement schedule are the responsibility of the Partnership’s management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.  We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, on July 10, 2003 RFS Partnership, L.P. was acquired by subsidiaries of CNL Hospitality Properties, Inc.

/s/ PRICEWATERHOUSECOOPERS,  LLP

Orlando, Florida

March 12, 2004

F-1

RFS PARTNERSHIP, L.P.

CONSOLIDATED BALANCE SHEETS

(in thousands)

	Post-Merger Partnership			Pre-Merger Partnership
	December 31, 2003			December 31, 2002
ASSETS
Investment in hotel properties, net	$	816,656		$	593,289
Real estate held for sale	29,550
Cash and cash equivalents	19,396			1,938
Restricted cash	17,253			4,383
Accounts receivable	8,215			4,698
Deferred expenses, net	6,085			8,805
Other assets	5,768			3,712
Deferred income taxes	25,826			25,830
Total assets	$	928,749		$	642,655
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable and accrued expenses	$	19,617		$	24,202
Borrowings on Line of Credit				6,950
Mortgage notes payable	324,354			159,279
Senior notes payable	81,674			125,000
Total liabilities	425,645			315,431
Commitments and contingencies
Redeemable limited partnership units at redemption value, 2,459 units at December 31, 2002				26,702
Partners’ Capital:
Other comprehensive income (loss)	(418		)
General partnership units, 31,942 units and 28,467 units at December 31, 2003 and December 31, 2002, respectively	503,522			300,522
Total partners’ capital	503,104			300,522
Total liabilities and partners’ capital	$	928,749		$	642,655

The accompanying notes are an integral part of these consolidated financial statements.

F-2

RFS PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2003, 2002 and 2001

(in thousands, except per unit data)

	Post-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership
	July 11 to Dec. 31, 2003			Jan. 1 to July 10, 2003			Jan. 1 to Dec. 31, 2002			Jan. 1 to Dec. 31, 2001
Revenue:
Rooms	$	71,464		$	78,234		$	156,670		$	173,562
Food and beverage	8,487			8,971			17,452			17,695
Other operating departments	3,041			2,820			6,175			8,661
Lease revenue, net	9,096			1,519			5,229			5,782
Other	946			214			411			573
Total hotel revenue	93,034			91,758			185,937			206,273
Expenses:
Rooms	16,078			16,391			31,914			33,738
Food and beverage	6,226			6,499			12,793			13,533
Other operating departments	1,549			792			1,724			1,997
Property operating costs	11,054			11,179			20,115			20,531
Property taxes, insurance and other	6,161			5,983			11,670			11,882
Franchise costs	5,250			7,573			15,001			15,530
Maintenance and repair	4,558			5,238			8,754			8,855
Management fees	2,588			4,582			4,552			5,338
Depreciation	15,553			14,805			27,743			27,321
Lease termination										65,489
Amortization of franchise fees and unearned compensation				2,028			1,247			1,384
General and administrative	8,785			26,008			18,027			18,161
Total operating expenses	77,802			101,078			153,540			223,759
Operating income (loss)	15,232			(9,320		)	32,397			(17,486		)
Debt extinguishments and swap termination costs							10,122
Amortization of loan origination costs	651			804			1,617			1,354
Interest expense	12,345			13,889			25,484			24,688
Income (loss) from continuing operations before minority interest and income taxes	2,236			(24,013		)	(4,826		)	(43,528		)
Minority interest	(10		)
Benefit from income taxes	1,321			1,546			1,096			24,714
Income (loss) from continuing operations	3,547			(22,467		)	(3,730		)	(18,814		)
Earnings (losses) from discontinued operations	1,222			607			(1,652		)	2,801
Gain (loss) on sale of assets				(9		)	950			1,127
Net income (loss)	4,769			(21,869		)	(4,432		)	(14,886		)
Gain (loss) on redemption of preferred units							(1,890		)	5,141
Preferred unit dividends							(1,562		)	(3,125		)
Net income (loss) applicable to unitholders	$	4,769		$	(21,869	)	$	(7,884	)	$	(12,870	)
Net income (loss) allocated to general partnership units	$	4,769		$	(20,077	)	$	(7,240	)	$	(11,713	)
Net loss allocated to limited partnership units				$	(1,792	)	$	(644	)	$	(1,157	)
Earnings (loss) per unit data:
Basic earnings (loss) per unit from continuing operations	$	0.11		(0.72		)	$	(0.20	)	$	(0.57	)
Discontinued operations	0.04			0.02			(0.06		)	0.10
Basic earnings (loss) per unit	$	0.15		$	(0.70		$	(0.26	)	$	(0.47	)
Diluted earnings (loss) per unit from continuing operations	$	0.11		$	(0.72	)	$	(0.20	)	$	(0.57	)
Discontinued operations	0.04			0.02			(0.06		)	0.10
Diluted earnings (loss) per unit	$	0.15		$	(0.70	)	$	(0.26	)	$	(0.47	)
Weighted average units outstanding—basic and diluted	31,942			31,271			29,905			27,520

The accompanying notes are an integral part of these consolidated financial statements.

F-3

RFS PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Years Ended December 31, 2003, 2002 and 2001

(in thousands)

	Post-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership
	July 11 to Dec. 31, 2003			Jan. 1 to July 10, 2003			Jan. 1 to Dec. 31, 2002			Jan. 1 to Dec. 31, 2001
Net income (loss)	$	4,769		$	(21,869	)	$	(4,432	)	$	(14,886	)
Reclassification adjustment for losses included in earnings							3,220
Unrealized holding loss on interest rate swaps or caps	(418		)							(3,220		)
Comprehensive income (loss)	$	4,351		$	(21,869	)	$	(1,212	)	$	(18,106	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

RFS PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Years Ended December 31, 2003, 2002 and 2001

(in thousands, except per unit data)

	Post-Merger Partnership			Pre-Merger Partnership
Balance, December 31, 2000				$	349,667
Issuance of general partnership units				4,661
Redemption of Series A Preferred units, including $5,141 gain on redemption				(13,000		)
Series B Preferred Unit issuance costs				(1,040		)
Distributions to general partnership units ($1.255 per unit)				(30,661		)
Distributions to redeemable limited partnership units ($1.255 per unit)				(3,135		)
Distributions preferred units ($0.385 per Series A Preferred unit and $12.50 per Series B Preferred unit)				(3,481		)
Allocation from redeemable limited partnership units				5,481
Contribution from general partner related to amortization of stock-based compensation				1,329
Unrealized holding loss on interest rate swaps				(3,220		)
Net loss				(14,886		)
Balance, December 31, 2001				$	291,715
Issuance of general partnership units				39,646
Loss on redemption of Series B Preferred units, net of $1,040 in issuance costs				(850		)
Distributions to general partnership units ($1.00 per unit)				(27,018		)
Distributions to redeemable limited partnership units ($1.00 per unit)				(2,592		)
Distributions preferred units ($6.25 per Series B Preferred unit)				(1,562		)
Allocation from redeemable limited partnership units				1,278
Contribution from general partner related to amortization of stock-based compensation				1,117
Reclassification of holding loss on interest rate swaps into earnings				3,220
Net loss				(4,432		)
Balance, December 31, 2002				$	300,522
Issuance of general partnership units				12,817
Contributions				(9		)
Distributions to general partnership units ($0.25 per unit)				(7,129		)
Distributions to redeemable limited partnership units ($0.25 per unit)				(606		)
Allocation to redeemable limited partnership units				(3,609		)
Contribution from general partner related to amortization of stock-based compensation				1,957
Net loss				(21,869		)
Balance, July 10, 2003				$	282,074
Contribution from CNL to acquire the Operating Partnership	$	363,160
Contributions from parent company	209,593
Distributions to parent company ($2.57 per unit)	(74,000		)
Unrealized holding loss on interest rate caps	(418		)
Net income	4,769
Balance, December 31, 2003	$	503,104

The accompanying notes are an integral part of these consolidated financial statements.

F-5

RFS PARNTERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2003, 2002 and 2001

	Post-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership
	July 11 to Dec. 31, 2003			Jan. 1 to July 10, 2003			Jan. 1 to Dec. 31, 2002			Jan. 1 to Dec. 31, 2001
	(in thousands )
Cash flows from operating activities:
Net income (loss)	$	4,769		$	(21,869	)	$	(4,432	)	$	(14,886	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization	16,204			18,675			32,944			32,343
(Gain) loss on sale of assets				9			2,890			(1,127		)
Write-off of deferred expenses				349			1,361
Changes in assets and liabilities:
Accounts receivable	(2,773		)	(744		)	835			7,508
Other assets	2,106			(5,279		)	(499		)	5,432
Deferred income taxes	(1,321		)	(1,546		)	(1,096		)	(24,734		)
Accounts payable and accrued expenses	(3,589		)	(2,122		)	4,523			5,930
Net cash provided (used) by operating activities	15,396			(12,527		)	36,526			10,466
Cash flows from investing activities:
Investment in hotel properties	(1,262		)	(10,035		)	(14,576		)	(18,013		)
Cash returned (paid) for franchise fees				107			(172		)	(65		)
Restricted cash	(8,184		)	(1,686		)	2,434			(1,888		)
Proceeds from sale of assets				6			4,175			11,324
Net cash used by investing activities	(9,446		)	(11,608		)	(8,139		)	(8,642		)
Cash flows from financing activities:
Contributions from parent company	77,950
Distributions to parent company	(74,000		)
Reimbursement of acquisition costs to CNL	(15,503		)
Net proceeds (payments) on line of credit				28,550			(74,238		)	30,914
Net payments on bridge loan	(101,000		)
Proceeds from issuance of (payments to retire) Senior Notes	(42,188		)	(3,780		)	125,000
Proceeds from issuance of 2003 CMBS and 2003 Mezzanine Loan	165,000
Payments on mortgage notes payable	(1,536		)	(1,578		)	(60,668		)	(7,210		)
Redemption of preferred units							(25,850		)	(13,000		)
Distributions to unitholders				(7,735		)	(31,304		)	(37,277		)
Issuance of general partnership units, net of $300 issuance costs in 2002				12,408			39,653			4,479
Issuance of preferred units, net of $1,000 issuance costs										23,960
Loan fees paid	(889		)	(56		)	(4,777		)	(1,636		)
Net cash provided (used) by financing activities	7,834			27,809			(32,184		)	230
Net increase (decrease) in cash and cash equivalents	13,784			3,674			(3,797		)	2,054
Cash and cash equivalents at beginning of period	5,612			1,938			5,735			3,681
Cash and cash equivalents at end of period	$	19,396		$	5,612		$	1,938		$	5,735
Supplemental disclosure of cash flow information:
Cash paid for interest	$	13,145		$	14,280		$	22,059		$	24,403

Supplemental disclosure of non-cash activities: See Note 15 to the consolidated financial statements

The accompanying notes are an integral part of these consolidated financial statements.

F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF RFS PARTNERSHIP, L.P.

Note 1. Organization

RFS Partnership, L.P. (the “Operating Partnership”) is a Tennessee limited partnership which, at December 31, 2003, owned interests in 62 hotels with 9,399 rooms located in 26 states (collectively the “Hotels”). On July 10, 2003, RFS Hotel Investors, Inc. (“RFS”) and the Operating Partnership were acquired by subsidiaries of CNL Hospitality Properties, Inc. (“CNL”) for approximately $383 million in cash ($12.35 per share or limited partnership unit) (“RFS-CNL Transaction”), excluding the 1.0 million shares of RFS stock acquired by CNL prior to July 10, 2003.  Upon consummation of this transaction, RFS was merged with and into a subsidiary of CNL and RFS ceased to exist as a separate corporate entity.  Further, upon consummation of this transaction, a subsidiary of CNL was merged with and into the Operating Partnership and the Operating Partnership continues to exist as a separate entity and as an indirect wholly owned subsidiary of CNL.  Prior to the closing of this transaction the common stock of RFS was publicly traded on the New York Stock Exchange under the symbol “RFS.”  The common stock of RFS has since been removed from listing on the New York Stock Exchange.  RFS filed a Form 15 on July 14, 2003, terminating its filing requirements with the Securities and Exchange Commission (“SEC”).  On August 14, 2003, the Operating Partnership filed with the SEC a Form 15, terminating the Operating Partnership’s obligation to file reports with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Although the filing of the Form 15 terminates the Operating Partnership’s obligation to file reports under the Exchange Act, the Operating Partnership is filing this Annual Report on Form 10-K, in accordance with its obligation to do so set forth in that certain indenture, by and among the Operating Partnership, RFS 2002 Financing, Inc., CNL Rose Acquisition Corp., RFS Leasing VII, Inc. and U.S. Bank, N.A., dated as of February 26, 2002.

Concurrent with the consummation of the RFS-CNL Transaction, CNL contributed five hotels to the Operating Partnership with net assets of approximately $131.6 million. The five hotels are a Residence Inn in Orlando, Florida, a Marriott Courtyard in Edison, New Jersey, a Hyatt Regency in Coral Gables, Florida, a Wyndham in Billerica, Massachusetts and a Wyndham in Denver, Colorado.  The two Wyndham properties are triple net lease properties, while the other three properties are leased to taxable REIT subsidiaries owned by CNL, but not owned by the Operating Partnership.

The Operating Partnership leases 52 of its 62 hotels to wholly owned taxable REIT subsidiary (“TRS”) entities and contracts with third-party hotel management companies to operate these hotels.  Hotel operating revenues and expenses for these hotels are included in the consolidated results of operations.  At December 31, 2003, the Operating Partnership leased seven hotels to three third-party lessees and three hotels to taxable REIT subsidiaries owned by CNL, but not owned by the Operating Partnership. Rental income from operating leases is included in the consolidated results of operations for these hotels.

Note 2. Basis of Presentation

SAB Topic 5-J states that a purchase transaction that results in an entity becoming substantially wholly owned establishes a new basis of accounting, commonly referred to as “push down accounting.”  Push down accounting is required when greater than 95% of the entity is acquired.  Accordingly, such new basis should be recorded in the financial statements of the acquired company, in this case the Operating Partnership. The application of push down accounting represents the termination of the old accounting entity and the creation of a new one.  As such, the Operating Partnership’s Consolidated Statements of Operations and Cash Flows present the Operating Partnership’s results prior to the merger, referred to as the Pre-Merger. For all disclosures in these notes to the consolidated financial statements, unless specified, the disclosures apply to both the Pre-Merger Partnership and the Post-Merger Partnership.

Note 3. Summary of Significant Accounting Policies

Principles of Consolidation.  The consolidated financial statements include the accounts of the Operating Partnership and each of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated.

Use of Estimates.  The Operating Partnership has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

Fair Value of Financial Instruments.  The Operating Partnership’s financial instruments include rents receivable, accounts payable, other accrued expenses and mortgage loans payable. The fair values of these financial instruments, except for the mortgage loans payable are not materially different from their carrying or contract values. The carrying values of the Operating Partnership’s borrowings are estimated to be above fair value by approximately $0.9 million due to changes in comparable interest rates.

Investment in Hotel Properties.  Hotel properties are recorded at historical cost and are depreciated using the straight-line method

F-7

over estimated useful lives of 40 years for buildings and improvements and three to seven years for furniture and equipment. Repairs and maintenance costs are charged to expense as incurred. When the hotels or equipment are sold, the related cost and accumulated depreciation will be removed from the accounts and any gain or loss from sale will be reflected as income or expense.

Impairment of Long-Lived Assets. Long-lived assets are tested for recoverability at least annually or whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The assessment is based on the carrying amount of the asset at the date it is tested for recoverability.  An impairment loss is recognized when the carrying amount of a long-lived asset exceeds its fair value.  If impairment is recognized, the adjusted carrying amount of a long-lived asset is its new cost basis.

Cash and Cash Equivalents.  The Operating Partnership considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  Cash and cash equivalents consist of demand deposits at commercial banks and money market funds. Cash accounts maintained on behalf of the Operating Partnership in demand deposits at commercial banks and money market funds may exceed federally insured levels; however, the Operating Partnership has not experienced any losses in such accounts. Management believes the Operating Partnership is not exposed to any significant credit risk on cash and cash equivalents.

Certain amounts of cash are restricted for real estate taxes, insurance premiums, maintenance and replacement of furniture, fixtures, and equipment at the Operating Partnership’s various hotel Properties.  These amounts have been separately classified as restricted cash in the accompanying consolidated balance sheets.

Deferred Expenses.  Loan costs incurred in connection with securing financing have been capitalized and are being amortized over the terms of the loans using the straight-line method, which approximates the effective interest method.

Earnings Per Unit.  Basic earnings per unit is calculated based upon the weighted average number of units outstanding during each year, and diluted earnings per unit is calculated based upon the weighted average number of units outstanding plus potentially dilutive units.

Reclassification.  Certain items in the prior years’ consolidated financial statements have been reclassified to conform with the 2003 presentation.  These reclassifications had no effect on partners’ capital or net income (loss).

Revenue Recognition.  Revenues are recognized when rooms are occupied and the services have been performed.  Cash received from customers for events occurring after the end of each respective year have been recorded as deposits and is included in accounts payable and accrued expenses in the accompanying consolidated financial statements. In accordance with Staff Accounting Bulletin (SAB) 101, lease revenue is recognized as income after certain specific annual hurdles have been achieved by the lessee in accordance with the provisions of the lease agreements.

Income Taxes.  The Operating Partnership leases all but ten of its hotels to wholly-owned taxable REIT subsidiaries that are subject to federal and state income taxes. The Operating Partnership accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” Under SFAS 109, the Operating Partnership accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses and tax-credit carry forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Debt Extinguishment and Swap Termination Costs.  The Operating Partnership has elected to adopt the provisions of SFAS 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB No. 13, and Technical Corrections,” as of January 1, 2002. SFAS 145 rescinds the provisions of SFAS 4 that would have required the loss on the extinguishments of debt of $6.9 million (excludes the $3.2 million swap termination costs) to be reported net of tax as an extraordinary item. Accordingly, these costs are included in debt extinguishment and swap termination costs in the accompanying statements of operations.

F-8

Derivative Instruments and Hedging Activities.  The Operating Partnership utilizes derivative instruments to partially offset the effect of fluctuating interest rates on the cash flows associated with its variable-rate debt. The Operating Partnership minimizes these risks by following established risk management policies and procedures including the use of derivatives. The Operating Partnership does not enter into or hold derivatives for trading or speculative purposes.  The Operating Partnership records all derivative instruments on the balance sheet at fair value.  On the date the Operating Partnership enters into a derivative contract, the derivative is designated a hedge to the exposure to variable cash flows of a forecasted transaction (referred to as a cash flow hedge).  When the Operating Partnership hedges variability of cash flows related to a variable-rate asset or liability or a forecasted transaction, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently recognized in operations in the periods in which earnings are impacted by the variability of the cash flows of the hedged item or forecasted transaction.  The ineffective portion of the gain or loss is reflected in earnings.

Segment Information.  SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” requires the disclosure of selected information about operating segments. Based on the guidance provided in the standard, the Operating Partnership has determined that its business is conducted in one operating segment.

Recent Accounting Pronouncements.  In April 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“FASB 149”).  FASB 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  The Operating Partnership adopted FAS 149 in the year ended December 31, 2003, and it did not have a material impact on the Operating Partnership’s results of operations.

In May 2003, the FASB issued FASB Statement No.150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“FASB 150”).  FASB 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  FASB 150 requires issuers to classify certain financial instruments as liabilities (or assets in some circumstances) that previously were classified as equity.  FASB 150 requires that minority interests for majority owned finite lived entities be classified as a liability and recorded at fair market value.  Effective October 29, 2003, the FASB deferred implementation of FASB 150, as it applies to minority interests of finite lived Partnerships.

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003) (“FIN 46R”), “Consolidation of Variable Interest Entities”.  This Interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved.  The primary beneficiary of a variable interest entity is the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable interests, which are the ownership, contractual, or other pecuniary interests in an entity that change with changes in the fair value of the entity’s net assets excluding variable interests.  Prior to FIN 46R, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests.  Application of FIN 46R is required in financial statements of public entities that have interests in variable interest entities for periods ending after March 15, 2004.  The Operating Partnership has no unconsolidated variable interest entities.

Note 4. Acquisition of RFS and the Operating Partnership

On July 10, 2003, RFS and the Operating Partnership were acquired by subsidiaries of CNL for approximately $383 million in cash ($12.35 per share or limited partnership unit) (the “RFS-CNL Transaction”), excluding the 1.0 million shares of RFS stock owned by CNL at the date of the RFS-CNL Transaction.  Upon consummation of this transaction, RFS was merged with and into a subsidiary of CNL and RFS ceased to exist as a separate corporate entity.  Further, upon consummation of this transaction, a subsidiary of CNL was merged with and into the Operating Partnership and the Operating Partnership continues to exist as a separate entity and as an indirect wholly owned subsidiary of CNL.

The Pre-Merger Partnership incurred costs of approximately $20.6 million as a result of the RFS-CNL Transaction.  The primary components of these costs are as follows: severance of $11.6 million, amortization of $1.5 million related to the acceleration of unvested restricted stock, advisory fees of $4.5 million, additional management fees of $1.9 million and miscellaneous other costs of $1.1 million.

F-9

The total cash consideration paid by CNL in connection with its acquisition of RFS is as follows (in thousands, except per unit amounts):

Cash paid for 31,941,851 units at $12.35 per unit	$	394,482
Less: cash funded by borrowings from the Operating Partnership	(50,971		)
Plus: Transaction costs paid by CNL	19,649
Total	$	363,160

The following sets forth the fair value of the assets and liabilities of the Operating Partnership, after push down accounting has been applied, as of the consummation of the RFS-CNL Transaction:

	July 10, 2003
ASSETS
Investment in hotel properties, net	$	683,802
Real estate held for sale	29,550
Cash and cash equivalents	5,612
Restricted cash	9,069
Accounts receivable	5,442
Deferred expenses, net	5,544
Other assets	8,595
Deferred income taxes	24,505
Total assets	$	772,119
LIABILITIES
Accounts payable and accrued expenses	$	23,207
Bridge loan	101,000
Mortgage notes payable	160,731
Senior notes payable	124,021
Total liabilities	$	408,959

The following presents unaudited pro forma results of operations for the years ended December 31, 2003 and 2002, respectively, of the Operating Partnership (excluding revenue of $6,024 and expenses of $2,362 million related to the five properties contributed by CNL) as if the RFS-CNL Transaction had occurred as of January 1, 2003 and 2002, respectively (in thousands, except per unit data):

	Year Ended December 31,
	2003			2002
Revenue	$	178,768		$	185,938
Expenses	186,059			192,345
Net loss	(7,291		)	(6,407		)
Basic and diluted loss per unit	$	(0.23	)	$	(0.21	)
Weighted average number of units outstanding – basic and diluted	31,942			29,905

F-10

Note 5. Investment in Hotel Properties

Investment in hotel properties consists of the following at December 31, 2003, and 2002, respectively (in thousands):

	Post-Merger Partnership			Pre-Merger Partnership
	Dec. 31, 2003			Dec. 31, 2002
Land	$	94,182		$	69,639
Building and improvements	681,280			545,557
Furniture and equipment	57,381			124,496
Capital improvements in progress	6,445			12,002
	839,288			751,694
Accumulated depreciation	(22,632		)	(158,405		)
	$	816,656		$	593,289

Note 6. Debt

The following details the Operating Partnership’s debt outstanding at December 31, 2003 and 2002 and the net book value of the collateral pledged against the debt at December 31, 2003 (dollar amounts in thousands):

			Collateral			Post-Merger Partnership		Pre-Merger Partnership
	Interest Rate		# of Hotels	Net Book Value
		Maturity				2003		2002
						(Note A)
Variable Rate Debt:
2003 CMBS	LIBOR + 189bp	December 2006	26	$	297,318	$	130,000
2003 Mezzanine	LIBOR + 465bp (B)	December 2006	Note B	Note B		35,000
Line of Credit	LIBOR + 250bp	July 10, 2003	24					$	6,950
Fixed Rate Debt:
Senior Notes	9.75%	March 2010		—		81,674		125,000
Mortgage	7.83%	December 2008	10	123,648		90,566		90,600
Mortgage	8.22%	November 2007	1	17,115		17,935		17,960
Mortgage	8.00%	August 2010	8	107,655		50,853		50,719
				$	545,736	$	406,028	$	291,229

Note A – In applying purchase accounting to the Operating Partnership’s debt instruments, each facility was adjusted to its fair value. Fair value is calculated based on discounted cash flows using a discount rate equal to the Operating Partnership’s new borrowing rate. Except for the 2003 CMBS and the 2003 Mezzanine Loan, these values include a “step-up” to the fair market value. This step-up is accreted over the term of the facility as a reduction of interest expense.

Note B – The minimum interest rate on the 2003 Mezzanine note payable is 6.65%, including the spread on LIBOR of 465 basis points. Also, the 26 hotels collateralizing the 2003 CMBS note payable also serve as collateral on the 2003 Mezzanine note payable.

In connection with the RFS-CNL Transaction, the Operating Partnership entered into a $320 million Credit Agreement with Bank of America dated July 10, 2003 (“Bridge Loan”).  On July 10, 2003, as part of the RFS-CNL Transaction, the Line of Credit was terminated and replaced with the Bridge Loan, of which only $101.0 million was drawn by the Operating Partnership to help fund the merger. During the third quarter of 2003, the Operating Partnership borrowed $88.0 million under the Bridge Loan to repurchase $41.8 million of Senior Notes ($42.2 million book value) and to make a distribution of $44.0 million to CNL.  On September 29, 2003, CNL contributed approximately $80.0 million to the Operating Partnership to fund the repayment of $88.0 million under the Bridge Loan.  The Operating Partnership refinanced the Bridge Loan with the issuance of a $130.0 million, long-term Commercial Mortgage Backed Security facility on December 4, 2003 (“2003 CMBS”).  A portion of the proceeds from issuance of the 2003 CMBS were used to repay in full the outstanding balance under the Bridge Loan of approximately $101.0 million.

F-11

On December 4, 2003, a new wholly owned subsidiary of the Operating Partnership, Rose SPE 1, L.P. issued the 2003 CMBS.  The 2003 CMBS is collateralized by 26 hotels with a net book value of approximately $297.3 million at December 31, 2003. The 2003 CMBS has a variable interest rate of thirty-day LIBOR plus 189 basis points.  The interest rate was approximately 3.0% at December 31, 2003. The 2003 CMBS matures in December, 2006.  Monthly payments of approximately $0.9 million include interest charges, reserves for the replacement of equipment, and reserves for real estate taxes and insurance. There are no regular monthly principal payments. The 2003 CMBS contain provisions restricting the sale of collateral, and is prepayable subject to various prepayment penalties, yield maintenance, or defeasance obligations.

On December 23, 2003, Rose SPE 1, L.P. issued an additional $35.0 million long-term facility (“2003 Mezzanine Loan”). The 2003 Mezzanine Loan is also collateralized by the 26 2003 CMBS hotels. The 2003 Mezzanine Loan has a variable interest rate of thirty-day LIBOR plus 465 basis points with a floor rate of 6.65%.  The interest rate was approximately 6.65% at December 31, 2003 since the adjusted LIBOR rate was only 5.8% at December 31, 2003. The 2003 CMBS matures in December, 2006.  Interest only payments of approximately $0.2 million are made on a monthly basis. A portion of the proceeds from issuance of the 2003 Mezzanine Loan was used to make a $30.0 million distribution to CNL.

The 2003 CMBS and the 2003 Mezzanine Loan contain primarily one restrictive financial covenant, which stipulates that consolidated Partners’ Capital will not be less than the sum of $150.0 million plus the cost basis of the 26 hotels comprising the Collateral Pool, minus $165.0 million (representing the sum of the 2003 CMBS and the 2003 Mezzanine Loan borrowings).  At December 31, 2003, this base value was $287.7 million as compared to Partners’ Capital of approximately $501.9 million. At December 31, 2003, the Operating Partnership was in compliance with all covenants under the 2003 CMBS and 2003 Mezzanine Loan.

From January 1 to July 10, 2003, the interest rate on the Line of Credit was 250 basis points above LIBOR. The Line of Credit was collateralized by first priority mortgages on 24 hotels that restricted the transfer, pledge or other hypothecation of the hotels.  The Line of Credit contained various financial covenants including the maintenance of a minimum net worth, minimum debt and interest coverage ratios, and total indebtedness and liability limitations. On July 10, 2003, the outstanding balance was repaid and the Line of Credit was terminated in connection with the RFS-CNL Transaction.  At July 10, 2003, the Operating Partnership was in violation of certain financial covenants under the Line of Credit.  All debt issuance costs pertaining to the Pre-Merger Partnership of approximately $7.1 million were expensed under purchase accounting guidelines.

On February 26, 2002, the Operating Partnership sold $125 million of Senior Notes (“Senior Notes”). The Senior Notes mature March 1, 2012 and bear interest at a rate of 9.75% per year, payable semi-annually, in arrears, on March 1 and September 1 of each year. The Senior Notes are unsecured obligations and are guaranteed by certain subsidiaries. The Senior Notes contain covenants that could, among other things, restrict the Operating Partnership’s ability to borrow money, pay distributions to CNL, make investments, and sell assets or enter into mergers and consolidations. The Partnership was in compliance with these covenants at December 31, 2003. See Note 15 to the Consolidated Financial Statements for additional detail regarding the Senior Notes and the guarantors thereof. In February 2003, the Operating Partnership retired $3.8 million of Senior Notes. As a result of the redemption of the $3.8 million Senior Notes, the Operating Partnership expensed $122 thousand in unamortized debt issuance costs and $29 thousand of costs related to acquiring the Senior Notes.  In August 2003, the Operating Partnership retired $41.8 million of Senior Notes.

The Operating Partnership’s other borrowings are nonrecourse to the Operating Partnership and contain provisions allowing for the substitution of collateral, upon satisfaction of certain conditions. Most of the mortgage borrowings are prepayable and subject to various prepayment penalties, yield maintenance, or defeasance obligations. At December 31, 2003 and 2002, approximately 59% and 98% of the Operating Partnership’s debt is fixed at an average interest rate of 8.6% and 8.7%, respectively.

Certain of the Operating Partnership’s loan agreements contain net worth or debt service coverage ratio requirements.  Violation of these covenants could potentially trigger penalties, including cash management arrangements whereby the lenders or their designated loan servicers capture operating cash from certain hotels and administer the payment of property taxes, insurance, debt service and expenditures for other obligations. The Operating Partnership was in compliance with all covenants at December 31, 2003.

F-12

Scheduled principal payments of debt obligations at December 31, 2003 are as follows (in thousands):

	Amount
2004	$	3,680
2005	3,953
2006	169,217
2007	20,455
2008	83,044
Thereafter	125,679
	$	406,028

Note 7. Income Taxes

The components of income tax benefit for the years ended December 31, 2003, 2002 and 2001 are as follows:

	Post-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership
	July 11 to Dec. 31, 2003			January 1 to July 10, 2003			January 1 to Dec. 31, 2002			January 1 to Dec. 31, 2001
Current:
State										$	20
Deferred:
Federal	$	(1,321	)	$	(1,546	)	$	(1,096	)	(24,734		)
Benefit from income taxes	$	(1,321	)	$	(1,546	)	$	(1,096	)	$	(24,714	)

The deferred benefit from income taxes and related deferred tax asset was calculated using an effective tax rate of 38% applied to the loss of the TRS Lessees, adjusted for temporary differences related mainly to the Hilton lease termination transaction and operating losses.  Significant components of the Operating Partnership’s gross deferred tax asset, at December 31, 2003, 2002 and 2001 are as follows:

	Post-Merger Partnership		Pre-Merger Partnership		Pre-Merger Partnership
	Dec. 31, 2003		Dec. 31, 2002		Dec. 31, 2001
Lease termination	$	15,192	$	19,583	$	22,228
Operating loss carryforwards	10,059		6,175		2,470
Other	575		72		36
Deferred tax asset	$	25,826	$	25,830	$	24,734

Upon the consummation of the RFS-CNL Transaction, the TRS Lessees are subject to Section 382 of the Internal Revenue Code, which limits the amount of taxable income after the change of ownership that may be offset by net operating loss carryforwards and certain built-in losses attributable to periods prior to the ownership change.  As a result of Section 382, the deferred tax asset of $27.4 million was reduced by $2.9 million in connection with purchase accounting.

The Operating Partnership’s operating loss carryforwards expire in 2021 ($2.5 million), 2022 ($3.7 million) and 2023 ($5.2 million). The Operating Partnership believes the TRS Lessees will generate sufficient future taxable income to realize the net deferred tax asset. There was no valuation allowance at December 31, 2003 and 2002, respectively.

F-13

Note 8. Joint Venture

The Operating Partnership, through one of its wholly owned indirect subsidiaries, participates in a joint venture partnership, named Wharf Associates, which owns the San Francisco Hilton Fisherman’s Wharf. The Operating Partnership owns 75% of Wharf Associates, and an independent third party, Wharf Enterprises, Inc. (“WEI”), owns the remaining 25%. At December 31, 2003 and December 31, 2002, respectively, the liability for WEI’s minority interest was valued at $0 and $2,042, respectively, and is recorded in Accounts Payable and Accrued Expenses on the accompanying Consolidated Balance Sheet.

Note 9. Partners Capital. Pre-Merger Partnership

Operating Partnership Units.  Prior to the RFS-CNL Transaction, RFS was the sole general partner of the Operating Partnership and was obligated to contribute the net proceeds from any issuance of its equity securities to the Operating Partnership in exchange for units of partnership interest (“Units”) corresponding in number and terms to the equity securities issued. The Operating Partnership could also issue Units to third parties in exchange for cash or property, and Units so issued to third parties were redeemable at the option of the holder for a like number of shares of common stock of the Company, or cash, or a combination thereof, at the election of the Company.

The ownership of the Operating Partnership is as follows at December 31, 2002:

	Common Units	%
2002
RFS Hotel Investors, Inc. (General Partnership Units)	28,466,461	92.05	%
Third parties (Redeemable Limited Partnership Units)	2,458,705	7.95	%
Total	30,925,166	100.00	%

General Partnership Units.  On May 8, 2003, RFS sold 1.0 million shares of common stock and contributed the net proceeds to the Operating Partnership in exchange for 1.0 million units. Proceeds of approximately $12.4 million from the sale of the common stock were used to reduce the outstanding balance on the line of credit.

On June 4, 2002, RFS sold 2.0 million shares of common stock and contributed the net proceeds to the Operating Partnership in exchange for 2.0 million common units. Proceeds of approximately $24.6 million (net of $0.1 million expenses), together with available cash, were used to redeem the Operating Partnership’s 250,000 outstanding Series B preferred units from RFS.

On February 20, 2002, RFS sold 1.15 million shares of common stock and contributed the net proceeds to the Operating Partnership in exchange for 1.15 million units. Proceeds of approximately $14.2 million (net of $0.2 million expenses) from the sale of the common stock were used to reduce the outstanding balance on the line of credit.

Redeemable Limited Partnership Units.  The Operating Partnership issued limited partnership units to third parties in exchange for cash or property. The outstanding units of limited partnership interest in the Operating Partnership were redeemable at the option of the holder for a like number of shares of common stock of RFS, or cash, or a combination thereof, at the election of RFS. Due to these redemption rights, these limited partnership units were excluded from partners’ capital and were included in redeemable limited partnership units and measured at redemption value as of the end of the periods presented based on the closing market price of RFS’s common stock at December 31, 2002, which was $10.86.

Preferred Units.  Under the partnership agreement between RFS and the Operating Partnership, the Operating Partnership was authorized to provide for the issuance of up to 5 million Preferred Units in one or more series, to establish the number of units in each series and to fix the designation, powers, preferences and rights of each such series and the qualifications, limitations or restrictions thereof.

In 1996, the Operating Partnership issued to one of the lessees 973,684 units of Series A Convertible Preferred Units (the “Series A Preferred Units”). The Operating Partnership redeemed the Series A Preferred Units on January 1, 2001 for cash consideration of $13.0 million, which resulted in a gain on redemption of $5.1 million that is included in net income (loss) applicable to unitholders in 2001.

F-14

On January 2, 2001, the Operating Partnership issued 250 thousand shares of non-convertible mandatorily redeemable Series B Preferred Units for $25 million prior to fees and expenses of approximately $1 million. Holders of the Series B Preferred Units were entitled to receive quarterly cash dividends commencing March 31, 2001 at an annual rate of 12.5%. If not redeemed prior to January 1, 2006, the dividend rate would increase 2.0% per annum up to a maximum rate of 20.5%. The Operating Partnership could redeem units of the Series B Preferred Units in whole but not in part, on or after December 31, 2003 at the original price of $25 million. If the units were redeemed before December 31, 2003, the redemption price was at varying amounts over the original unit price. The units were mandatorily redeemable by the holders at varying premiums over the original unit price upon a change of control, dissolution, or winding up of the Operating Partnership.

On June 28, 2002, the Operating Partnership repurchased all of its Series B preferred units from RFS for an aggregate purchase price of $25,850,000, excluding dividends. Correspondingly, RFS repurchased all of its Series B Preferred Stock from an independent third party for an aggregate purchase price of $25,850,000, excluding dividends. In the second quarter of 2002, the Operating Partnership expensed $1.9 million in costs associated with the repurchase, comprised of $0.9 million related to prepayment costs and $1.0 million in issuance costs.

When RFS, the general partner, repurchased its outstanding common stock, the Operating Partnership repurchased a matching number of units held by RFS at an equal price. The Board of Directors of RFS approved a stock repurchase program to buy back up to 3 million shares of common stock on the open market subject to certain market conditions and other factors. During 2000, RFS repurchased 409 thousand shares at an average price per share of $10.88 or $4.4 million which was recorded as a reduction to partners’ capital as a result of the redemption of units held by RFS to fund the repurchase, bringing the total number of shares repurchased under the program to 576 thousand.

Note 10. Partners Capital. Post-Merger Partnership

Operating Partnership Units. In connection with the RFS-CNL Transaction, two wholly owned subsidiaries of CNL, CNL Rose Acquisition Corp. and CNL Rose GP Corp., acquired all of the 29,519,999 general partnership units and all of the 2,421,852 redeemable limited partnership units.  At December 31, 2003, CNL Rose Acquisition Corp. and CNL Rose GP Corp. owned 99.9% and 0.1% of the outstanding Operating Partnership’s units, respectively.

Capital Contributions.  Concurrent with the consummation of the RFS-CNL Transaction, CNL contributed five hotels to the Operating Partnership with net assets of approximately $131.6 million as follows:

ASSETS
Investment in hotel properties, net	$	131,414
Restricted cash	1,854
Accounts receivable	320
Other assets	296
Total assets	$	133,884
LIABILITIES
Accounts payable and accrued expenses	$	2,241
Total liabilities	$	2,241

The five hotels are a Residence Inn in Orlando, Florida, a Marriott Courtyard in Edison, New Jersey, a Hyatt Regency in Coral Gables, Florida, a Wyndham in Billerica, Massachusetts and a Wyndham in Denver, Colorado.  The two Wyndham properties are triple net lease properties, while the other three properties are leased to taxable REIT subsidiaries owned by CNL but not owned by the Operating Partnership. For the period July 11, 2003 to December 31, 2003, the Operating Partnership recognized approximately $6.0 million of revenue and $2.4 million of depreciation on these contributed properties.

On August 25, 2003, the Operating Partnership received a capital contribution of $190 thousand from CNL to help fund costs associated with the repurchase of the Senior Notes.  On August 29, 2003, in accordance with the terms of the indenture governing the Senior Notes, the Operating Partnership repurchased from existing holders approximately $41.8 million of its Senior Notes.  On September 29, 2003, CNL made a $77.8 million capital contribution to the Operating Partnership, the proceeds of which were combined with the Operating Partnership’s available cash to reduce the balance outstanding on the Bridge Loan by $88.0 million.

Capital Distributions.  On August 25, 2003, $44 million was distributed to CNL. On December 31, 2003, the Operating

F-15

Partnership used a portion of the proceeds from the issuance of the 2003 Mezzanine Loan to distribute $30 million to CNL.

Note 11. Commitments and Contingencies

On May 13, 2003, A. Bruce Chasen, as class representative, filed a putative class action lawsuit in the Circuit Court of Shelby County, Tennessee, 30^th Judicial District against RFS, RFS’s directors and CNL (the “Chasen Complaint”).  On June 6, 2003, the Chasen Complaint was amended.  The amended Chasen Complaint alleges, among other things, that (i) the merger consideration to be received by RFS’s shareholders is significantly less than the intrinsic value of RFS, (ii) the RFS directors breached their fiduciary duties due to shareholders on a variety of grounds including failing to ascertain the true value of RFS, failing to determine whether there were any other bidders for RFS, and failing to avoid certain alleged conflicts of interest shared by members of the RFS board of directors and its financial advisor, (iii) CNL aided and abetted the RFS board of directors in connection with their breach of fiduciary duties, (iv) the RFS board of directors violated portions of the Tennessee Investor Protection Act, and (v) the RFS proxy statement is false and misleading.  Among other relief, the amended Chasen Complaint seeks certification of the class action, an injunction enjoining RFS and CNL from completing the merger, monetary damages in an unspecified amount, the payment of attorney’s fees, and rescissory damages.  On July 1, 2003, RFS and CNL filed an answer to the amended Chasen Complaint setting forth an affirmative defense and its general denials of the allegations set forth therein.  The plaintiff’s motion for a temporary restraining order for purposes of enjoining the transaction, was denied by the Circuit Court of Shelby County, Tennessee, 30^th Judicial District on July 8, 2003. Based upon the information currently available to the Operating Partnership and CNL, the Operating Partnership believes the allegations contained in the amended Chasen Complaint are without merit and it is the Operating Partnership’s understanding that CNL intends to vigorously defend the action, and therefore, a liability was not accrued.  The Operating Partnership and CNL are planning to file a motion to dismiss the allegations in the amended Chasen Complaint. If the motion is not successful, it is expected that the case will proceed to trial.

On August 26, 2002, Carmel Valley, LLC filed a lawsuit against RFS and some of its subsidiaries in the Superior Court of the State of California, for the County of San Diego (the “Carmel Valley Complaint”).  The Operating Partnership is a party to a Carmel Valley Complaint which claims damages relating to a dispute over a parcel of land located adjacent to one of its hotels.  The Operating Partnership has unsuccessfully attempted to mediate this case.  At this time, we believe that the damages claimed lack sufficient factual support and will continue to vigorously defend the action, and therefore, a liability was not accrued. However, it is possible that the Operating Partnership could incur losses if the plaintiff ultimately prevails.  The plaintiff is seeking monetary damages of up to $0.7 million.  The Operating Partnership and CNL have recently filed certain motions to dismiss which are being considered by the Court.  If the motions are not successful, it is expected that the case will proceed to trial.

From time to time the Operating Partnership may be exposed to litigation arising from the operations of its business.  At this time, management does not believe that resolution of these matters will have a material adverse effect of the Operating Partnership’s financial condition or results of operation.

The Operating Partnership maintains comprehensive insurance on each of its hotels, including liability, fire and extended coverage, of the type and amount the Operating Partnership believes is customarily obtained for or by hotel owners. Some of the Operating Partnership’s insurance policies are written, implemented and monitored by the third party companies who manage the Operating Partnership’s hotels and the Operating Partnership does not have the ability to actively monitor these programs and claims thereon. All 10 of the Operating Partnership’s hotels in California are located in areas that are typically subject to more earthquake activity than in other locations in the United States. These hotels are located in areas of high seismic risk and some were constructed under building codes which were less stringent with regard to earthquake related requirements. An earthquake could render significant uninsured damage to the hotels. Additionally, areas in Florida, where eight of the Operating Partnership’s hotels are located, may experience hurricane or high-wind activity. The Operating Partnership has earthquake and windstorm insurance policies on its hotels. However, various types of catastrophic losses, like earthquakes and floods may not be fully insurable or may not be economically insurable. With respect to the earthquake insurance policies, in addition to the applicable deductibles under the earthquake insurance policies, the Operating Partnership is self-insured for any losses in excess of $40 million per earthquake. The windstorm insurance policies are of the type and amount the Operating Partnership believes is customarily obtained for or by hotel owners.  The Operating Partnership also maintains terrorism insurance, which the Operating Partnership believes currently insures against losses resulting from a terrorist attack. In the event of a substantial loss, insurance coverage may not be able to cover the full current market value or replacement cost of the Operating Partnership’s lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also affect the Operating Partnership’s ability to replace or renovate a hotel after it has been damaged or destroyed.

F-16

As of December 31, 2003, the Operating Partnership has a cash deposit of $3.0 million, held in escrow, that serves as collateral on the worker’s compensation plan for the former hotel employees of Flagstone. This cash deposit is included on the Consolidated Balance Sheet in Restricted Cash. This deposit is required by the insurance carrier to be maintained until the outstanding claims under the plan have developed and there are adequate reserves to cover the claims.  There have been no withdrawals made from the escrow deposit.

As a result of the RFS-CNL Transaction, the respective hotel franchisors have issued product improvement plans on most of the Operating Partnership’s hotels and require that the Operating Partnership complete these product improvement plans over the next several years. The Operating Partnership expects the total cost of these product improvement plans will be approximately $40 million.

During 2003, the Operating Partnership received rental income from ten hotels leased to third parties, three of which were leased to a taxable REIT subsidiary owned by CNL, but not owned by the Operating Partnership, under leases which expire in 2007 (2 hotels), 2008 (4 hotels), 2009 (2 hotels) and 2015 (2 hotels). During 2002 and 2001, the Operating Partnership received rental income from five hotels leased to third parties.  Minimum future rental income (base rents) due the Operating Partnership under these noncancelable operating leases at December 31, 2003, is as follows (in thousands):

Year	Amount
2004	$	12,614
2005	12,614
2006	12,614
2007	12,170
2008	5,935
2009 and thereafter	29,743
	$	85,690

Lease revenue is based on a percentage of room revenues, food and beverage revenues and other revenues of the hotels. On some of its third party leases, both the base rent and the threshold room revenue in each lease computation are adjusted annually for changes in the Consumer Price Index (“CPI”). The adjustment is calculated at the beginning of each calendar year. The CPI adjustments made in January 2003 and 2002 were 2.3% and 1.6%, respectively.

The Operating Partnership may terminate any lease agreement with respect to a hotel property upon the sale of a hotel property in exchange for a termination payment to the lessee. Under five of the ten hotel leases, the Operating Partnership is obligated to pay the costs of real estate taxes, property insurance, maintenance of underground utilities and structural elements of the Hotels, and to set aside a portion of the hotels’ revenues to fund capital expenditures for the periodic replacement or refurbishment of furniture, fixtures and equipment required for the retention of the franchise licenses with respect to the hotels.  For the other five hotel leases, these are leased to third-party tenants on a “triple-net” basis, whereby the tenant is generally responsible for all operating expenses relating to the hotel, including property taxes, insurance, and maintenance and repairs.

The Operating Partnership’s hotels are operated under various management agreements with third party managers that call for base management fees, which generally range from 3% to 5% of hotel revenues and have an incentive management fee provision related to the hotel’s profitability. The management agreements generally require us to set aside 3% to 5% of hotel revenues in FF&E Reserve accounts to be used for the replacement of furniture, fixtures and equipment. The management agreements generally have terms from 10 to 20 years and have renewal options.

F-17

Note 12. Derivative Instruments

On December 4, 2003 and December 23, 2003, respectively, the Operating Partnership purchased two interest rate caps that limit the LIBOR portion of the floating interest rates on the 2003 CMBS and the 2003 Mezzanine Loan to 5.0%, before the spread of 189 basis points and 465 basis points, respectively. The Company paid a $1.5 million premium to enter into these agreements. At December 31, 2003, the Operating Partnership has net unrealized holding losses related to these two interest rate cap agreements of $0.4 million, which is included in other comprehensive income (loss). The net asset of $1.1 million is included in other assets on the consolidated balance sheet. The fair values of the interest rate instruments are estimated by obtaining quotes from brokers and are the estimated amounts that the Operating Partnership would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates and other relevant factors.

Note 13. Discontinued Operations

In connection with the RFS-CNL Transaction, the Operating Partnership decided to sell six non-strategic hotels, and therefore, these hotels are classified as real estate held for sale.  In November 2002, the Operating Partnership sold its Comfort Inn in Fort Mill, South Carolina for $3.25 million in cash, resulting in a loss on sale of approximately $3.8 million. Under FAS 144, this loss is included in discontinued operations. Depreciation is not recorded once real estate has been identified for sale. Accordingly, no depreciation was recorded on the six hotels that were classified as real estate held for sale. Had the Post-Merger Operating Partnership recorded depreciation on the six hotels, depreciation would have increased by $0.9 million.

The financial results for these hotel Properties are reflected as discontinued operations in the accompanying consolidated financial statements. The operating results of discontinued operations were as follows for the years ended December 31 2003, 2002 and 2001 are shown below:

	Post-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership
	July 11 to Dec. 31, 2003			January 1 to July 10, 2003			January 1 to Dec. 31, 2002			January 1 to Dec. 31, 2001
Hotel revenue	$	5,700		$	6,197		$	14,550		$	15,606
Hotel operating costs	(4,478		)	(4,552		)	(10,025		)	(10,521		)
Depreciation				(1,038		)	(2,337		)	(2,284		)
Income from operations	1,222			607			2,188			2,801
Loss on sale of discontinued operations							(3,840		)
Earnings (losses) from discontinued operations	$	1,222		$	607		$	(1,652	)	$	2,801

Note 14. Stock-Based Compensation Plans. Pre-Merger Partnership

RFS sponsored a Restricted Stock and Stock Option Plan (the “Plan”) that provided for the grant of stock options to purchase a specified number of shares of common stock (“Options”) and grants of restricted shares of common stock (“Restricted Stock”). Upon issuance of any stock, RFS was obligated to contribute the proceeds to the Operating Partnership in exchange for an equal number of Operating Partnership units. Under the Plan, approximately 2.3 million shares of common stock, of which 650 thousand shares were restricted stock, were available for awards to the officers and key employees of the Operating Partnership and 675 thousand shares of common stock, of which 120 thousand shares were restricted stock, were available for awards to directors of the Operating Partnership who were not officers or employees. Options issued under the plan had a maximum term of ten years from the date of grant. The exercise price of the options was determined on the date of each grant. Restricted shares vested between one and five years based on each individual award and these shares had voting and dividend rights from the date of grant. Upon consummation of the RFS-CNL Transaction, all unvested Options and Restricted Stock immediately vested to the employees and directors. The Operating Partnership paid approximately $0.8 million to employees and directors for “in the money” stock options (i.e., where the exercise price of the stock option was less than the $12.35 sale price). Approximately 213,000 shares of Restricted Stock with a sales value of approximately $2.6 million vested upon the RFS-CNL Transaction.

F-18

A summary of the RFS’s stock options under the Plan as of July 10, 2003, December 31, 2002 and 2001, and the changes during the periods are presented below (in thousands, except per share data):

	Pre-Merger Partnership				Pre-Merger Partnership				Pre-Merger Partnership
	Jan. 1 to July 10, 2003				Jan. 1 to Dec. 31, 2002				Jan. 1 to Dec. 31, 2001
	Number of Shares Underlying Options		Weighted Average Exercise Price		Number of Shares Underlying Options		Weighted Average Exercise Price		Number of Shares Underlying Options		Weighted Average Exercise Price
Outstanding at beginning of period	1,328		$	12.25	1,388		$	12.76	1,207		$	13.43
Granted					280		13.15		680		11.47
Exercised	(1,328	)	12.25		(89	)	11.99		(343	)	12.30
Forfeited					(251	)	16.14		(156	)	13.72
Outstanding at end of period	0				1,328		$	12.25	1,388		$	12.76
Exercisable at end of period	0		$	0	581		$	12.45	519		$	14.28
Weighted-average fair value			$	0			$	1.79			$	1.10
Price range of shares under option	$10.50 to $16.87				$10.50 to $16.87				$10.50 to $16.87

There were no grants of options made during 2003. The fair value of each option granted in 2002 and 2001 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: dividend of $1.00 for 2002 grants and $1.10 for 2001; volatility of 27.6% for 2002 grants and volatility of 26.7% for 2001 grants, risk-free interest rate of 4.9% for 2002 and 4.8% for 2001 and expected life of 6 years for 2002 and 2001.

Restricted Stock.  A summary of the status of RFS’s restricted stock grants under the Plan as of July 10, 2003, December 31, 2002 and 2001, and the changes during the periods are presented below (value is computed as the weighted average fair market value of the restricted stock at grant date):

	Pre-Merger Partnership			Pre-Merger Partnership				Pre-Merger Partnership
	Jan. 1 to July 10, 2003			Jan. 1 to Dec. 31, 2002				Jan. 1 to Dec. 31, 2001
	# Shares	Value		# Shares		Value		# Shares		Value
Outstanding at beginning of period	618,834	$	13.28	611,667		$	13.31	343,000		$	13.42
Granted, subject to vesting	10,500	$	10.86	10,500		$	11.38	270,000		$	13.11
Forfeited				(3,333	)	$	13.06	(1,333	)	$	11.88
Outstanding at end of period	629,334	$	13.24	618,834		$	13.28	611,667		$	13.31
Vested at end of period	629,334	$	13.24	380,169		$	13.43	314,000		$	13.65

The FASB issued SFAS No. 148 “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The Operating Partnership applied the fair value based method of accounting for stock-based employee compensation prospectively to all awards granted, modified, or settled beginning January 1, 2003.  As a result of the RFS-CNL Transaction, the Operating Partnership no longer has any stock-based employee compensation.  Had compensation cost for the Operating Partnership’s stock-based compensation plans been determined consistent with SFAS 123, the Operating Partnership’s net income (loss) and net income (loss) per unit would have been reduced to the pro forma amounts as indicated below:

F-19

	Pre-Merger Partnership			Pre-Merger Partnership			Pre-Merger Partnership
	Jan. 1 to July 10, 2003			Jan. 1 to Dec. 31, 2002			Jan. 1 to Dec. 31, 2001
Net income (loss) applicable to unitholders:
As reported	$	(21,869	)	$	(7,884	)	$	(12,870	)
Pro forma	$	(22,080	)	$	(8,372	)	$	(13,170	)
Basic and diluted earnings (loss) per unit:
As reported	$	(0.70	)	$	(0.26	)	$	(0.47	)
Pro forma	$	(0.71	)	$	(0.28	)	$	(0.48	)

Note 15. Supplemental Disclosure of Non-Cash Activities

In 2003:

i.The Pre-Merger Partnership allocated $3.6 million from Partners’ Capital to redeemable limited partnership units.

ii.The Pre-Merger Partnership issued 37 thousand general partnership units with a value of $0.4 million in exchange for 37 thousand redeemable limited partnership units.

iii.The Post-Merger Partnership, as part of the acquisition of the Operating Partnership by CNL, issued 2.4 million general partnership units to CNL with a value of $29.9 million in exchange for 2.2 million redeemable limited partnership units.

iv.CNL contributed to the Post-Merger Partnership net assets of approximately $131.6 million.

In 2002, the Pre-Merger Partnership:

i.Allocated $1.3 million from redeemable limited partnership units to Partners’ Capital.

ii.Recorded an expense of $1.1 million related to the issuance costs associated with the redemption of the Series B Preferred Units which was previously included in Partners’ Capital.

In 2001, the Pre-Merger Partnership:

i.Issued 103 thousand general partnership units with a value of $1.6 million in exchange for 103 thousand redeemable limited partnership units and issued 7 thousand general partnership units with a value of $0.1 million for an interest in a subsidiary partnership.

ii.Allocated $1.3 million from redeemable limited partnership units to Partners’ Capital.

iii.Recorded a liability of $3.2 million for the fair value of the interest rate swaps at December 31, 2001.

iv.Sold a hotel that closed on February 20, 2001 in which a loss and related liability of $1.0 million was recorded in the financial statements in 2000 as a non-cash transaction at December 31, 2000.

Note 16. Related Party Transactions

Certain officers of the Operating Partnership hold similar positions with CNL and its affiliates. These affiliates are by contract entitled to receive fees and compensation for services provided in connection with the acquisition, development, management and sale of the Operating Partnership’s assets. During 2003, the Operating Partnership paid approximately $15.5 million to affiliates of CNL in connection with reimbursements for acquisition costs incurred by CNL related to the RFS-CNL Transaction.

Affiliates of CNL provide various administrative services to the Operating Partnership, including services related to accounting; financial, tax and regulatory compliance reporting; due diligence and marketing; and investor relations, on a day to day basis. The Operating Partnership incurred costs of approximately $30 thousand for these services.

Included in other assets are amounts due from CNL and its affiliates of approximately $0.5 million for settlement of various operational items. These amounts are repaid in the ordinary course of business.

F-20

Note 17. Consolidating Financial Information of RFS Partnership, L.P.

RFS Leasing II, Inc., RFS Leasing VII, Inc., RFS Financing Partnership, L.P., RFS Financing Corporation and RFS Financing 2002, LLC, wholly-owned subsidiaries of the Operating Partnership (“Guarantor Subsidiaries”), have guaranteed on a full and unconditional basis, the payment of amounts due under the Operating Partnership’s Senior Notes. In addition, CNL Rose Acquisition Corp., the Operating Partnership’s parent company, has guaranteed on a full and unconditional basis, the payment of amounts due under the Operating Partnership’s Senior Notes. Other than its investment in the Operating Partnership, CNL Rose Acquisition Corp. does not have a material amount of assets. RFS Leasing II and RFS Leasing VII had no substantial operations prior to January 1, 2001. As of December 31, 2003 and 2002, RFS Leasing II and RFS Leasing VII did not have a material amount of assets, and incurred both operating and net losses. RFS Financing 2002 was formed to facilitate the issuance of the Senior Notes. RFS Financing Corporation was formed to facilitate the issuance of the 1996 commercial mortgage bonds, which were redeemed with a portion of the proceeds from the sale of the Senior Notes. RFS Financing Corporation and RFS Financing 2002 have no operations or assets and no sources of revenue or cash flow. Consequently, in the event that it becomes necessary for CNL Rose Acquisition Corp., RFS Leasing II, RFS Leasing VII, RFS Financing 2002 or RFS Financing Corporation to provide credit support for the Senior Notes, CNL Rose Acquisition Corp., RFS Leasing II, RFS Leasing VII, RFS Financing 2002 and RFS Financing Corporation likely will not have sufficient cash flow to make any required payments under the Senior Notes.

The following tables present consolidating information for the Operating Partnership, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries.  For the year ended December 31, 2003, the tables present combined results of operations of the Pre-Merger and Post-Merger Partnership as the Operating Partnership believes this information is more meaningful.

Consolidating Balance Sheet
December 31, 2003
(in thousands)

	RFS Partnership, L.P.				Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
ASSETS
Investment in hotel properties, net	$		266,394				$	550,262				$	816,656
Real estate held for sale	11,090				$	18,460						29,550
Investment in consolidated entities	299,536				55,257		13,214		$	(368,007	)	—
Cash and cash equivalents	6,649				2,684		10,063					19,396
Restricted cash	5,214						12,039					17,253
Accounts receivable	9,381				26,044		4,898		(32,108		)	8,215
Deferred expenses, net							6,085					6,085
Other assets	1,194				1,531		3,043					5,768
Deferred income taxes					17,315		8,511					25,826
Total assets	$	599,458			$	121,291	$	608,115	$	(400,115	)	$	928,749
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable and accrued expenses	$	14,680			$	17,180	$	19,865	$	(32,108	)	$	19,617
Mortgage notes payable							324,354					324,354
Senior notes payable	81,674											81,674
Total liabilities	96,354				17,180		344,219		(32,108		)	425,645
Other comprehensive income	(418			)								(418		)
General partnership units	503,522				104,111		263,896		(368,007		)	503,522
Total partners’ capital	503,104				104,111		263,896		(368,007		)	503,104
Total liabilities and partners’ capital	$	599,458			$	121,291	$	608,115	$	(400,115	)	$	928,749

F-21

Consolidating Balance Sheet
December 31, 2002
(in thousands)

	RFS Partnership, L.P.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
ASSETS
Investment in hotel properties, net	$	212,823	$	133,507	$	246,959				$	593,289
Investment in consolidated entities	253,921				18,962		$	(272,883	)	—
Cash and cash equivalents	446		825		667					1,938
Restricted cash					4,383					4,383
Accounts receivable	2,596		12,439		10,901		(21,238		)	4,698
Deferred expenses, net	6,578		176		2,051					8,805
Other assets	1,478		620		1,614					3,712
Deferred income taxes			14,384		11,446					25,830
Total assets	$	477,842	$	161,951	$	296,983	$	(294,121	)	$	642,655
LIABILITIES AND PARTNERS’ CAPITAL
Accounts payable and accrued expenses	$	18,668	$	9,432	$	17,340	$	(21,238	)	$	24,202
Borrowings on Line of Credit	6,950									6,950
Mortgage notes payable					159,279					159,279
Senior notes payable	125,000									125,000
Total liabilities	150,618		9,432		176,619		(21,238		)	315,431
Redeemable units at redemption value	26,702									26,702
General partnership units	300,522		152,519		120,364		(272,883		)	300,522
Total partners’ capital	300,522		152,519		120,364		(272,883		)	300,522
Total liabilities and partners’ capital	$	477,842	$	161,951	$	296,983	$	(294,121	)	$	642,655

F-22

Combined Pre-Merger & Post-Merger Partnership
Statement of Operations
For the Year Ended December 31, 2003
(in thousands)

	RFS Partnership, L.P.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenue:
Rooms				$	78,118	$	71,580					$	149,698
Food and beverage				10,956		6,502						17,458
Other operating departments				2,464		3,397						5,861
Lease revenue	$	28,121		17,265		2,744			$	(37,515	)	10,615
Other	1,762			247		114			(963		)	1,160
Total hotel revenue	29,883			109,050		84,337			(38,478		)	184,792
Hotel operating expenses:
Rooms				17,011		15,458						32,469
Food and beverage				8,496		4,229						12,725
Other operating departments				1,015		1,326						2,341
Undistributed operating expenses:
Property operating costs				13,667		9,529			(963		)	22,233
Property taxes, insurance and other	3,688			1,845		6,611						12,144
Franchise costs	(153		)	6,882		6,094						12,823
Maintenance and repair				5,252		4,544						9,796
Management fees				4,088		3,082						7,170
Percentage lease expense				37,515					(37,515		)
Depreciation	10,267			2,616		17,475						30,358
Amortization of franchise fees and unearned compensation	1,994			20		14						2,028
General and administrative	19,090			7,606		8,097						34,793
Total operating expenses	34,886			106,013		76,459			(38,478		)	178,880
Operating income (loss)	(5,003		)	3,037		7,878			—			5,912
Amortization of loan origination costs	645			2		808						1,455
Interest expense	13,190					13,044						26,234
Equity in (earnings) loss of consolidated subsidiaries	(1,748		)			6,672			(4,924		)
Income (loss) from continuing operations before minority interest and income taxes	(17,090		)	3,035		(12,646		)	4,924			(21,777		)
Minority interest						(10		)				(10		)
Provision for (benefit from) income taxes				3,712		(845		)				2,867
Income (loss) from continuing operations	(17,090		)	6,747		(13,501		)	4,924			(18,920		)
Income from discontinued operations				1,829								1,829
Gain (loss) on sale of assets	(10		)	1								(9		)
Net income (loss) applicable to unitholders	$	(17,100	)	$	8,577	$	(13,501	)	$	4,924		$	(17,100	)

F-23

Consolidating Statement of Operations
For the Year Ended December 31, 2002
(in thousands)

	RFS Partnership, L.P.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenue:
Rooms				$	100,282		$	56,388					$	156,670
Food and beverage				12,241			5,211						17,452
Other operating departments				3,357			2,818						6,175
Lease revenue	$	27,071		20,569			2,487			$	(44,898	)	5,229
Other	911			31			177			(708		)	411
Total hotel revenue	27,982			136,480			67,081			(45,606		)	185,937
Hotel operating expenses:
Rooms				20,792			11,122						31,914
Food and beverage				9,455			3,338						12,793
Other operating departments				1,163			561						1,724
Undistributed operating expenses:
Property operating costs				13,688			6,427						20,115
Property taxes, insurance and other	3,393			2,715			5,562						11,670
Franchise costs	(193		)	9,009			6,185						15,001
Maintenance and repair				5,763			2,991						8,754
Management fees				2,861			1,691						4,552
Percentage lease expense				44,898						(44,898		)
Depreciation	10,213			5,159			12,371						27,743
Amortization of franchise fees and unearned compensation	1,181			40			26						1,247
General and administrative	697			9,632			7,698						18,027
Total operating expenses	15,291			125,175			57,972			(44,898		)	153,540
Operating income	12,691			11,305			9,109			(708		)	32,397
Debt extinguishments and swap termination costs	3,210			6,912									10,122
Amortization of loan origination costs	1,302			16			299						1,617
Interest expense	11,692			1,599			12,901			(708		)	25,484
Equity in (earnings) loss of consolidated subsidiaries	1,894						1,527			(3,421		)
Income (loss) from continuing operations before income taxes	(5,407		)	2,778			(5,618		)	3,421			(4,826		)
Benefit from income taxes				832			264						1,096
Income (loss) from continuing operations	(5,407		)	3,610			(5,354		)	3,421			(3,730		)
Losses from discontinued operations				(1,652		)							(1,652		)
Gain (loss) on sale of assets	975						(25		)				950
Net income (loss)	(4,432		)	1,958			(5,379		)	3,421			(4,432		)
Loss on redemption of preferred units	(1,890		)										(1,890		)
Preferred unit dividends	(1,562		)										(1,562		)
Net income (loss) applicable to unitholders	$	(7,884	)	$	1,958		$	(5,379	)	$	3,421		$	(7,884	)

F-24

Consolidating Statement of Operations
For the Year Ended December 31, 2001
(in thousands)

	RFS Partnership, L.P.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenue:
Rooms				$	107,558		$	66,004					$	173,562
Food and beverage				12,556			5,139						17,695
Other operating departments				4,797			3,864						8,661
Lease revenue	$	29,455		23,172			2,651			$	(49,496	)	5,782
Other	1,715			96			279			(1,517		)	573
Total hotel revenue	31,170			148,179			77,937			(51,013		)	206,273
Hotel operating expenses:
Rooms				21,170			12,568						33,738
Food and beverage				10,171			3,362						13,533
Other operating departments				1,355			642						1,997
Undistributed operating expenses:
Property operating costs	(216		)	13,803			6,944						20,531
Property taxes, insurance and other	3,392			2,569			5,921						11,882
Franchise costs				8,893			6,637						15,530
Maintenance and repair				5,761			3,094						8,855
Management fees				3,583			1,755						5,338
Percentage lease expense				55,403			(5,907		)	(49,496		)
Depreciation	9,037			4,757			13,527						27,321
Lease termination				35,657			29,832						65,489
Amortization of franchise fees and unearned compensation	1,315			41			28						1,384
General and administrative	1,384			9,335			7,442						18,161
Total operating expenses	14,912			172,498			85,845			(49,496		)	223,759
Operating income (loss)	16,258			(24,319		)	(7,908		)	(1,517		)	(17,486		)
Amortization of loan origination costs	903			146			305						1,354
Interest expense	7,355			4,650			14,200			(1,517		)	24,688
Equity in (earnings) loss of consolidated subsidiaries	22,886						22,047			(44,933		)
Loss from continuing operations before income taxes	(14,886		)	(29,115		)	(44,460		)	44,933			(43,528		)
Benefit from income taxes				13,552			11,162						24,714
Loss from continuing operations	(14,886		)	(15,563		)	(33,298		)	44,933			(18,814		)
Income from discontinued operations				2,801									2,801
Gain on sale of assets							1,127						1,127
Net loss	(14,886		)	(12,762		)	(32,171		)	44,933			(14,886		)
Gain on redemption of preferred units	5,141												5,141
Preferred unit dividends	(3,125		)										(3,125		)
Net loss applicable to unitholders	$	(12,870	)	$	(12,762	)	$	(32,171	)	$	44,933		$	(12,870	)

F-25

Combined Pre-Merger & Post-Merger Partnership
Statement of Cash Flows
For the Year Ended December 31, 2003
(in thousands)

	RFS Partnership, L.P.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidated
Cash flows from (used in) operating activities	$	(9,171	)	$	2,695		$	9,345		$	2,869
Cash flows from (used in) investing activities	(40,996		)	56,292			(36,350		)	(21,054		)
Cash flows from (used in) financing activities	56,370			(57,128		)	36,401			35,643
Net increase (decrease) in cash and cash equivalents	6,203			1,859			9,396			17,458
Cash and cash equivalents at beginning of period	446			825			667			1,938
Cash and cash equivalents at end of period	$	6,649		$	2,684		$	10,063		$	19,396

Consolidating Statement of Cash Flows
For the Year Ended December 31, 2002
(in thousands)

	RFS Partnership, L.P.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidated
Cash flows from (used in) operating activities	$	36,108		$	10,066		$	(9,648	)	$	36,526
Cash flows from (used in) investing activities	(64,421		)	45,484			10,798			(8,139		)
Cash flows from (used in) financing activities	28,496			(58,192		)	(2,488		)	(32,184		)
Net increase (decrease) in cash and cash equivalents	183			(2,642		)	(1,338		)	(3,797		)
Cash and cash equivalents at beginning of period	263			3,467			2,005			5,735
Cash and cash equivalents at end of period	$	446		$	825		$	667		$	1,938

Consolidating Statement of Cash Flows
For the Year Ended December 31, 2001
(in thousands)

	RFS Partnership, L.P.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Total Consolidated
Cash flows from (used in) operating activities		$	26,229			$	(14,993	)		$	(770	)		$	10,466
Cash flows from (used in) investing activities		(34,462		)		(13,540		)		39,360				(8,642		)
Cash flows from (used in) financing activities		7,447				31,864				(39,081		)		230
Net increase (decrease) in cash and cash equivalents		(786		)		3,331				(491		)		2,054
Cash and cash equivalents at beginning of period		1,049				136				2,496				3,681
Cash and cash equivalents at end of period		$	263			$	3,467			$	2,005			$	5,735

F-26

RFS HOTEL INVESTORS, INC.

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

as of December 31, 2003

(in thousands)

	Initial Cost				Cost Capitalized Subsequent to Acquisition				Gross Amount at Which Carried at end of Period						Accumulated Depreciation Buildings and Improvements		Net Book Value Buildings and Improvements		Date of Acquisition
Description	Land		Buildings and Improvements		Land		Buildings and Improvements		Land		Buildings and Improvements		Total
Hotels each less than 5% of total (various city and states)	$	97,330	$	702,370	$	97,330	$	702,370	$	97,330	$	702,370	$	799,700	$	11,881	$	787,819	Various
Totals	$	97,330	$	702,370	$	97,330	$	702,370	$	97,330	$	702,370	$	799,700	$	11,881	$	787,819

	Post-Merger Partnership		Pre-Merger Partnership		Pre-Merger Partnership			Pre-Merger Partnership
	July 11 to Dec. 31, 2003		January 1 to July 10, 2003		January 1 to Dec. 31, 2002			January 1 to Dec. 31, 2001
Cost of land and improvements, buildings and improvements:
Balance at beginning of period	$	799,700	$	615,195	$	614,313		$	613,733
Additions			2,522		8,051			11,849
Disposals					(7,169		)	(11,269		)
Balance at end of period	$	799,700	$	617,717	$	615,195		$	614,313
Accumulated depreciation on land improvements, buildings and improvements
Balance at beginning of period (Note 1)	$	4,275	$	88,753	$	76,437		$	64,247
Additions	7,606		7,690		13,789			13,571
Disposals					(1,473		)	(1,381		)
Balance at end of period	$	11,881	$	96,443	$	88,753		$	76,437

Note 1 – For the period July 11 to December 31, 2003, the balance at the beginning of the period is related to the accumulated depreciation on the five hotels contributed by CNL to the Operating Partnership.

F-27

EX-3.1

Exhibit 3.1

CERTIFICATE OF AMENDMENT

TO CERTIFICATE OF LIMITED PARTNERSHIP

OF RFS PARTNERSHIP, L.P.

Dated as of August 2, 1993

CERTIFICATE OF LIMITED PARTNERSHIP

RFS PARTNERSHIP, L.P.

1.The name of the limited partnership is RFS Partnership, L.P.

2.The limited partnership’s initial registered office is located at 1213 Park Place Center, Suite 200, Memphis, Shelby County, Tennessee 38119.  The initial registered agent at that office is Robert M. Solmson.

3.The principal office of the limited partnership is 1213 Park Place Center, Suite 200, Memphis, Tennessee 38119.

4.The general partner of the limited partnership is RFS Hotel Investors, Inc., a Tennessee corporation whose address is 1213 Park Place Center, Suite 200, Memphis, Tennessee 38119.

Dated:	August 2, 1993.
		RFS Partnership, L.P.
		By its General Partner:
		RFS HOTEL INVESTORS, INC.
		/s/  Robert M. Solmson
		Robert M. Solmson, President

EX-3.2

Exhibit 3.2

CERTIFICATE OF AMENDMENT

TO CERTIFICATE OF LIMITED PARTNERSHIP

OF RFS PARTNERSHIP, L.P.

Dated as of June 9, 1997

CERTIFICATE OF AMENDMENT

TO CERTIFICATE OF LIMITED PARTNERSHIP

OF RFS PARTNERSHIP, L.P.

To the Secretary of State of the State of Tennessee:

Pursuant to the provisions of the Tennessee Revised Uniform Limited Partnership Act, Section 61-2-201 et seq., the undersigned parties hereby execute this Certificate of Amendment to the Certificate of Limited Partnership:

1.             The name of the limited partnership is RFS Partnership, L.P. (the “Partnership”).

2.             The original Certificate of Limited Partnership of the Partnership was filed with the Office of the Secretary of State of Tennessee on August 3, 1993 and is recorded at File Number DW8500 in the office of the Register of Deeds of Shelby County, Tennessee (the “Certificate”).

3.             The Partnership’s address is hereby changed from 889 Ridge Lake Boulevard, Suite 100, Memphis, Tennessee 38120 to 850 Ridge Lake Boulevard, Suite 220, Memphis, Tennessee 38120.

4.             Except as modified and amended herein, the Certificate of Limited Partnership shall in all other respects remain in full force and effect.

5.             This document shall be effective upon filing by the Secretary of State of Tennessee.

IN WITNESS WHEREOF, the undersigned have executed this document effective as of the 9^th day of June, 1997.

GENERAL PARTNER:
RFS HOTEL INVESTORS, INC.
By:	/s/  Michael J. Pascal
	Michael J. Pascal
	Secretary and Treasurer

STATE OF TENNESSEE

COUNTY OF SHELBY, to wit:

On the 19^th day of June, 1997, personally appeared before me, Liz Stamey, a Notary Public of said County and State, Michael J. Pascal, who acknowledged himself to be Secretary and Treasurer or RFS Hotel Investors, Inc., the within named bargainor, and that he, as such Secretary and Treasurer, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as such Secretary and Treasurer.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

	/s/ Liz Stamey
	Notary Public
Notary Public Seal
My commission expires:
11/7/2000

EX-4.2

Exhibit 4.2

SUPPLEMENTAL INDENTURE

Dated as of June 9, 1997

Between

CNL ROSE ACQUISITION CORP.,
RFS PARTNERSHIP, L.P.,
and RFS 2002 FINANCING, INC.

and

US BANK NATIONAL ASSOCIATION,

SUPPLEMENTAL INDENTURE

Supplemental Indenture (this “Supplemental Indenture”), dated as of July 10, 2003, among CNL Rose Acquisition Corp., a Delaware corporation (the “Surviving Entity”), RFS Partnership, L.P., a Tennessee limited partnership (an “Issuer”), RFS 2002 Financing, Inc., a Tennessee corporation, and U.S. Bank National Association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, RFS Hotel Investors, Inc., a Tennessee corporation and predecessor-by-merger to the Surviving Entity (“RFS Hotel Investors”), has heretofore executed and delivered to the Trustee, as guarantor, an indenture (the “Indenture”), dated as of February 26, 2002, providing for the issuance by the Issuer, a subsidiary of Surviving Entity, of 9.75% Senior Notes due 2012 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances and pursuant to Section 5.1 of the Indenture, the Surviving Entity shall execute and deliver to the Trustee a Supplemental Indenture pursuant to which it expressly assumes all of RFS Hotel Investors’ obligations in connection with the guarantee of Parent for payment of the Notes by the Parent; and

WHEREAS, Surviving Entity and Issuer are parties to that certain merger agreement, dated as of May 8, 2003, as amended on May 22, 2003, by and among CNL Hospitality Properties, Inc., Surviving Entity, RFS Hotel Investors, CNL Rose Acquisition OP, LP, and Issuer, pursuant to which, RFS Hotel Investors will, simultaneously with the execution of this Supplemental Indenture, merge with and into Surviving Entity and RFS Hotel Investors separate corporate existence will, simultaneously with the execution of this Supplemental Indenture, cease; and

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Surviving Entity and the Trustee mutually covenant and agree as follows;

1.Capitalized Terms.   Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2.Agreement to Assume Obligations.   The Surviving Entity irrevocably and unconditionally assumes the punctual performance of all obligations of RFS Hotel Investors pursuant to the terms of the Indenture, and this Supplemental Indenture.

No past, present or future partner, director, officer, employee, incorporator or stockholder (direct or indirect) of the Surviving Entity (or any such successor entity), as such, shall have any liability for any obligations of the Surviving Entity under this Supplemental Indenture or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation, except in their capacity as an obligor or Guarantor of the Notes in accordance with the Indenture.

3.NEW YORK LAW TO GOVERN.   THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

4.Counterparts.   The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

5.Effect of Headings.   The Section headings herein are for convenience only and shall not affect the construction hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

RFS PARTNERSHIP, L.P.
By:		CNL Rose GP Corp.,
Its:		General Partner
By:		/s/ Marcel Verbaas
		Name:	Marcel Verbaas
		Title:  Senior Vice President
RFS 2002 FINANCING, INC.
By:		/s/ Marcel Verbaas
		Name: Marcel Verbaas
		Title: Senior Vice President
CNL ROSE ACQUISITION CORP.
By:	/s/ Marcel Verbaas
	Name: Marcel Verbaas
	Title: Senior Vice President
THE TRUSTEE:
U.S BANK NATIONAL ASSOCIATION
By:	/s/ Frank P. Leslie III
	Name: Frank P. Leslie III
	Title: Vice President

EX-10.20

Exhibit 10.20

AMENDED AND RESTATED LOAN AGREEMENT

Dated as of December 4, 2003

Between

ROSE SPE 1, LP,

as Borrower

and

BANK OF AMERICA, N.A.,

as Lender

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1.	DEFINITIONS
SECTION 1.2.	PRINCIPLES OF CONSTRUCTION
ARTICLE 2 GENERAL TERMS
SECTION 2.1.	LOAN COMMITMENT; DISBURSEMENT TO BORROWER
SECTION 2.2.	INTEREST RATE
SECTION 2.3.	LOAN PAYMENTS
SECTION 2.4.	PREPAYMENTS
ARTICLE 3 CONDITIONS PRECEDENT
SECTION 3.1.	REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH CONDITIONS
SECTION 3.2.	DELIVERY OF LOAN DOCUMENTS; TITLE INSURANCE; REPORTS; LEASES
SECTION 3.3.	RELATED DOCUMENTS
SECTION 3.4.	ORGANIZATIONAL DOCUMENTS
SECTION 3.5.	OPINIONS OF BORROWER’S COUNSEL
SECTION 3.6.	ANNUAL BUDGET
SECTION 3.7.	TAXES AND OTHER CHARGES
SECTION 3.8.	COMPLETION OF PROCEEDINGS
SECTION 3.9.	PAYMENTS
SECTION 3.10.	TRANSACTION COSTS
SECTION 3.11.	NO MATERIAL ADVERSE CHANGE
SECTION 3.12.	OPERATING LEASES
SECTION 3.13.	LEASES; RENT ROLLS
SECTION 3.14.	TENANT ESTOPPELS
SECTION 3.15.	REA ESTOPPELS
SECTION 3.16.	SUBORDINATION AND ATTORNMENT
SECTION 3.17.	TAX LOT
SECTION 3.18.	PHYSICAL CONDITIONS REPORT; PIP REPORT
SECTION 3.19.	MANAGEMENT AGREEMENT
SECTION 3.20.	APPRAISAL
SECTION 3.21.	FINANCIAL STATEMENTS
SECTION 3.22.	NET OPERATING INCOME
SECTION 3.23.	FRANCHISE AGREEMENTS
SECTION 3.24.	GROUND LEASE
SECTION 3.25.	FURTHER DOCUMENTS
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
SECTION 4.1.	ORGANIZATION
SECTION 4.2.	STATUS OF BORROWER; AFFILIATED LESSEE
SECTION 4.3.	VALIDITY OF DOCUMENTS
SECTION 4.4.	NO CONFLICTS
SECTION 4.5.	LITIGATION
SECTION 4.6.	AGREEMENTS
SECTION 4.7.	SOLVENCY
SECTION 4.8.	FULL AND ACCURATE DISCLOSURE
SECTION 4.9.	NO PLAN ASSETS
SECTION 4.10.	NOT A FOREIGN PERSON
SECTION 4.11.	ENFORCEABILITY
SECTION 4.12.	BUSINESS PURPOSES

i

SECTION 4.13.	COMPLIANCE
SECTION 4.14.	FINANCIAL INFORMATION
SECTION 4.15.	CONDEMNATION
SECTION 4.16.	UTILITIES AND PUBLIC ACCESS; PARKING
SECTION 4.17.	SEPARATE LOTS
SECTION 4.18.	ASSESSMENTS
SECTION 4.19.	INSURANCE
SECTION 4.20.	USE OF PROPERTY
SECTION 4.21.	CERTIFICATE OF OCCUPANCY; LICENSES
SECTION 4.22.	FLOOD ZONE
SECTION 4.23.	PHYSICAL CONDITION
SECTION 4.24.	BOUNDARIES
SECTION 4.25.	LEASES AND RENT ROLL
SECTION 4.26.	FILING AND RECORDING TAXES
SECTION 4.27.	MANAGEMENT AGREEMENT
SECTION 4.28.	ILLEGAL ACTIVITY
SECTION 4.29.	CONSTRUCTION EXPENSES
SECTION 4.30.	PERSONAL PROPERTY
SECTION 4.31.	TAXES
SECTION 4.32.	PERMITTED ENCUMBRANCES
SECTION 4.33.	FEDERAL RESERVE REGULATIONS
SECTION 4.34.	INVESTMENT COMPANY ACT
SECTION 4.35.	RECIPROCAL EASEMENT AGREEMENTS
SECTION 4.36.	NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE
SECTION 4.37.	INTELLECTUAL PROPERTY
SECTION 4.38.	SURVEY
SECTION 4.39.	EMBARGOED PERSON
SECTION 4.40.	PATRIOT ACT
SECTION 4.41.	FRANCHISE AGREEMENTS.
SECTION 4.42.	GROUND LEASE REPRESENTATIONS
SECTION 4.43.	SURVIVAL; MISCELLANEOUS
ARTICLE 5 BORROWER COVENANTS
SECTION 5.1.	EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS
SECTION 5.2.	MAINTENANCE AND USE OF PROPERTY
SECTION 5.3.	WASTE
SECTION 5.4.	TAXES AND OTHER CHARGES
SECTION 5.5.	LITIGATION
SECTION 5.6.	ACCESS TO PROPERTY
SECTION 5.7.	NOTICE OF DEFAULT
SECTION 5.8.	COOPERATE IN LEGAL PROCEEDINGS
SECTION 5.9.	PERFORMANCE BY BORROWER
SECTION 5.10.	AWARDS; INSURANCE PROCEEDS
SECTION 5.11.	FINANCIAL REPORTING
SECTION 5.12.	ESTOPPEL STATEMENT
SECTION 5.13.	OPERATING LEASE; LEASING MATTERS
SECTION 5.14.	PROPERTY MANAGEMENT
SECTION 5.15.	LIENS
SECTION 5.16.	DEBT CANCELLATION
SECTION 5.17.	ZONING
SECTION 5.18.	ERISA
SECTION 5.19.	NO JOINT ASSESSMENT
SECTION 5.20.	RECIPROCAL EASEMENT AGREEMENTS
SECTION 5.21.	ALTERATIONS

ii

SECTION 5.22.	FRANCHISE AGREEMENTS
SECTION 5.23.	GROUND LEASE
SECTION 5.24.	INTEREST RATE CAP AGREEMENT
SECTION 5.25.	MANAGER OF FLINT PROPERTY
SECTION 5.26.	CONSOLIDATED TANGIBLE NET WORTH
ARTICLE 6 ENTITY COVENANTS
SECTION 6.1.	SINGLE PURPOSE ENTITY/SEPARATENESS
SECTION 6.2.	CHANGE OF NAME, IDENTITY OR STRUCTURE
SECTION 6.3.	BUSINESS AND OPERATIONS
SECTION 6.4.	INDEPENDENT DIRECTOR
ARTICLE 7 NO SALE OR ENCUMBRANCE
SECTION 7.1.	TRANSFER DEFINITIONS
SECTION 7.2.	NO SALE/ENCUMBRANCE
SECTION 7.3.	PERMITTED TRANSFERS
SECTION 7.4.	LENDER’S RIGHTS
SECTION 7.5.	ASSUMPTION
ARTICLE 8 INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
SECTION 8.1.	INSURANCE
SECTION 8.2.	CASUALTY
SECTION 8.3.	CONDEMNATION
SECTION 8.4.	RESTORATION
ARTICLE 9 RESERVE FUNDS
SECTION 9.1.	REQUIRED REPAIRS
SECTION 9.2.	REPLACEMENTS
SECTION 9.3.	INTENTIONALLY OMITTED
SECTION 9.4.	REQUIRED WORK
SECTION 9.5.	RELEASE OF RESERVE FUNDS
SECTION 9.6.	TAX AND INSURANCE RESERVE FUNDS
SECTION 9.7.	EXCESS CASH RESERVE
SECTION 9.8.	OPERATING EXPENSES; EXTRAORDINARY EXPENSES
SECTION 9.9.	RESERVE FUNDS GENERALLY
SECTION 9.10.	GROUND RENT RESERVE FUNDS.
SECTION 9.11.	LEASE ENHANCEMENT FUNDS
ARTICLE 10 CASH MANAGEMENT
SECTION 10.1.	CASH MANAGEMENT AGREEMENT
ARTICLE 11 EVENTS OF DEFAULT; REMEDIES
SECTION 11.1.	EVENT OF DEFAULT
SECTION 11.2.	REMEDIES
ARTICLE 12 ENVIRONMENTAL PROVISIONS
SECTION 12.1.	ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES
SECTION 12.2.	ENVIRONMENTAL COVENANTS
SECTION 12.3.	LENDER’S RIGHTS
SECTION 12.4.	OPERATIONS AND MAINTENANCE PROGRAMS
SECTION 12.5.	ENVIRONMENTAL DEFINITIONS
SECTION 12.6.	INDEMNIFICATION

iii

ARTICLE 13 SECONDARY MARKET
SECTION 13.1.	TRANSFER OF LOAN
SECTION 13.2.	DELEGATION OF SERVICING
SECTION 13.3.	DISSEMINATION OF INFORMATION
SECTION 13.4.	COOPERATION
SECTION 13.5.	SECURITIZATION INDEMNIFICATION
SECTION 13.6.	INTENTIONALLY DELETED
ARTICLE 14 INDEMNIFICATIONS
SECTION 14.1.	GENERAL INDEMNIFICATION
SECTION 14.2.	MORTGAGE AND INTANGIBLE TAX INDEMNIFICATION
SECTION 14.3.	ERISA INDEMNIFICATION
SECTION 14.4.	SURVIVAL
ARTICLE 15 EXCULPATION
SECTION 15.1.	EXCULPATION
ARTICLE 16 NOTICES
SECTION 16.1.	NOTICES
ARTICLE 17 FURTHER ASSURANCES
SECTION 17.1.	REPLACEMENT DOCUMENTS
SECTION 17.2.	RECORDING OF MORTGAGE, ETC.
SECTION 17.3.	FURTHER ACTS, ETC.
SECTION 17.4.	CHANGES IN TAX, DEBT, CREDIT AND DOCUMENTARY STAMP LAWS
SECTION 17.5.	EXPENSES
ARTICLE 18 WAIVERS
SECTION 18.1.	REMEDIES CUMULATIVE; WAIVERS
SECTION 18.2.	MODIFICATION, WAIVER IN WRITING
SECTION 18.3.	DELAY NOT A WAIVER
SECTION 18.4.	TRIAL BY JURY
SECTION 18.5.	WAIVER OF NOTICE
SECTION 18.6.	REMEDIES OF BORROWER
SECTION 18.7.	WAIVER OF MARSHALLING OF ASSETS
SECTION 18.8.	WAIVER OF STATUTE OF LIMITATIONS
SECTION 18.9.	WAIVER OF COUNTERCLAIM
SECTION 18.10.	GRADSKY WAIVERS
ARTICLE 19 GOVERNING LAW
SECTION 19.1.	CHOICE OF LAW
SECTION 19.2.	SEVERABILITY
SECTION 19.3.	PREFERENCES
ARTICLE 20 MISCELLANEOUS
SECTION 20.1.	SURVIVAL
SECTION 20.2.	LENDER’S DISCRETION
SECTION 20.3.	HEADINGS
SECTION 20.4.	COST OF ENFORCEMENT
SECTION 20.5.	SCHEDULES INCORPORATED
SECTION 20.6.	OFFSETS, COUNTERCLAIMS AND DEFENSES
SECTION 20.7.	NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY BENEFICIARIES
SECTION 20.8.	PUBLICITY
SECTION 20.9.	CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE
SECTION 20.10.	ENTIRE AGREEMENT

iv

SECTION 20.11.	CROSS COLLATERALIZATION
SECTION 20.12.	TAX DISCLOSURE
SECTION 20.13.	MEZZANINE LOAN AGREEMENTS

v

AMENDED AND RESTATED LOAN AGREEMENT

THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of December 4, 2003 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”), between BANK OF AMERICA, N.A., a national banking association, having an address at Bank of America Corporate Center, 214 North Tryon Street, Charlotte, North Carolina 28255 (together with its successors and/or assigns, “Lender”) and ROSE SPE 1, LP, a Delaware limited partnership having an address at 450 South Orange Avenue, Orlando, Florida 32801-3336 (together with its successors and/or assigns, “Borrower”).

RECITALS:

WHEREAS, Lender, in its capacity as administrative agent for certain named lenders, including Banc of America Bridge, LLC (Lender and such named lenders, collectively “Original Lenders”) previously made a loan (the “Bridge Loan”) to RFS Partnership, L.P. and RFS Financing Partnership, L.P., collectively, as borrower (collectively, “Original Borrowers”), evidenced by, among other things, (a) a certain Note in the maximum principal amount of $320,000,000.00 (as amended, modified, and in effect from time to time, the “Bridge Note”) and (b) a certain Credit Agreement (as amended, modified and in effect from time to time, the “Credit Agreement”);

WHEREAS, the Bridge Loan was secured by Original Borrowers’ interest in certain properties, including, but not limited to the Properties (as defined below);

WHEREAS, on even date herewith Bridge Lender and Original Borrowers entered into that certain Amended and Restated Renewal Promissory Note in the amount of $130,000,000 (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Note”), which amended and restated the Bridge Note in its entirety.

WHEREAS, (a) as evidenced by certain deeds of even date herewith, each Original Borrower transferred to Borrower all of its right, title and interest in and to each Property, subject to the lien of the applicable Mortgage (as defined below), and (b) in connection therewith as evidenced by, among other things, a certain Multi-State Loan Assignment, Assumption and Modification Agreement, (the “Loan Modification Agreement”) of even date herewith, each Original Borrower agreed to assign to Borrower and Borrower agreed to assume the obligations of Original Borrowers with respect to the Bridge Loan, the Amended and Restated Loan, the Credit Agreement, the Mortgages and the other documents evidencing the Bridge Loan (the Amended and Restated Note, the Credit Agreement, the Mortgages and all other documents evidencing the Bridge Loan, collectively, the “Bridge Loan Documents”);

WHEREAS, Original Lenders assigned all of their right, title and interest in and to the Bridge Loan, the Amended and Restated Note, the Credit Agreement, the Mortgages and the other Bridge Loan Documents to Lender; and

WHEREAS, Borrower and Lender have agreed to amend and restate the terms of the Bridge Loan and the Bridge Loan Documents pursuant to the terms set forth herein and in the other Loan Documents (as defined below).

ARTICLE 1
DEFINITIONS; PRINCIPLES OF CONSTRUCTION

Section 1.1.        DEFINITIONS

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

“Acceptable Accountant” shall mean a “Big Four” accounting firm or other independent certified public accountant acceptable to Lender.

“Acceptable Counterparty” shall mean any counterparty to the Rate Cap that has and shall maintain, until the expiration of the applicable Rate Cap, a credit rating of not less than AA- from S&P and not less than Aa3 from Moody’s.

“Acquired Property” shall have the meaning set forth in Section 5.11(c)(i)(A) hereof.

“Acquired Property Statements” shall have the meaning set forth in Section 5.11(c)(i)(A) hereof.

“Act” shall have the meaning set forth in Section 6.1(c) hereof.

“Additional Replacement” shall have the meaning set forth in Section 9.5(g) hereof.

“Additional Required Repair” shall have the meaning set forth in Section 9.5(f) hereof.

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person or of an Affiliate of such Person.

“Affiliated Lessee” shall mean, individually or collectively, as the context may require, any operating lessee under an Operating Lease, which is an Affiliate of Borrower and which qualifies as a special purpose entity as defined from time to time by the Rating Agencies, provided that such operating lessee shall be selected in accordance with the terms hereof.  As of the date hereof, the term Affiliated Lessee shall refer to CNL Rose SPE Tenant Corp., a Delaware corporation, the current operating lessee of each Property other than the “Miami Lakes Property” and the “Miami Airport West Property” (each as defined on Schedule A attached hereto), and an Affiliate of Borrower.

“Affiliated Loans” shall mean a loan made by Lender to a parent, subsidiary or other entity which is an Affiliate of Borrower or Borrower Principal.

“Affiliated Manager” shall have the meaning set forth in Section 7.1 hereof.

2

“Agent” shall mean Bank of America, N.A. or any successor Eligible Institution acting as Agent under the Cash Management Agreement.

“Allocated Loan Amount” shall mean a certain portion of the original principal amount of the Note allocated, solely for the purposes of performing certain calculations hereunder, to each Property, as the same shall be reduced by (a) ratable application of payments of principal made under and in accordance with the terms of this Agreement and the Note, determined based on the Allocated Loan Percentage and/or (b) deemed reductions attributable to any partial prepayment made in connection with a release of a Property pursuant to the provisions of Section 2.4(c)(ii) hereof or in connection with a permitted partial prepayment occurring in connection with a Casualty or Condemnation.  The Allocated Loan Amounts shall at all times equal the then outstanding principal balance of the Note.  The Initial Allocated Loan Amounts are set forth on Schedule A hereto.

“Allocated Loan Percentage” shall mean that proportion, expressed as a percentage, which each Allocated Loan Amount, if any, bears to the outstanding principal balance of the Note.  The sum of the Allocated Loan Percentages shall at all times equal 100%.  The initial Allocated Loan Percentages are as set forth on Schedule A hereto.

“ALTA” shall mean American Land Title Association, or any successor thereto.

“Alteration Threshold” means with respect to any particular Property five percent (5%) of the then Allocated Loan Amount attributable to such Property.

“Annex” shall have the meaning set forth in Section 4.40 hereof.

“Annual Budget” shall mean, individually or collectively, as the context may require, the operating budgets, including all planned capital expenditures, for each Property approved by Lender in accordance with Section 5.11(a)(iv) hereof for the applicable calendar year or other period.

“Assignment of Management Agreement” shall mean, individually or collectively, as the context may require, each Assignment and Subordination of Management Agreement and Consent of Manager and/or other similar agreement (including, without limitation, any subordination, non-disturbance and attornment agreement) executed in connection with each Management Agreement, by and among Lender, Borrower, the applicable Operating Lessee and the applicable Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Award” shall mean any compensation paid by any Governmental Authority in connection with a Condemnation in respect of all or any part of any Property.

“Borrower Principal” shall mean RFS Partnership, L.P., a Tennessee limited partnership.

“Borrower Principal Obligations” shall have the meaning set forth in Section 18.10(c) hereof.

3

“Breakage Costs” shall have the meaning set forth in Section 2.3(f)(v) herein.

“Bridge Loan” shall have the meaning set forth in the Recitals hereto.

“Business Day” shall mean any day other than (i) a Saturday or a Sunday or (ii) a day on which federally insured depository institutions in the States of New York or North Carolina or the state in which the offices of the Lender’s servicer and the trustee in the Securitization are located are authorized or obligated by law, governmental decree or executive order to be closed, except that when used with respect to the determination of LIBOR, “Business Day” shall be a day on which commercial banks are open for international business (including dealings in U.S. Dollar deposits) in London, England.

“Cash Management Account” shall mean an Eligible Account established pursuant to the Cash Management Agreement.

“Cash Management Agreement” shall mean that certain Cash Management Agreement by and among Borrower, Agent and Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Cash Management Account.

“Casualty” shall have the meaning set forth in Section 8.2.

“Closing Date” shall mean the date of the funding of the Loan.

“Collateral Assignment of Interest Rate Cap” shall mean that certain Collateral Assignment of Interest Rate Cap Agreement, dated as of the date hereof, executed by Borrower in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the result, in lieu or in anticipation, of the exercise of the right of condemnation or eminent domain, of all or any part of any Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting any Property or any part thereof.

“Condemnation Proceeds” shall have the meaning set forth in Section 8.4(b).

“Consequential Loss” shall have the meaning set forth in Section 2.3(f)(i).

“Consolidated Tangible Net Worth” means, for Borrower Principal and its Subsidiaries on a consolidated basis as of any date of determination, Partners’ Capital on that date minus Intangible Assets on that date.

“Control” shall have the meaning set forth in Section 7.1 hereof.

“Creditors Rights Laws” shall mean with respect to any Person any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization,

4

conservatorship, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to its debts or debtors.

“Debt” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums due to Lender in respect of the Loan under the Note, this Agreement, the Mortgages or any other Loan Document.

“Debt Service” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments under the Note.

“Debt Service Coverage Ratio” shall mean, as of any date of determination, for the immediately preceding twelve (12) calendar month period, the ratio, as determined by Lender, of (a) Net Operating Income to (b) the aggregate amount of Debt Service and Mezzanine Debt Service which would be due for the same period based on the principal amount of the Loan and the Mezzanine Loan outstanding as of the date of such determination and calculated at a mortgage constant equal to (i) ten percent (10%) for purposes of determining if an Excess Cash Flow Sweep Period has occurred and/or remains in effect and (ii) for all other purposes ten and one-quarter percent (10.25%).

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

“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the maximum rate permitted by applicable law, or (b) four percent (4%) above the Note Rate.

“Determination Date” shall mean (a) with respect to any Interest Period prior to the Interest Period within which the Securitization Closing Date occurs, two (2) Business Days prior to the start of the applicable Interest Period; (b) with respect to the Interest Period within which the Securitization Closing Date occurs, (i) for that portion of such Interest Period which ends on the day prior to the Securitization Closing Date, the date that is two (2) Business Days prior to the start of such Interest Period, and (ii) for the remaining portion of such Interest Period which commences on the Securitization Closing Date, the date that is two (2) Business Days prior to the Securitization Closing Date; and (iii) with respect to each Interest Period thereafter, the date that is two (2) Business Days prior to the beginning of such Interest Period.

“Disclosure Document” shall have the meaning set forth in Section 13.5 hereof.

“Doubletree Property” shall have the meaning set forth on Schedule B attached hereto.

“Doubletree Replacement Reserve Account” shall have the meaning set forth in Section 9.2(b) hereof.

“Eligible Account” shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state chartered depository institution or trust company which complies with the definition of

5

Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority.  An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

“Eligible Institution” shall mean Bank of America, N.A. or a depository institution or trust company insured by the Federal Deposit Insurance Corporation, the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s).

“Embargoed Person” shall the meaning set forth in Section 4.39.

“Environmental Law” shall have the meaning set forth in Section 12.5 hereof.

“Environmental Liens” shall have the meaning set forth in Section 12.5 hereof.

“Environmental Report” shall have the meaning set forth in Section 12.5 hereof.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statutes thereto and applicable regulations issued pursuant thereto in temporary or final form.

“Event of Default” shall have the meaning set forth in Section 11.1 hereof.

“Excess Cash” shall mean an amount equal to all funds remaining in the Cash Management Account on each Payment Date following the disbursements and application of funds pursuant to the terms of the Cash Management Agreement.

“Excess Cash Flow Sweep Period” shall mean the period commencing on the date upon which (i) an Event of Default occurs or (ii) at any time the Debt Service Coverage Ratio (based on a ten (10.00%) mortgage constant, as detailed in the definition of the term Debt Service Coverage Ratio) is less than or equal to 1.10 to 1.00, and ending on the date all sums are permitted to be released from the Excess Cash Flow Reserve Account pursuant to Section 9.7 hereof.

“Excess Cash Reserve Account” shall have the meaning set forth in Section 9.7 hereof.

“Excess Cash Reserve Funds” shall have the meaning set forth in Section 9.7 hereof.

“Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended.

“Exchange Act Filing” shall have the meaning set forth in Section 5.11(c) hereof.

6

“Extended Maturity Date” shall have the meaning set forth in Section 2.3(b).

“Extension Option” shall have the meaning set forth in Section 2.3(b).

“Extraordinary Expense” shall mean an operating expense or capital expenditure with respect to any Property that (i) is not set forth on the Annual Budget and (ii) is not subject to payment by withdrawals from the Replacement Reserve Account.  If Borrower requests the disbursement of any Extraordinary Expense, Borrower shall deliver promptly to Lender with such request a reasonably detailed explanation of such proposed Extraordinary Expense for the approval of Lender.

“Extraordinary Expense Reserve Account” shall have the meaning set forth in Section 9.8(b) hereof.

“Extraordinary Expense Reserve Funds” shall have the meaning set forth in Section 9.8(b) hereof.

“FF&E” shall mean all furniture, fixtures, outfittings, apparatus, equipment and all other items of personal property of the type customarily installed in, held in storage for use in, used in or required for use in connection with any Property as a hotel.

“First Payment Date” shall mean the Payment Date occurring in January, 2004.

“Fitch” shall mean Fitch, Inc.

“Flagstone” shall have the meaning set forth in Schedule B hereof.

“Flint Property” shall have the meaning set forth in Schedule B hereof.

“Foreign Taxes” shall have the meaning set forth in Section 2.3(f)(ii).

“Franchise Agreement” shall mean, individually or collectively, as the context may require, each franchise or similar agreement entered into by and between the applicable Operating Lessee and Franchisor pursuant to which the Operating Lessee is permitted to operate the applicable Property under the “flag” or other trade name that is the subject thereof, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof; provided that, as long as the Non-Affiliated Lessee leases the Miami Lakes Property or the Miami Airport West Property, as to each such Property, the term “Franchise Agreement” shall exclude any franchise or similar agreement entered into by such Operating Lessee.

“Franchisor” shall mean, individually or collectively, as the context may require, each franchisor under a Franchise Agreement.  As of the date hereof, each Franchisor of each Property is set forth on Schedule B attached hereto.  No replacement or substitute Franchisor shall be selected, approved or consented to by Borrower or Affiliated Lessee other than in accordance with the terms hereof.

7

“GAAP” shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report.

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

“Ground Lease” means, individually or collectively, as the context may require, that certain (a) Ground Lease dated November 30, 1987 between Commonwealth Trust Company, trustee for the Chopin Trust, as Lessor, and RFP Group, Inc., as Lessee, the terms of which were amended and evidenced of record by that certain Memorandum and Amendment to Ground Lease Agreement dated as of June 20, 1988 and recorded in Book 730, Page 289 of the Office of the Recorder of Deeds for new Castle County, Delaware, between Commonwealth Trust Company, trustee for the Chopin Trust and RFP Group, Inc., as assigned under Assignment of Lease from RFP Group, Inc. to RFS Partnership, L.P. dated October 14, 1994 and recorded in Deed Book 1824, Page 196 and further assigned by that certain assignment by RFS Partnership, L.P. to Borrower, and as amended by that certain Ground Lease Estoppel and Agreement by Northtowne, Inc., as successor trustee for Chopin Trust, and Borrower and agreed and consented to by the National Life Insurance Company of Vermont all with respect to the “Wilmington Newark Property” (as defined on Schedule A) (such Ground Lease, the “Wilmington Ground Lease”) and (b) Lease between Shively Masonic Lodge No. 951, F. & A.M. by and through its Board of Trustees and its Building Committee, as Lessor, and West, Inc. d/b/a Holiday Inn Southwest, as Lessee which was recorded at Book 5039, Page 873 in the Office of the Clerk of the County Court of Jefferson County, Kentucky being the same leasehold estate which was acquired by LVSW Partners, LP, a Tennessee limited partnership, from West, Inc. by Assignment of Lease dated November 27, 1984 and recorded in Deed Book 5463, page 861 in the aforesaid clerk’s office, which was further assigned to RFS Partnership, L.P. by Assignment of Lease dated August 5, 1993 and recorded in Book 6345, Page 085 in the same clerk’s office and which was further assigned by RFS Partnership, L.P. to Borrower, under Assignment and Assumption of Ground Lease dated as of and recorded promptly following the date hereof, all with respect to the “Louisville Southwest Property” (as defined on Schedule A) (such Ground Lease, the “Louisville Southwest Ground Lease”).

“Ground Rent” means all amounts payable to the landlords under each Ground Lease.

“Ground Rent Monthly Deposit” shall have the meaning set forth in Section 9.10 hereof.

“Ground Rent Reserve Funds” shall have the meaning set forth in Section 9.10 hereof.

“Ground Rent Reserve Account” shall have the meaning set forth in Section 9.10 hereof.

“Hazardous Materials” shall have the meaning set forth in Section 12.5 hereof.

8

“Hilton” shall mean, individually or collectively, as the context shall require, Promus Hotels, Inc., and with respect to the “San Diego Del Mar Property”, (as defined in Schedule A), DT Management, Inc.

“Hilton Managed Properties” shall mean as each Property managed by Hilton pursuant to a Management Agreement in effect as of the Closing Date and approved by Lender.

“Hilton Replacement Reserve Agreement” shall have the meaning set forth in Section 9.2(b) hereof.

“Improvements” shall have the meaning set forth in the granting clause of each Mortgage.

“Indemnified Parties” shall mean (a) Lender, (b) any prior owner or holder of the Loan or Participations in the Loan, (c) any servicer or prior servicer of the Loan, (d) any Investor or any prior Investor in any Securities, (e) any trustees, custodians or other fiduciaries who hold or who have held a full or partial interest in the Loan for the benefit of any Investor or other third party, (f) any receiver  or other fiduciary appointed in a foreclosure or other Creditors Rights Laws proceeding, (g) any officers, directors, shareholders, partners, members, employees, agents, servants, representatives, contractors, subcontractors, Affiliates or subsidiaries of any and all of the foregoing, and (h) the heirs, legal representatives, successors and assigns of any and all of the foregoing (including, without limitation, any successors by merger, consolidation or acquisition of all or a substantial portion of the Indemnified Parties’ assets and business), in all cases whether during the term of the Loan or as part of or following a foreclosure of any or all of the Mortgages.

“Independent Director” shall have the meaning set forth in Section 6.4.

“Insurance Premiums” shall have the meaning set forth in Section 8.1(b) hereof.

“Insurance Proceeds” shall have the meaning set forth in Section 8.4(b) hereof.

“Intangible Assets” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount, and capitalized research and development costs.

“Intercreditor Agreement” shall mean the Intercreditor Agreement, to be dated as of the date of the loan agreement evidencing the Mezzanine Loan, by and between Lender and Mezzanine Lender.

“Interest Period” shall mean (a) with respect to the initial period for the accrual of interest due under this Agreement, the Interim Interest Period, and (b) with respect to the First Payment Date and each Payment Date thereafter, the period from and including the Selected Day immediately preceding the applicable Payment Date through but excluding the Selected Day next occurring after the applicable Payment Date.  Notwithstanding the foregoing clause (b), if the Lender so elects at any time, the “Interest Period” shall be the calendar month preceding each Payment Date.

9

“Interim Interest Period” shall mean the period from and including the Closing Date through but excluding the Selected Day first occurring after the Closing Date, provided, however, there shall be no “Interim Interest Period” in the event the Closing Date shall occur on a Selected Day.

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

“Interstate” shall mean Interstate Management Company, L.L.C.

“Interstate Managed Properties” shall mean each Property managed by Interstate pursuant to a Management Agreement in effect as of the Closing Date and approved by Lender and shall include the Flint Property regardless of whether it is managed by Interstate or Flagstone.

“Interstate Replacement Reserve Account” shall have the meaning set forth in Section 9.2(b) hereof.

“Investor” shall have the meaning set forth in Section 13.3 hereof.

“Issuer Group” shall have the meaning set forth in Section 13.5(b) hereof.

“Issuer Person” shall have the meaning set forth in Section 13.5(b) hereof.

“Lease” shall have the meaning set forth in the Mortgages (and shall include, but not be limited to, each Operating Lease).

“Lease Enhancement Account” shall have the meaning set forth in Section 9.11 hereof.

“Lease Enhancement Funds” shall have the meaning set forth in Section 9.11 hereof.

“Legal Requirements” shall mean all statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting any Property or any part thereof, or the construction, use, alteration or operation thereof, whether now or hereafter enacted and in force, and all permits, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting any Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to any Property or any part thereof, or (b) in any way materially limit the use and enjoyment thereof for hotel and related uses.

“Letter of Credit”  shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit acceptable to Lender and the Rating Agencies (either an evergreen letter of credit or one which does not expire until at least (a) thirty (30) Business Days after the Maturity Date, as the same may be extended or (b) such other applicable date in the event of a Letter of Credit delivered pursuant to the provisions of Section 5.21, Section 9.6, Section 9.10 or Section 9.11

10

hereof) in favor of Lender and entitling Lender to draw thereon in New York, New York issued by a domestic Eligible Institution or the U.S. agency or branch of a foreign Eligible Institution.  If at any time the bank issuing the Letter of Credit shall cease to be an Eligible Institution, Lender shall have the right to immediately draw down the Letter of Credit in full and apply the proceeds thereof in accordance with the terms hereof.

“LIBOR” shall mean, with respect to each Interest Period, a rate of interest per annum obtained by dividing

(a)           the rate for deposits in U.S. Dollars, for a period equal to one month, which appears on the Telerate Page 3750 as of 11:00 a.m., London time, on the related Determination Date; provided, however, if Telerate is unavailable, the rate shall be as specified on Reuters Screen LIBOR Page or, more than one rate is specified on Reuters Screen LIBOR Page, the LIBOR Rate shall be the arithmetic mean of all rates.  Lender shall determine the LIBOR Rate for each Interest Period and Selected Day and the determination of the LIBOR Rate by Lender shall be binding upon Borrower absent manifest error, by

(b)           a percentage equal to 100% minus the applicable Reserve Percentage then in effect.

LIBOR may or may not be the lowest rate based upon the market for U.S. Dollar deposits in the London Interbank Eurodollar Market at which the Lender prices loans on the date which LIBOR is determined by Lender as set forth above.

“LIBOR Loan” shall mean the Loan at such time as interest thereon accrues at the LIBOR Rate.

“LIBOR Margin” shall mean 1.89%.

“LIBOR Rate” shall mean the sum of (i) LIBOR plus (ii) the LIBOR Margin.

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

“LLC Agreement” shall have the meaning set forth in Section 6.1(c) hereof.

“Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement.

“Loan Documents” shall mean, collectively, this Agreement, the Note, the Mortgages, each Assignment of Management Agreement, the Cash Management Agreement, the Collateral Assignment of Interest Rate Cap, each Subordination, Non-Disturbance and Attornment Agreement, each Subordination, Attornment and Security Agreement and any and all other documents, agreements and certificates executed and/or delivered in connection with the Loan,

11

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

“Lockout Period” shall mean the period commencing on the date hereof through and including the Payment Date occurring in June, 2005.

“Lockout Yield Maintenance Premium” shall mean an amount equal to fourpercent (4%) of the then principal amount of the Loan.

“Losses” shall mean any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, judgments, awards, amounts paid in settlement of whatever kind or nature (including but not limited to legal fees and other costs of defense).

“Louisville Property” has the meaning set forth on Schedule B attached hereto.

“Major Lease” shall mean as to any Property (i) any Lease which, individually or when aggregated with all other leases at such Property with the same Tenant or its Affiliate, either (A) accounts for five percent (5%) or more of such Property’s aggregate Net Operating Income, or (B) demises 5,000 square feet or more of such Property’s gross leasable area, (ii) any Lease which contains any option, offer, right of first refusal or other similar entitlement to acquire all or any portion of any Property, or (iii) any instrument guaranteeing or providing credit support for any Lease meeting the requirements of (i) or (ii) above.  Without limiting any of the foregoing, each Operating Lease shall be considered a Major Lease for all purposes hereunder.

“Management Agreement” shall mean, individually or collectively, as the context may require, each management agreement entered into by and between the Operating Lessee and Manager, in form and substance reasonably acceptable to Lender, pursuant to which each Manager is to provide management and other services with respect to the applicable Property, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof; provided that, as long as the Non-Affiliated Lessee leases the Miami Lakes Property or the Miami Airport West Property, as to each such Property, the term “Management Agreement” shall exclude any management agreement entered into by such Operating Lessee.

“Manager” shall mean, individually or collectively, as the context may require, each manager of a Property under the terms of a Management Agreement.  As of the date hereof, each Manager of each Property is set forth on Schedule B attached hereto.  No replacement or substitute Manager shall be selected other than in accordance with the terms hereof.

“Manager Replacement Reserve Account” shall have the meaning set forth in Section 9.2(b).

“Manager Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section 9.2(b).

“Marriott” shall mean, individually or collectively, as the context shall require, Residence Inn By Marriott, Inc. and Towneplace Management Corporation.

12

“Marriott Managed Property” shall mean each Property managed by Marriott pursuant to a Management Agreement in effect as of the Closing Date and approved by Lender.

“Marriott Management Agreement” shall mean each Management Agreement in effect as of the Closing Date between Affiliated Lessee and Marriott, as amended by the Marriott Pooling Agreement, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof.

“Marriott Pooling Agreement” shall mean that certain Pooling Agreement dated as of October 10, 2003 by and among Residence Inn By Marriott, Inc., Towneplace Management Corporation, RFS Partnership, L.P., RFS Financing Partnership, L.P. and CNL Rose SPE Tenant Corp. with respect to the Marriott Managed Properties, the interests of RFS Partnership, L.P. and RFS Financing Partnership, L.P. in which have been assigned to Borrower as of the date hereof, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof.

“Marriott Replacement Reserve Account” shall have the meaning set forth in Section 9.2(b) hereof.

“Maturity Date” shall mean the Payment Date occurring in December, 2006, as such date may be extended pursuant to Section 2.3(b) hereof.

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

“Member” shall have the meaning set forth in Section 6.1(c) hereof.

“Mezzanine Debt Service” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments under the Mezzanine Loan.

“Mezzanine Borrower” shall mean Rose Mezzanine SPE 1, LP, a Delaware limited partnership.

“Mezzanine Lender” shall mean the entity making the Mezzanine Loan.

“Mezzanine Loan” shall mean that certain mezzanine loan in the original principal amount of $35,000,000.00 to Rose Mezzanine SPE, LP, the limited partner of Borrower and sole member of Rose SPE 1 GP, LLC, the general partner of Borrower.

“Miami Airport West Property” shall have the meaning set forth on Schedule B hereto.

“Miami Lakes Property” shall have the meaning set forth on Schedule B hereto.

“Moody’s” shall mean Moody’s Investor Services, Inc.

13

“Monthly Payment Amount” shall mean the monthly payment of interest due on each Payment Date equal to the interest that has or will accrue at the Note Rate during the Interest Period in which the applicable Payment Date shall occur based on the outstanding principal balance of the Note (a) as the same shall exist on the Closing Date in the instance of the First Payment Date and (b) thereafter as the same shall exist on the Selected Day immediately preceding the applicable Payment Date.

“Mortgage” shall mean, collectively, each first priority mortgage/deed of trust/deed to secure debt and security agreement encumbering the applicable Property(ies), originally executed and delivered by the applicable Original Borrowers to the Original Lenders as security for the Bridge Loan and (a) assigned by (i) the Original Lenders to Lender and (ii) the applicable Original Borrower to Borrower pursuant to the Loan Modification Agreement and (b) further modified by the Loan Modification Agreement and/or certain amendments of even date herewith, as the same may be further amended, restated, replaced, supplemented or otherwise modified from time to time.  “Mortgage” means any of the Mortgages.

“Net Operating Income” shall mean, with respect to any period of time, the amount obtained by subtracting Operating Expenses from Operating Income, as such amount may be adjusted by Lender in its good faith discretion based on Lender’s current underwriting standards and any underwriting standards then in use by any of the Rating Agencies, including without limitation, adjustments for vacancy allowance.

“Net Proceeds” shall have the meaning set forth in Section 8.4(b) hereof.

“Net Proceeds Deficiency” shall have the meaning set forth in Section 8.4(b)(vi) hereof.

“Non-Affiliated Lessee” shall mean, individually or collectively, as the context may require, each operating lessee under an Operating Lease, which is not an Affiliate of Borrower, provided that such operating lessee shall be selected in accordance with the terms hereof.  As of the date hereof, the term Non-Affiliated Lessee shall refer to Landcom Hospitality Management, Inc., in its capacity as the lessee of (a) the Miami Lakes Property and (b) the Miami Airport West Property.

“Note” shall have the meaning set forth in the Recitals hereto.

“Note Rate” shall mean (a) with respect to the Interim Interest Period, an interest rate per annum equal to 3.060%; and (b) with respect to each Interest Period thereafter, through and including the Interest Period in which the Maturity Date or Extended Maturity Date, as applicable, shall occur, an interest rate per annum equal to (i) the LIBOR Rate (in all cases where clause (ii) below does not apply), or (ii) the Static LIBOR Rate, to the extent provided in accordance with the provisions of Section 2.2(b).

“OFAC” shall have the meaning set forth in Section 4.40 hereof.

“Offering Document Date” shall have the meaning set forth in Section 5.11(c)(i)(D) hereof.

14

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed by an authorized officer of the general partner of Borrower.

“Operating Expenses” shall mean, with respect to any period of time, the total of all expenses actually paid or payable, computed in accordance with GAAP, of whatever kind relating to the operation, maintenance and management of each Property, including without limitation, utilities, ordinary repairs and maintenance, Insurance Premiums, Ground Rent, license and franchise fees, Taxes and Other Charges, advertising expenses, payroll and related taxes, computer processing charges, management fees equal to the greater of four percent (4%) of the Operating Income of each Property and the management fees actually paid under each Management Agreement, operational equipment or other lease payments as approved by Lender, FF&E expenditures equal to the greater of five percent (5%) per annum and the actual FF&E expenditures per annum with respect to each Property, without duplication of any other item identified above, all payments required to be made pursuant to any Franchise Agreement and/or Management Agreement, but specifically excluding depreciation and amortization, income taxes, Debt Service, any incentive fees due under the Management Agreement, any item of expense that in accordance with GAAP should be capitalized but only to the extent the same would qualify for funding from the Reserve Accounts, any item of expense that would otherwise be covered by the provisions hereof but which is paid by any Tenant (other than any Affiliated Lessee) under such Tenant’s Lease or other agreement, and deposits into the Reserve Accounts.

“Operating Expense Reserve Account” shall have the meaning set forth in Section 9.8 hereof.

“Operating Expense Reserve Funds” shall have the meaning set forth in Section 9.8 hereof.

“Operating Income” shall mean, with respect to any period of time, all income, computed in accordance with GAAP, derived from the ownership and operation of  each Property from whatever source, including, but not limited to, Rents, utility charges, escalations, forfeited security deposits, interest on credit accounts, service fees or charges, license fees, parking fees, rent concessions or credits, and other required pass-throughs but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, refunds and uncollectible accounts, sales of furniture, fixtures and equipment, interest income from any source other than the escrow accounts, Reserve Accounts or other accounts required pursuant to the Loan Documents, Insurance Proceeds (other than business interruption or other loss of income insurance), Awards, percentage rents, unforfeited security deposits, utility and other similar deposits, income from tenants not paying rent, income from tenants in bankruptcy, non-recurring or extraordinary income, including, without limitation lease termination payments, and any disbursements to Borrower from the Reserve Funds.

“Operating Lease” shall mean, individually or collectively, as the context may require, the operating lease or similar agreement entered into by and between Borrower and the applicable Operating Lessee, which governs the operation of one of more of the Properties as the same may be amended, restated, replaced, supplemented or modified from time to time, in accordance with the terms hereof.

15

“Operating Lessee” shall mean, individually or collectively, as the context may require, Affiliated Lessee and Non-Affiliated Lessee, together with any substitutes or replacements determined in accordance with the terms hereof.

“Other Charges” shall mean all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining any Property, now or hereafter levied or assessed or imposed against any Property or any part thereof.

“Other Replacement Reserve Account” shall have the meaning set forth in Section 9.2(b) hereof.

“Other Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section 9.2(b).

“Participations” shall have the meaning set forth in Section 13.1 hereof.

“Partners’ Capital” means, as of any date of determination, with respect to any Person, consolidated partner’s capital of such Person as of that date determined in accordance with GAAP.

“Patriot Act” shall have the meaning set forth in Section 4.40 hereof.

“Payment Date” shall mean the day that is seven (7) Business Days prior to the Selected Day.

“Permitted Encumbrances” shall mean collectively, (a) the Lien and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent, (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s reasonable discretion, and (e) such other easements reasonably created by Borrower in the ordinary course of business which do not have (and are not anticipated to have) a material adverse affect on the value, use, operation or enjoyment of the applicable Property as a hotel of a similar type as the hotel situated on such Property as of the Closing Date or on the ability of Borrower to perform its obligations (including its payment obligations under this Agreement, the Note and the other Loan Documents).

“Permitted Investments” shall mean to the extent available from Lender or Lender’s servicer for deposits in the Reserve Accounts, any one or more of the following obligations or securities acquired at a purchase price of not greater than par, including those issued by a servicer of the Loan, the trustee under any securitization or any of their respective Affiliates, payable on demand or having a maturity date not later than the Business Day immediately prior to the date on which the funds used to acquire such investment are required to be used under this Agreement and meeting one of the appropriate standards set forth below:

(a)           obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America, including, without

16

limitation, obligations of: the U.S. Treasury (all direct or fully guaranteed obligations), the Farmers Home Administration (certificates of beneficial ownership), the General Services Administration (participation certificates), the U.S. Maritime Administration (guaranteed Title XI financing), the Small Business Administration (guaranteed participation certificates and guaranteed pool certificates), the U.S. Department of Housing and Urban Development (local authority bonds) and the Washington Metropolitan Area Transit Authority (guaranteed transit bonds); provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) be rated “AAA” or the equivalent by each of the Rating Agencies, (iii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iv) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (v) such investments must not be subject to liquidation prior to their maturity;

(b)           Federal Housing Administration debentures;

(c)           obligations of the following United States government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt obligations); provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

(d)           federal funds, unsecured certificates of deposit, time deposits, bankers’ acceptances and repurchase agreements with maturities of not more than 365 days of any bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

(e)           fully Federal Deposit Insurance Corporation-insured demand and time deposits in, or certificates of deposit of, or bankers’ acceptances with maturities of not more than 365 days and issued by, any bank or trust company, savings and loan association or savings bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the

17

highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

(f)            debt obligations with maturities of not more than 365 days and at all times rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) in its highest long-term unsecured rating category; provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

(g)           commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) with maturities of not more than 365 days and that at all times is rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) in its highest short-term unsecured debt rating; provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

(h)           units of taxable money market funds or mutual funds, with maturities of not more than 365 days and which funds are regulated investment companies, seek to maintain a constant net asset value per share and invest solely in obligations backed by the full faith and credit of the United States, which funds have the highest rating available from each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) for money market funds or mutual funds; and

(i)            any other security, obligation or investment which has been approved as a Permitted Investment in writing by (i) Lender and (ii) each Rating Agency, as evidenced by a

18

written confirmation that the designation of such security, obligation or investment as a Permitted Investment will not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities by such Rating Agency;

provided, however, that no obligation or security shall be a Permitted Investment if (A) such obligation or security evidences a right to receive only interest payments, (B) the right to receive principal and interest payments on such obligation or security are derived from an underlying investment that provides a yield to maturity in excess of one hundred twenty percent (120%) of the yield to maturity at par of such underlying investment or (C) such obligation or security has a remaining term to maturity in excess of one (1) year.

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

“Personal Property” shall have the meaning set forth in the granting clause of the Mortgages.

“Physical Conditions Report” shall mean a report prepared by a company reasonably satisfactory to Lender regarding the physical condition of each Property, satisfactory in form and substance to Lender in its reasonable discretion (the form  of reports accepted by Lender as of the Closing Date shall be presumed to be in acceptable form for reports to be submitted thereafter in accordance with the terms hereof).

 “PIP Report” shall mean any property improvement plan or other similar report issued by any Franchisor or Manager (with respect to any Property which is not subject to a Franchise Agreement), with respect to any repairs, replacements, improvements or additions as may be required under the applicable Franchise Agreement or Management Agreement.

“PIP Reserve Account” shall have the meaning set forth in Section 9.2(c) hereof.

“PIP Reserve Funds” shall have the meaning set forth in Section 9.2(c) hereof.

“PIP Reserve Monthly Deposit” shall have the meaning set forth in Section 9.2(c) hereof.

“Policies” shall have the meaning specified in Section 8.1(b) hereof.

“Policy” shall have the meaning specified in Section 8.1(b) hereof.

“Prohibited Transfer” shall have the meaning set forth in Section 7.2(a) hereof.

“Properties” shall mean each parcel of real property (or leasehold interest in real property demised under either Ground Lease, as the case may be), the Improvements thereon and all Personal Property owned by Borrower and encumbered by the Mortgages, together with all rights pertaining to such property and Improvements, as more particularly described in the

19

granting clause of the Mortgages and referred to therein as the “Property”.  “Property” means any of the Properties.

“Provided Information” shall have the meaning set forth in Section 13.4(a) hereof.

“Qualified Lessee” shall mean (a) CNL Rose SPE Tenant Corp.; (b) an entity which is an Affiliate of Borrower, including, any then existing Affiliated Lessee, provided that (i) no Default or Event of Default shall exist hereunder, (ii) in the instance of an entity which is then an Affiliated Lessee, such entity is not then in default beyond any applicable notice or cure period under any Operating Lease, Franchise Agreement or Management Agreement to which it is a party, (iii) such entity shall be a “special purpose entity” containing (A) the same special purpose entity covenants as set forth in CNL Rose SPE Tenant Corp.’s organizational documents as the same shall exist as of the Closing Date, and (B) such other special purpose entity covenants or provisions as may then be required by the Rating Agencies, (iv) Lender shall have first received a substantive non-consolidation opinion with respect to the appointment of such entity as successor lessee under any Operating Lease and (v) a Qualified Manager shall be managing each related Property pursuant to a Management Agreement in form acceptable to Lender or (c) a hotel operating company which at the time of its engagement as Operating Lessee (i) shall be (or when considered together with any Affiliate thereof, shall be) operating and controlling full-service hotels having an aggregate of at least 2,500 rooms and 20 hotel properties similar to the Properties, exclusive of rooms located on any Property and the Properties, (ii) shall be approved by Lender, which approval shall not be unreasonably withheld and (iii) for which Lender shall have received written confirmation from the Rating Agencies that the appointment of such operating lessee shall not result in a downgrade, withdrawal or qualification of the initial, or if higher, then current ratings issued in connection with a Securitization, or if a Securitization has not occurred, any ratings to be assigned in connection with a Securitization.

“Qualified Manager” shall mean a reputable and experienced professional management organization (a) which manages, together with its Affiliates, full-service hotels, having in aggregate at least 2,500 rooms and 20 hotel properties similar to the Properties, exclusive of rooms located on any Property and the Properties and (b) approved by Lender, which approval shall not have been unreasonably withheld and for which Lender shall have received (i) written confirmation from the Rating Agencies that the employment of such manager will not result in a downgrade, withdrawal or qualification of the initial, or if higher, then current ratings issued in connection with a Securitization, or if a Securitization has not occurred, any ratings to be assigned in connection with a Securitization, and (ii) with respect to any Affiliated Manager, a substantive non-consolidation opinion.

“Rate Cap” shall mean an interest rate cap with a termination date no earlier than the end of the Interest Period in which the initial Maturity Date occurs, entered into with Bank of America, N.A. or an Acceptable Counterparty with a notional amount equal to the Loan for the term of the Loan and a LIBOR strike price not greater than seven percent (7.0 %); provided, however, if the provider of any Rate Cap (including, but not limited to, Bank of America, N.A.) ceases to be an Acceptable Counterparty, Borrower shall obtain a replacement Rate Cap from an Acceptable Counterparty within ten (10) Business Days of receipt of notice from Lender or Borrower’s obtaining knowledge that the then current counterparty under such Rate Cap is no longer an Acceptable Counterparty; until such time as a replacement provider is obtained in

20

accordance with the above provisions, the current provider will continue to perform its obligations under the Rate Cap; and provided, further, any replacement Rate Cap shall be accompanied by legal opinions regarding the Rate Cap, in form and substance acceptable to Lender, including, without limitation opinions with respect to (i) enforceability, (ii) payment priority, (iii) choice of law and (iv) enforcement of judgments.  Furthermore, each Rate Cap shall provide for (i) the calculation of interest, (ii) the determination of the interest rate, (iii) the modification of the Interest Period and (iv) the distribution of payments thereunder to be identical to the definition of Interest Period set forth herein.

“Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other nationally-recognized statistical rating agency which has been approved by Lender, provided that from and after the Securitization Date, such term shall only refer to the nationally-recognized statistical rating agency(ies) rating the securities offered in connection with the Securitization.

“REA” shall mean, collectively or individually, as the context may require, any “construction, operation and reciprocal easement agreement” or similar agreement (including any “separate agreement” or other agreement between Borrower and one or more other parties to an REA with respect to such REA) affecting any Property or portion thereof.

“Release” shall have the meaning set forth in Section 12.5 hereof.

“Release Price” shall mean 120% times the then Allocated Loan Amount of the Property(ies) being released.

 “REMIC Trust” shall mean a “real estate mortgage investment conduit” (within the meaning of Section 860D, or applicable successor provisions, of the Code) that holds the Note.

“Rent Roll” shall have the meaning set forth in Section 4.25 hereof.

“Rents” shall have the meaning set forth in the Mortgages.

“Replacement Rate Cap” shall mean an interest rate cap from an Acceptable Counterparty with terms identical to the Rate Cap.

“Replacement Reserve Account” shall have the meaning set forth in Section 9.2(b) hereof.

“Replacement Reserve Funds” shall have the meaning set forth in Section 9.2(b) hereof.

“Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section 9.2(b) hereof.

“Replacements” shall have the meaning set forth in Section 9.2(a) hereof.

“Required PIP Replacements” shall have the meaning set forth in Section 9.2(c) hereof.

“Required Repair Account” shall have the meaning set forth in Section 9.1(b) hereof.

21

“Required Repair Funds” shall have the meaning set forth in Section 9.1(b) hereof.

“Required Repairs” shall have the meaning set forth in Section 9.1(a) hereof.

“Required Work” shall have the meaning set forth in Section 9.4 hereof.

“Reserve Accounts” shall mean the Tax and Insurance Reserve Account, the Replacement Reserve Account, the Required Repair Account, the Excess Cash Reserve Account (if applicable), Operating Expense Account, the Extraordinary Expense Reserve Account,Ground Rent Reserve Account, Lease Enhancement Account, the PIP Reserve Account and any other escrow account established by the Loan Documents.

“Reserve Funds” shall mean the Tax and Insurance Reserve Funds, the Replacement Reserve Funds, the Required Repair Funds, the Ground Rent Reserve Funds, the Excess Cash Reserve Funds (if applicable), the Operating Expense Reserve Funds, the Extraordinary Expense Reserve Funds, the Lease Enhancement Funds, the PIP Reserve Funds and any other escrow funds established by the Loan Documents.

“Reserve Percentage” shall mean, with respect to any day of any Interest Period, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the maximum reserve requirement (including basic, supplemental, emergency, special and marginal reserves) generally applicable to financial institutions regulated by the Federal Reserve Board comparable in size and type to Lender in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on the Loan is determined), whether or not Lender has any Eurocurrency liabilities or such requirement otherwise in fact applies to Lender.  The LIBOR Rate shall be adjusted automatically as of the effective date of each change in the Reserve Percentage.  As of the date hereof, the Reserve Percentage is zero, however, there can be no assurance as to what such amount may be in the future.

“Restoration” shall mean, following the occurrence of a Casualty or a Condemnation which is of a type necessitating the repair of any Property, the completion of the repair and restoration of such Property as nearly as possible to the condition such Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender.

“Restoration Consultant” shall have the meaning set forth in Section 8.4(b)(iii) hereof.

“Restoration Retainage” shall have the meaning set forth in Section 8.4(b)(iv) hereof.

“Restricted Party” shall have the meaning set forth in Section 7.1 hereof.

“Sale or Pledge” shall have the meaning set forth in Section 7.1 hereof.

“Securities” shall have the meaning set forth in Section 13.1 hereof.

“Securities Act” shall mean the Securities Act of 1933, as amended.

22

“Securities Liabilities” shall have the meaning set forth in Section 13.5 hereof.

“Securitization” shall have the meaning set forth in Section 13.1 hereof.

“Securitization Closing Date” shall mean a date selected by Lender in its sole discretion by providing not less than forty-eight (48) hours prior notice to Borrower.

“Securitization Fee” has the meaning set forth in Section 17.5 hereof.

“Selected Day” means the fifteenth (15th) day of each calendar month or such other date as determined by the Lender pursuant to Section 2.2(d) hereof.

“SPE Component Entity” shall have the meaning set forth in Section 6.1(b) hereof.

“Special Member” shall have the meaning set forth in Section 6.1(c) hereof.

“Standard Statements” shall have the meaning set forth in Section 5.11(c)(i)(A) hereof.

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

“State” shall mean the state or states in which any Property or any part thereof is located.

“Static LIBOR Rate” shall have the meaning set forth in Section 2.2(b) hereof.

“Static LIBOR Rate Loan” shall have the meaning set forth in Section 2.3(f)(iii) hereof.

“Subordination, Attornment and Security Agreement” shall mean for each Operating Lease with an Affiliated Lessee, a Subordination, Attornment and Security Agreement or other similar agreement among Lender, Borrower and the Affiliated Lessee, in the form acceptable to Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof.

“Subordination, Non-Disturbance and Attornment Agreement” shall mean with respect to the Operating Leases between Borrower and any Non-Affiliated Lessee, a Subordination, Non-Disturbance and Attornment Agreement, by and among Lender, Borrower and the applicable Non-Affiliated Lessee, in the form acceptable to Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company, or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.

“Syndication” shall have the meaning set forth in Section 13.1 hereof.

23

“Tax and Insurance Reserve Funds” shall have the meaning set forth in Section 9.6 hereof.

“Tax and Insurance Reserve Account” shall have the meaning set forth in Section 9.6 hereof.

“Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against any Property or part thereof.

“Tenant” shall mean any Person (including, but not limited to, any Operating Lessee) leasing, subleasing or otherwise occupying any portion of a Property under a Lease or other occupancy agreement with Borrower or Operating Lessee.

“Title Insurance Policy” shall mean individually or collectively, as the context shall require, each ALTA mortgagee title insurance policy issued with respect to each Property and insuring the lien of the corresponding Mortgage.

“Transferee” shall have the meaning set forth in Section 7.5 hereof.

“Tribunal” shall mean any state, commonwealth, federal, foreign, territorial or other court or governmental department, commission, board, bureau, district, authority, agency, central bank, or instrumentality, or any arbitration authority.

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the State where the applicable Property is located.

“Underwriter Group” shall have the meaning set forth in Section 13.5(b) hereof.

Section 1.2.        PRINCIPLES OF CONSTRUCTION

All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified.  All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise.  Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

ARTICLE 2
GENERAL TERMS

Section 2.1.        LOAN COMMITMENT; DISBURSEMENT TO BORROWER

(a)           Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date.

24

(b)           Borrower may request and receive only one borrowing in respect of the Loan and any amount borrowed and repaid in respect of the Loan may not be reborrowed.

(c)           The Loan shall be evidenced by the Note and secured by the Mortgages and the other Loan Documents.

(d)           Borrower shall use the proceeds of the Loan to (i) pay certain costs in connection with the financing of the Properties, (ii) make deposits into the Reserve Funds on the Closing Date in the amounts provided herein, (iii) pay costs and expenses incurred in connection with the closing of the Loan, as approved by Lender, (iv) fund any working capital requirements of the Properties, and (v) distribute the balance, if any, to its partners.

Section 2.2.        INTEREST RATE

(a)           Note Rate.  The outstanding principal balance of the Loan shall bear interest at the Note Rate.  Except as otherwise set forth in this Agreement, interest shall be paid in arrears.

(b)           Unavailability of LIBOR Rate.  In the event that Lender shall have determined (which determination shall be conclusive and binding upon Borrower absent manifest error) that by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate, then Lender shall forthwith give notice by telephone of such determination, confirmed in writing, to Borrower at least one (1) Business Day prior to the last day of the related Interest Period. If such notice is given, the Note Rate, commencing with the first (1st) day of the next succeeding Interest Period, shall be the LIBOR Rate in effect for the most recent Interest Period (the “Static LIBOR Rate”).

If, pursuant to the terms of this Agreement, the Loan has been converted to the Static LIBOR Rate and Lender shall determine (which determination shall be conclusive and binding upon Borrower absent manifest error) that the event(s) or circumstance(s) which resulted in such conversion shall no longer be applicable, Lender shall give notice thereof to Borrower, and the Static LIBOR Rate shall convert to the LIBOR Rate effective on the first day of the next succeeding Interest Period. Notwithstanding any provision of this Agreement to the contrary, in no event shall Borrower have the right to elect to convert from the LIBOR Rate to the Static LIBOR Rate.

(c)           Computations and Determinations.  All interest shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed during an Interest Period.  Lender shall determine each interest rate applicable to the Debt in accordance with this Agreement and its determination thereof shall be conclusive in the absence of manifest error.  The books and records of Lender shall be prima facie evidence of all sums owing to Lender from time to time under this Agreement, but the failure to record any such information shall not limit or affect the obligations of Borrower under the Loan Documents.

(d)           Selected Day.  Prior to a Securitization, Lender may in its sole discretion change the day of the month that will constitute the Selected Day.

(e)           Default Rate.  Any principal of, and to the extent permitted by applicable law, any interest on the Note, and any other sum payable hereunder, which is not paid when due shall bear

25

interest from the date due and payable until paid, payable on demand, at a rate per annum (the “Default Rate”) equal to the Note Rate plus four percent (4%).

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

Section 2.3.        LOAN PAYMENTS

(a)           Payments.  Borrower agrees to pay sums under the Note in installments as follows:

(i)            a payment on the Closing Date of all interest that will accrue on the principal amount of the Note during the Interim Interest Period;

(ii)           a payment on each Payment Date of interest equal to the Monthly Payment Amount and any other interest that has or will accrue hereunder during the Interest Period in which such Payment Date occurs; and

(iii)          the outstanding principal amount and all interest thereon (including interest through the end of the Interest Period in which the Maturity Date occurs) shall be due and payable on the Payment Date occurring in December, 2006 (the “Maturity Date”), unless the Maturity Date is extended pursuant to Section 2.3(b) below.

(b)           Extension of the Maturity Date.  Borrower shall have the option to extend the term of the Loan beyond the initial Maturity Date for two (2) successive terms (each, an “Extension Option”) of one (1) year each to (x) the Payment Date occurring in December, 2007 and (y) the Payment Date occurring in December, 2008 (each such date, the “Extended Maturity Date”), respectively, and, as to each Extension Option, upon satisfaction of the following terms and conditions:

(i)            no Event of Default shall have occurred and be continuing at the time the applicable Extension Option is exercised and on the date that the applicable extension term is commenced;

26

(ii)           Borrower shall notify Lender of its irrevocable election to extend the Maturity Date as aforesaid not earlier than three (3) months, and no later than one (1) month, prior to the then applicable Maturity Date;

(iii)          Borrower shall obtain and deliver to Lender prior to exercise of such Extension Option, one or more Replacement Rate Caps, which Replacement Rate Caps shall be effective commencing on the first day of such Extension Option and shall have a maturity date not earlier than the end of the Interest Period in which the applicable Extended Maturity Date shall occur; and

(iv)          in connection with each Extension Option, Borrower shall have delivered to Lender together with its notice pursuant to subsection (b) of this Section 2.3 and as of the commencement of the applicable Extension Option, an Officer’s Certificate in form acceptable to the Lender (A) certifying that each of the representations and warranties of Borrower contained in the Loan Documents is true, complete and correct in all material respects as of the date of such Officer’s Certificate to the extent such representations and warranties are not matters which by their nature can no longer be true and correct as a result of the passage of time or (B) specifying any exceptions to such representations and warranties as may be acceptable to Lender in its discretion.

All references in this Agreement and in the other Loan Documents to the Maturity Date shall mean the applicable Extended Maturity Date in the event the applicable Extension Option is exercised.

(c)           Payments after Default.  Upon the occurrence and during the continuance of an Event of Default, (i) interest on the outstanding principal balance of the Loan and, to the extent permitted by law, overdue interest and other amounts due in respect of the Loan shall accrue at the Default Rate, and (ii) Lender shall be entitled to receive and Borrower shall pay to Lender all cash flow from the Properties in accordance with the terms of the Cash Management Agreement, such amount to be applied by Lender to the payment of the Debt in such order as Lender shall determine in its sole discretion, including, without limitation, alternating applications thereof between interest and principal.  Interest at the Default Rate shall be computed from the occurrence of the Event of Default until the earlier of (x) the actual receipt and collection of the Debt (or that portion thereof that is then due) and (y) the cure of such Event of Default.  To the extent permitted by applicable law, interest at the Default Rate shall be added to the Debt, shall itself accrue interest at the same rate as the Loan and shall be secured by the Mortgages.  This paragraph shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default; the acceptance of any payment from Borrower shall not be deemed to cure or constitute a waiver of any Event of Default; and Lender retains its rights under this Agreement to accelerate and to continue to demand payment of the Debt upon the happening of and during the continuance any Event of Default, despite any payment by Borrower to Lender.

(d)           Late Payment Charge.  If any principal or interest payment is not paid by Borrower on or before three (3) Business Days after the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred

27

by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment.  Any such amount shall be secured by the Mortgages and the other Loan Documents to the extent permitted by applicable law.

(e)           Method and Place of Payment.  Each payment by Borrower hereunder or under the Note shall be payable at P.O. Box 515228, Los Angeles, California 90051-6528, Attn:  Commercial Mortgage Loan Servicing #1777, or at such other place as the Lender may designate from time to time in writing, on the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower.  Each payment by Borrower hereunder or under the Note shall be made in funds settled through the New York Clearing House Interbank Payments System or other funds immediately available to Lender by 2:00 p.m., New York City time, on the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower.  Whenever any payment hereunder or under the Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the first Business Day preceding such scheduled due date. Notwithstanding the foregoing, amounts due under the Loan Documents shall be deemed paid so long as there is sufficient money in the Cash Management Account for payment of such amounts pursuant to the Cash Management Agreement and Lender’s access to such money has not been constrained or constricted in any manner.

(f)            Additional Payment Provisions.

(i)            If at any time after the date hereof, Lender (which shall include, for purposes of this Section, any corporation controlling Lender) reasonably determines that due to the adoption or modification of any Legal Requirement regarding taxation, Lender’s required levels of reserves, deposits, Federal Deposit Insurance Corporation insurance or capital (including any allocation of capital requirements or conditions), or similar requirements, or any interpretation or administration thereof by any Tribunal or compliance of Lender with any of such requirements, has or would have the effect of (a) increasing Lender’s costs relating to the Loan, or (b) reducing the yield or rate of return of Lender on the Loan, to a level below that which Lender could have achieved but for the adoption or modification of any such Legal Requirements, Borrower shall, within fifteen (15) days of any request by Lender, pay to Lender such additional amounts as (in Lender’s sole judgment, after good faith and reasonable computation) will compensate Lender for such increase in costs or reduction in yield or rate of return of Lender (a “Consequential Loss”).  No failure by Lender to immediately demand payment of any additional amounts payable hereunder shall constitute a waiver of Lender’s right to demand payment of such amounts at any subsequent time.  Nothing herein contained shall be construed or so operate as to require Borrower to pay any interest, fees, costs or charges greater than is permitted by applicable Law.

(ii)           All payments made by Borrower hereunder shall be made free and clear of, and without reduction for or on account of, income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions, reserves or withholdings imposed, levied, collected, withheld or assessed by any Governmental Authorities, which are imposed, enacted or become effective on or after the date hereof (such non-excluded taxes being referred to collectively as “Foreign Taxes”), excluding income and franchise taxes of the

28

United States of America or any political subdivision or taxing authority thereof or therein.  If any Foreign Taxes are required to be withheld from any amounts payable to Lender hereunder and such Foreign Taxes are not a result of activities of Lender unrelated to the Loan or Borrower, the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after payment of all Foreign Taxes) interest or any such other amounts payable hereunder at the rate or in the amounts specified hereunder. Whenever any Foreign Tax is payable pursuant to applicable law by Borrower, as promptly as possible thereafter, Borrower shall send to Lender an original official receipt, if available, or certified copy thereof showing payment of such Foreign Tax. Borrower hereby indemnifies Lender for any incremental taxes, interest or penalties that may become payable by Lender which may result from any failure by Borrower to pay any such Foreign Tax when due to the appropriate taxing authority of which Lender shall have provided Borrower with prior written notice, if possible, or any failure by Borrower to remit to Lender the required receipts or other required documentary evidence. Lender’s inability to notify Borrower of any such Foreign Tax in accordance with the immediately preceding sentence shall in no way relieve Borrower of its obligations under this Section 2.3(f)(ii).

(iii)          If any requirement of law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for Lender to make or maintain a Loan with the Note Rate being based on LIBOR as contemplated hereunder, (i) the obligation of Lender hereunder to make such Loan based on LIBOR or to convert the Loan from the Static LIBOR Rate to the LIBOR Rate shall be canceled forthwith and (ii) any outstanding LIBOR Loan shall be converted automatically to a loan bearing interest at the Static LIBOR Rate (the “Static LIBOR Rate Loan”) on the next succeeding Payment Date or within such earlier period as required by law.  Borrower hereby agrees promptly to pay Lender, upon demand, any additional amounts necessary to compensate Lender for any costs incurred by Lender in making any conversion in accordance with this Agreement, including, without limitation, any interest or fees payable by Lender to lenders of funds obtained by it in order to make or maintain the LIBOR Loan hereunder.  If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.3(f)(iii), Lender shall provide Borrower with not less than ninety (90) days written notice specifying in reasonable detail the event by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional costs.  Lender’s notice of such costs, as certified to Borrower, shall be conclusive absent manifest error.

(iv)          In the event that any change in any requirement of law or in the interpretation or application thereof, or compliance by Lender with any request or directive (whether or not having the force of law) hereafter issued from any central bank or other Governmental Authority:

(A)          shall hereafter impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of Lender

29

which is not otherwise included in the determination of the LIBOR Rate hereunder;

(B)           shall hereafter have the effect of reducing the rate of return on Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration Lender’s policies with respect to capital adequacy) by any amount deemed by Lender to be material; or

(C)           shall hereafter impose on Lender any other condition and the result of any of the foregoing is to increase the cost to Lender of making, renewing or maintaining loans or extensions of credit or to reduce any amount receivable hereunder;

then, in any such case, Borrower shall promptly pay Lender, upon demand, any additional amounts necessary to compensate Lender for such additional cost or reduced amount receivable which Lender deems to be material as determined by Lender. If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.3(f)(iv), Lender shall provide Borrower with not less than ninety (90) days written notice specifying in reasonable detail the event by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional cost or reduced amount. A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive in the absence of manifest error. This provision shall survive payment of the Note and the satisfaction of all other obligations of Borrower under this Agreement and the Loan Documents.

(v)           Borrower agrees to indemnify Lender and to hold Lender harmless from any loss or expense which Lender sustains or incurs as a consequence of (i) any default by Borrower in payment of the principal of or interest on a LIBOR Loan, including, without limitation, any such loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain a LIBOR Loan hereunder, (ii) any prepayment (whether voluntary or mandatory) of the LIBOR Loan that did not include all interest which had accrued (or would have accrued) at the Note Rate through the end of the related Interest Period, including, without limitation, such loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain the LIBOR Loan hereunder, and (iii) the conversion (for any reason whatsoever, whether voluntary or involuntary) of the Note Rate from the LIBOR Rate to the Static LIBOR Rate with respect to any portion of the outstanding principal amount of the Loan then bearing interest at the LIBOR Rate on a date other than the Payment Date immediately following the last day of an Interest Period, including, without limitation, such loss or expenses arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain a LIBOR Loan hereunder (the amounts referred to in clauses (i), (ii) and (iii) are herein referred to collectively as the “Breakage Costs”).  This provision shall survive payment of the Note in full and the satisfaction of all other obligations of Borrower under this Agreement and the other Loan Documents.

30

(vi)          Lender shall not be entitled to claim compensation pursuant to this Section 2.3(f) for any Foreign Taxes, increased cost or reduction in amounts received or receivable hereunder, or any reduced rate of return, which was incurred or which accrued more than one hundred eighty (180) days before the date Lender notified Borrower of the change in law or other circumstance on which such claim of compensation is based and delivered to Borrower a written statement setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.3(f), which statement shall be conclusive and binding upon all parties hereto absent manifest error.

(vii)         Within fifteen (15) days after request by Lender (or at the time of any prepayment), Borrower shall pay to Lender such amount or amounts as will compensate Lender for any loss, cost, expense, penalty, claim or liability, including any loss incurred in obtaining, prepaying, liquidating or employing deposits or other funds from third parties and any loss of yield, as determined by Lender in its judgment reasonably exercised, incurred by it with respect to the Loan as a result of the payment or prepayment of any amount on a date other than the date such amount is required or permitted to be paid or prepaid; provided that Lender delivers to Borrower a certificate as to the amounts of such costs described herein, which certificate shall be conclusive in the absence of manifest error.  Lender shall have no obligation to purchase, sell and/or match funds in connection with the funding or maintaining of the Loan or any portion thereof.  The obligations of Borrower under this Section shall survive any termination of the Loan Documents and payment of the Note and shall not be waived by any delay by Lender in seeking such compensation.

(viii)        All payments made by Borrower  hereunder or under the other Loan Documents shall be made irrespective of, and without any deduction for, any setoff, defense or counterclaims.

(ix)           Remittances in payment of any part of the Loan in less than the required amount in immediately available U.S. funds shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by the holder hereof in immediately available U.S. funds and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practices of the collecting bank or banks.

Section 2.4.        PREPAYMENTS.

(a)           Voluntary Prepayments.  Except as otherwise expressly provided herein and in Section 2.4(c)(ii) hereof, Borrower shall not have the right to prepay the Loan in whole or in part prior to the initial Maturity Date. Any partial prepayment shall be applied to the last payments of principal due under the Loan and shall reduce the outstanding principal balance of the Loan for purposes of computing the Monthly Payment Amount.

(b)           Lockout.  The Loan shall only be prepayable after the expiration of the Lockout Period.

31

(c)           Payments After the Lockout Period.

(i)            Full Prepayment.

(A)          At any time after the expiration of the Lockout Period other than during the time period in any month from and including the day after the Payment Date through and including the day prior to the Determination Date, Borrower may prepay the Loan in whole but not in part at any time upon not less than thirty (30) days prior written notice to Lender.  Any such prepayment shall include (A) in the event the prepayment occurs at any time during the period after the Payment Date occurring in June, 2005 through and including the Payment Date occurring in December, 2005, a prepayment premium in the amount of 1.75% of the then principal amount of the Loan, (B) all amounts required to be paid by Borrower under Section 2.4(c)(iii) hereof and (C) all other amounts owing by Borrower to Lender under this Agreement and the other Loan Documents, including, without limitation, any Breakage Costs incurred by Lender.

(B)           In addition to the foregoing requirements for a full prepayment of the Loan, prior to Lender’s obligation to accept a prepayment pursuant to the foregoing Section 2.4(c)(i)(A) Borrower shall have paid any amounts required to be paid under Section 2.4(c)(i) of the Mezzanine Loan Agreement to Mezzanine Lender in connection with the full prepayment of the Mezzanine Loan.

(ii)           Partial Prepayment.  Provided no Event of Default shall have occurred and is then continuing, commencing on the day after the expiration of the Lockout Period, and upon giving Lender at least thirty (30) days (but not more than ninety (90) days) prior written notice, which said notice can be given prior to the expiration of the Lockout Period in connection with the prepayment to occur following the Lockout Period, Borrower may voluntarily prepay a portion of the Loan on a Payment Date and obtain a release of a Property from the Lien of the related Mortgage, provided Borrower satisfies the following release conditions:

(A)          Borrower shall provide Lender with prior written notice specifying (1) the Payment Date on which Borrower intends to make the partial prepayment (“Release Date”) and (2) the Property proposed to be released from the Lien of the related Mortgage (the “Release Property”)

(B)           Borrower shall pay to Lender (i) the applicable Release Price in connection with any such release, (ii) all amounts payable under Section 2.4(c)(iii) below in connection with the accompanying prepayment of the Loan and any “curative”  partial prepayment permitted under clause (D) below, and (iii) any and all expenses incurred by Lender in connection with any such release, including, but not limited to, reasonable attorney’s fees and expenses, as required under clause (J) below;

32

(C)           Borrower shall pay in the event the prepayment occurs at any time during the period after the Lockout Period through and including the Payment Date occurring in December, 2005, a prepayment premium in the amount of 1.75% of the applicable Release Price;

(D)          After giving effect to the release of the Lien of the Mortgage encumbering the Release Property, (i) the Debt Service Coverage Ratio shall be no less than the greater of (A) the Debt Service Coverage Ratio as of the Closing Date or (B) the Debt Service Coverage Ratio immediately prior to such release, provided that in the event Borrower is not able to meet such Debt Service Coverage Ratio test, Borrower shall be entitled to “cure” the same by (1) pledging cash to Lender or delivering to Lender a Letter of Credit as additional security for the Loan, in which instance the amount of the Loan equal to the amount of such cash or the face value of the Letter of Credit, shall be disregarded for the purpose of determining the then outstanding principal balance of the Loan in connection with Lender’s determination of the Debt Service Coverage Ratio from and after the date of such pledge, through the date on which such additional collateral is no longer available and/or any such Letter of Credit no longer meets the definitional requirements for a Letter of Credit as set forth in Article 1 hereof, or (2) prepaying so much of the Loan as is necessary to meet the above-stated Debt Service Coverage Ratio test, provided that any such prepayment shall be accompanied by any amounts due under Section 2.4(e) hereof in connection with the prepayment of such additional amounts;

(E)           In connection with clause (D) above, Borrower shall have delivered to Lender and the Rating Agencies (1) statements of Net Operating Income and Debt Service and Mezzanine Debt Service (in both cases assuming a mortgage constant equal to ten and one-quarter percent (10.25%)) (both on a consolidated basis and a separate basis with respect to the Release Property) for the applicable measuring period and (2) based on the foregoing statements of Net Operating Income and Debt Service and Mezzanine Debt Service, calculations of the Debt Service Coverage Ratio both with and without giving effect to the proposed release, and (3) calculations of the ratios referred to in clause (D) above, accompanied by an Officer’s Certificate stating that such statements, calculations and information are true, correct and complete in all material respects;

(F)           Borrower shall deliver to Lender written confirmation from each of the applicable Rating Agencies that the proposed release will not result in the qualification, withdrawal or downgrade of any rating of any of the Securities;

(G)           Borrower shall have delivered to Lender written confirmation that Rate Cap in the aggregate notional amount of no less than the principal balance of the Loan as prepaid shall remain in full force and effect after the proposed release;

(H)          Borrower shall execute (a) amendments to the Loan Documents to the extent necessary (as determined by and reasonably acceptable

33

to Lender) and shall agree to corresponding adjustments of the reserves and escrow accounts with respect to the remaining Properties as Lender shall reasonably determine and (b) amendments to the Operating Lease or any other document related to the Release Property to the extent necessary (as determined by and reasonably acceptable to Lender) to ensure that (i) such Operating Lease or other document shall not continue to govern or relate to the Release Property and any other Property which shall act as collateral for the Loan from and after the date of the Release and (ii) the Affiliated Lessee will not be the tenant of such Release Property following the release of such Release Property from the Lien of the related Mortgage;

(I)            Borrower shall deliver to Lender such other documents, instruments, opinions and certificates as Lender may reasonably request;

(J)            Borrower shall pay all out-of-pocket costs and expenses of Lender incurred in connection with the proposed release, including Lender’s reasonable attorneys’ fees and expenses;

(K)          Borrower shall have distributed to Mezzanine Borrower and Mezzanine Borrower shall have paid any amounts required to be paid under the Mezzanine Loan Agreement to Mezzanine Lender in connection with the release of the Release Property and shall have satisfied all conditions for the release of the Release Property set forth in the Mezzanine Loan Documents;

(L)           Borrower shall submit to Lender for execution, not less than fifteen (15) days prior to the date of the proposed release, a release of Lien (and related Loan Documents) for the Release Property.  Such release documentation shall be in form appropriate in the jurisdiction in which the Release Property is located and reasonably satisfactory to Lender.  In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release;

(M)         Borrower shall provide Lender with evidence that the prepayment and release of the applicable Property is in connection with (1) a bona fide arms length sale to a third party not Affiliated with Borrower, (2) a conveyance for other bona fide substantial business purpose (other than any refinancing of a portion of the Loan) reasonably acceptable to Lender or (3) a conveyance of a Property in the instance in which Lender does not make Insurance Proceeds or Condemnation Proceeds, as the case may be, available for any restoration thereof and Borrower satisfies all the conditions of this Section 2.4(c)(ii); and

(N)          Borrower shall deposit into the PIP Reserve Account the amounts required by Lender pursuant to Section 9.2(c).

(iii)          Prepayments in General.  All payments and prepayments of the Loan, whether voluntary, involuntary, at the Maturity Date or otherwise (but exclusive of

34

prepayments made pursuant to Section 2.4(d) hereof) shall include in the event that any such repayment or prepayment is made on a day other than a Payment Date, a sum equal to the amount of interest which would have accrued under this Agreement through the end of the Interest Period in which the next Payment Date occurs.  For purposes of this Agreement, an involuntary prepayment shall be deemed to include, but not be limited to, a prepayment of the Loan in connection with or following the Lender’s acceleration of the outstanding balance of the Loan, whether or not the Mortgage is satisfied or released by foreclosure (whether by power of sale or judicial proceeding), deed in lieu of foreclosure or by other means, including, without limitation, repayment of the Loan by the Borrower or any other Person pursuant to any statutory or common law right of  redemption.

(d)           Insurance and Condemnation Proceeds; Excess Interest.  Notwithstanding any other provision herein to the contrary, and provided no Default exists, Borrower shall not be required to pay any prepayment premium in connection with any prepayment occurring solely as a result of (i) the application of Insurance Proceeds or Condemnation Proceeds pursuant to the terms of the Loan Documents, or (ii) the application of any interest in excess of the maximum rate permitted by applicable law to the reduction of the Loan.  Without limiting any other rights contained herein, Borrower may obtain a release of a Property in accordance and upon compliance with the provisions of Section 2.4(c)(ii), in the event in which such Property is affected by a Casualty or Condemnation and Lender, pursuant to the terms hereof, applies the Insurance Proceeds or Condemnation Proceeds toward repayment of the Debt.

(e)           Prepayments Prior to the Lockout Period.  If, during the Lockout Period, payment of all or any part of the Debt is tendered by Borrower or otherwise recovered by Lender, such tender or recovery shall be (a) made on the next occurring Payment Date together with the Debt Service then due and (b) deemed a voluntary prepayment by Borrower in violation of the prohibition against prepayment set forth in this Section 2.4 and Borrower shall pay, in addition to the Debt being repaid and the accompanying Debt Service payment, (x) an amount equal to the Lockout Yield Maintenance Premium and (y) the accrued and unpaid interest calculated for the full Interest Period in which such voluntary prepayment occurs.

(f)            Application of Payments.  All voluntary and involuntary prepayments on the Note shall be applied, to the extent thereof, to accrued but unpaid interest on the amount prepaid, to the remaining principal amount, and any other sums due and unpaid to Lender in connection with the Loan, in such manner and order as Lender may elect in its sole and absolute discretion, including, but not limited to, application to principal installments in inverse order of maturity.  Following the occurrence of an Event of Default, any payment made on the Note shall be applied to accrued but unpaid interest, late charges, accrued fees, the unpaid principal amount of the Note, and any other sums due and unpaid to Lender in connection with the Loan, in such manner and order as Lender may elect in its sole and absolute discretion.

35

ARTICLE 3
CONDITIONS PRECEDENT

The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrower or waiver by Lender of the following conditions precedent no later than the Closing Date

Section 3.1.        REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH CONDITIONS

The representations and warranties of Borrower and Affiliated Lessee contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date, and Lender shall have determined that no Default or an Event of Default shall have occurred and be continuing nor will any Default or Event of Default occur immediately following the Closing Date; and Borrower shall be in compliance in all material respects with all terms and conditions set forth in this Agreement and in each other Loan Document on its part to be observed or performed.

Section 3.2.        DELIVERY OF LOAN DOCUMENTS; TITLE INSURANCE; REPORTS; LEASES

(a)           Mortgage, Loan Agreement and Note.  Lender shall have received from Borrower a fully executed and acknowledged counterpart of each Mortgage and evidence that counterparts of each Mortgage and Uniform Commercial Code financing statements have been delivered to the title company for recording, in the reasonable judgment of Lender, so as to effectively create upon such recording valid and enforceable Liens upon the Properties, of the requisite priority, in favor of Lender (or such other trustee as may be required or desired under local law), subject only to the Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents.  Lender shall have also received from Borrower, Borrower Principal, the applicable Operating Lessee and Manager, as applicable, fully executed counterparts of the Cash Management Agreement, this Agreement, the Note, each Subordination, Non-Disturbance and Attornment Agreement, each Subordination, Attornment and Security Agreement, and each Assignment of Management Agreement and all other Loan Documents.

(b)           Title Insurance.  Lender shall have received a Title Insurance Policy with respect to each Property issued by a title company acceptable to Lender and dated as of the Closing Date, with reinsurance and direct access agreements acceptable to Lender.  Each such Title Insurance Policy shall (i) provide coverage in the applicable Allocated Loan Amount with tie-in endorsements with respect to the other Properties, provided that in the instance of any Property(ies) located in the State of New York or the State of Florida, no tie-in endorsement shall be required and the coverage shall be limited to the aggregate Allocated Loan Amounts of such Property(ies) located in each such state, (ii) insure Lender that the Mortgage creates a valid lien on the Properties of the requisite priority, free and clear of all exceptions from coverage other than Permitted Encumbrances and standard exceptions and exclusions from coverage (as modified by the terms of any endorsements), (iii) contain such endorsements and affirmative coverages as Lender may reasonably request, and (iv) name Lender as the insured.  Each Title

36

Insurance Policy shall be assignable.  Lender also shall have received evidence that all premiums in respect of each Title Insurance Policy have been paid.

(c)           Survey.  Lender shall have received a current title survey for each Property, certified to the title company and Lender and their successors and assigns, in form and content satisfactory to Lender and prepared by a professional and properly licensed land surveyor satisfactory to Lender in accordance with the 1999 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys.  Each survey shall meet the classification of an “Urban Survey” and the following additional items from the list of “Optional Survey Responsibilities and Specifications” (Table A) should be added to each survey:  2, 3, 4, 6, 8, 9, 10, 11 and 13.  Each such survey shall reflect the same legal description contained in the corresponding Title Insurance Policy referred to in subsection (b) above and shall include, among other things, a metes and bounds description of the real property comprising part of each Property reasonably satisfactory to Lender.  The surveyor’s seal shall be affixed to each survey and the surveyor shall provide a certification for each survey in form and substance acceptable to Lender.  Notwithstanding the foregoing, Lender hereby acknowledges (i) receipt of surveys with respect to each Property, delivered to Bank of America, N.A. in connection with the Bridge Loan and (ii) that absent any material adverse change to any Property from and after the date of such survey, each such survey shall be deemed to be acceptable for all purposes hereunder.

(d)           Insurance.  Lender shall have received copies of the Policies required hereunder, satisfactory to Lender in its sole discretion, and evidence of the payment of all Insurance Premiums payable for the existing policy period.

(e)           Environmental Reports.  Lender shall have received an Environmental Report in respect of each Property satisfactory to Lender (or an acceptable update and reliance letter relating to the applicable Environmental Report delivered to Bridge Lender in connection with the Bridge Loan).

(f)            Zoning/Building Code.  Lender shall have received evidence of compliance with zoning and building ordinances and codes with respect to each Property, including, without limitation, required certificates of occupancy, reasonably acceptable to Lender.  Notwithstanding the foregoing, Lender hereby acknowledges (i) receipt of evidence of compliance with zoning and building ordinances and codes with respect to each Property in the form of zoning reports delivered to Bank of America, N.A. in connection with the Bridge Loan and (ii) that absent any material adverse change to any Property from and after the date of such zoning reports, the same shall be deemed to be acceptable for all purposes hereunder.

(g)           Encumbrances.  Borrower shall have taken or caused to be taken such actions in such a manner so that Lender has valid and perfected first Liens as of the Closing Date on the Properties, subject only to applicable Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents, and Lender shall have received satisfactory evidence thereof.

(h)           Lien Searches.  Borrower shall have delivered to Lender certified search results pertaining to the Borrower, Borrower Principal, Affiliated Lessee and such other Persons or any

37

SPE Component Entity as reasonably required by Lender for state and federal tax liens, bankruptcy, judgment, litigation and state and local UCC filings.

Section 3.3.        RELATED DOCUMENTS

Each additional document not specifically referenced herein, but relating to the transactions contemplated herein, shall have been duly authorized, executed and delivered by all parties thereto and at Lender’s written request, Lender shall have received and approved certified copies thereof.

Section 3.4.        ORGANIZATIONAL DOCUMENTS

On or before the Closing Date, Borrower shall deliver or cause to be delivered to Lender (a) copies certified by Borrower of all organizational documentation related to Borrower, Affiliated Lessee, each SPE Component Entity and Borrower Principal which must be acceptable to Lender in its sole discretion, and (b) such other evidence of the formation, structure, existence, good standing and/or qualification to do business of the Borrower, Affiliated Lessee, each SPE Component Entity and Borrower Principal, as Lender may request in its sole discretion, including, without limitation, good standing or existence certificates, qualifications to do business in the appropriate jurisdictions, resolutions authorizing the entering into of the Loan and incumbency certificates as may be requested by Lender.

Section 3.5.        OPINIONS OF BORROWER’S COUNSEL

Lender shall have received opinions of Borrower’s counsel (a) with respect to non-consolidation issues and (b) with respect to due execution, authority, enforceability of the Loan Documents and such other matters as Lender may require, all such opinions in form, scope and substance satisfactory to Lender and Lender’s counsel in their sole discretion.

Section 3.6.        ANNUAL BUDGET

Borrower shall have delivered, and Lender shall have approved, the Annual Budget for the current fiscal year, a copy of which is attached as Exhibit A hereto.

Section 3.7.        TAXES AND OTHER CHARGES

Borrower shall have paid all Taxes and Other Charges which are due and payable (including any in arrears) relating to each Property, which amounts may be funded with proceeds of the Loan.

Section 3.8.        COMPLETION OF PROCEEDINGS

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

38

Section 3.9.        PAYMENTS

All payments, deposits or escrows required to be made or established by Borrower under this Agreement, the Note and the other Loan Documents on or before the Closing Date shall have been paid.

Section 3.10.      TRANSACTION COSTS

Except as otherwise expressly provided herein, Borrower shall have paid or reimbursed Lender for all out of pocket expenses in connection with the underwriting, negotiation, Securitization and closing of the Loan, including title insurance premiums and other title company charges; recording, registration, filing and similar fees, taxes and charges; transfer, mortgage, deed, stamp or documentary taxes or similar fees or charges; costs of third-party reports, including without limitation, environmental studies, credit reports, seismic reports, engineer’s reports, appraisals and surveys; underwriting and origination expenses; Securitization expenses; and all actual, reasonable legal fees and expenses charged by counsel to Lender.

Section 3.11.      NO MATERIAL ADVERSE CHANGE

There shall have been no material adverse change in the financial condition or business condition of any Property, Borrower, Borrower Principal, Operating Lessee, any SPE Component Entity, any Manager or any other person or party contributing to the operating income and operations of any Property since the date of the most recent financial statements and/or other information delivered to Lender.  The income and expenses of each Property, the occupancy and leases thereof, and all other features of the transaction shall be as represented to Lender without material adverse change.  Neither Borrower nor Borrower Principal, any Operating Lessee, any SPE Component Entity or any Manager shall be the subject of any bankruptcy, reorganization, or insolvency proceeding.

Section 3.12.      OPERATING LEASES

Lender shall have received (i) a certified copy of each Operating Lease, (ii) fully executed estoppels from the applicable Operating Lessee of each Property, and (iii) fully executed counterparts signed by Borrower and the applicable Operating Lessee of a Subordination, Non-Disturbance and Attornment Agreement, with respect to the Operating Leases of the Miami Lakes Property and the Miami Airport West Property, and a Subordination, Attornment and Security Agreement, with respect to each of the remaining Operating Leases, in all instances in form and substance acceptable to Lender.

Section 3.13.      LEASES; RENT ROLLS

Lender shall have received abstracts of all Leases affecting any Property (other than Operating Leases, which are addressed in Section 3.12), which shall be satisfactory in form and substance to Lender.  Lender shall have received a current certified rent roll of each Property, which shall include, but not be limited to, Operating Leases and Rents payable thereunder, reasonably satisfactory in form and substance to Lender.

39

Section 3.14.      TENANT ESTOPPELS

Lender shall have received an executed tenant estoppel letter, which shall be in form and substance satisfactory to Lender, from such Tenants (in addition to the Operating Lessees) as Lender shall require.

Section 3.15.      REA ESTOPPELS

Borrower shall have delivered to Lender an executed REA estoppel letter, which shall be in form and substance satisfactory to Lender, from each party to any REA with respect to any Property.

Section 3.16.      SUBORDINATION AND ATTORNMENT

Borrower shall have delivered to Lender executed instruments acceptable to Lender subordinating to the applicable Mortgage all of the Leases (other than the Operating Leases, which are addressed in Section 3.12) affecting each Property, to the extent designated by Lender.  Lender hereby agrees to provide upon request a reasonable and customary non-disturbance agreement as a condition to receipt of any such subordination agreement.

Section 3.17.      TAX LOT

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

Section 3.18.      PHYSICAL CONDITIONS REPORT; PIP REPORT

Lender shall have received (a) a Physical Conditions Report with respect to each Property, each such report shall be reasonably satisfactory in form and substance to Lender, and (b) any PIP Reports issued with respect to any Property.

Section 3.19.      MANAGEMENT AGREEMENT

Lender shall have received a certified copy of each Management Agreement with respect to each Property, each of which shall be satisfactory in form and substance to Lender.

Section 3.20.      APPRAISAL

Lender shall have received an appraisal of each Property, which shall be satisfactory in form and substance to Lender.  Lender hereby acknowledges (a) receipt of appraisals with respect to each Property, as delivered to Bank of America, N.A. in connection with the  Bridge Loan and (b) that each such appraisal together with any reliance letter which Lender may require in its reasonable discretion shall be deemed acceptable for all purpose under this Section 3.20 absent any material adverse change to the applicable Property from and after the date of such appraisal.

40

Section 3.21.      FINANCIAL STATEMENTS

Lender shall have received financial statements and related information in form and substance satisfactory to Lender and in compliance with any Legal Requirements promulgated by the Securities and Exchange Commission, including, without limitation, (a) operating statement as of September 30, 2003 with respect to each Property, for the year-to-date 2003, and (b) audited financial statements by an Acceptable Accountant with respect to RFS Partnership, L.P. (the prior direct/indirect owner of each Property) for the years 2002, 2001, 2000 and 1999, in all instances the same shall be accompanied by an unqualified opinion of such Acceptable Accountant that such statements have been prepared in accordance with GAAP applied on a consistent basis.

Section 3.22.      NET OPERATING INCOME

The annual Net Operating Income for all the Properties shall not be less than $20,000,000.00 as determined by Lender in its sole discretion pursuant to its standard underwriting procedures for loans which are consummated by Lender for the purpose of any Securitization.

Section 3.23.      FRANCHISE AGREEMENTS

Lender shall have received (i) a certified copy of each Franchise Agreement with respect to each Property (other than those previously disclosed to Lender for which there is no Franchise Agreement, only a Management Agreement), and (ii) a franchisor estoppel/comfort letter executed by each Franchisor under each Franchise Agreement, in form and substance reasonably satisfactory to Lender.

Section 3.24.      GROUND LEASE

Lender shall have received (a) a certified copy of each Ground Lease and (b) a fully executed ground lessor estoppel from the ground lessor under the Wilmington Ground Lease and an executed ground lessor estoppel from the Borrower with respect to the Louisville Southwest Ground Lease, each of which shall be in form and substance reasonably satisfactory to Lender.

Section 3.25.      FURTHER DOCUMENTS

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

ARTICLE 4
REPRESENTATIONS AND WARRANTIES

Borrower and, where specifically indicated, each Borrower Principal and Affiliated Lessee represents and warrants to Lender as of the Closing Date that:

41

Section 4.1.        ORGANIZATION

Each of Borrower, Borrower Principal (when not an individual) and Affiliated Lessee (a) has been duly organized and is validly existing and in good standing with requisite power and authority to own its properties and to transact the businesses in which it is now engaged, (b) is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations, (c) possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged, and the sole business of (i) Borrower is the ownership, management and operation of the Properties and (ii) Affiliated Lessee is to act as lessee of certain of the Properties and manage and operate the same under and in accordance with the terms of the applicable Operating Lease, and (d) in the case of Borrower, has full power, authority and legal right to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey the Properties pursuant to the terms of the Loan Documents, and in the case of Borrower, each Borrower Principal and Affiliated Lessee, has full power, authority and legal right to keep and observe all of the terms of the Loan Documents to which it is a party.  Borrower, each Borrower Principal and Affiliated Lessee represent and warrant that the chart attached hereto as Exhibit B sets forth an accurate listing of the direct and indirect owners of the equity interests in Borrower, Affiliated Lessee, each SPE Component Entity (if any) and each Borrower Principal (when not an individual).

Section 4.2.        STATUS OF BORROWER; AFFILIATED LESSEE

Borrower’s exact legal name is correctly set forth on the first page of this Agreement, on each Mortgage and on any UCC-1 Financing Statements filed in connection with the Loan.  Affiliated Lessee’s exact legal name is correctly set forth in all Loan Documents to which it is a party.  Borrower is an organization of the type specified on the first page of this Agreement and Affiliated Lessee is a corporation.  Each of Borrower and Affiliated Lessee is incorporated in or organized under the laws of the state of Delaware.  Each of Borrower’s and Affiliated Lessee’s  principal place of business and chief executive office, and the place where each of Borrower and Affiliated Lessee keeps their respective books and records, including recorded data of any kind or nature, regardless of the medium of recording, including software, writings, plans, specifications and schematics, has been for the preceding four months (or, if less, the entire period of the existence of Borrower and/or Affiliated Lessee) the address of Borrower set forth on the first page of this Agreement.  The organizational identification number, if any, assigned by the state of incorporation or organization of (a) Borrower is 3721068 and (b) Affiliated Lessee is 370194.

Section 4.3.        VALIDITY OF DOCUMENTS

Borrower, each Borrower Principal and Affiliated Lessee have taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents to which they are parties.  This Agreement and such other Loan Documents have been duly executed and delivered by or on behalf of Borrower, each Borrower Principal and Affiliated Lessee, as applicable, and constitute the legal, valid and binding obligations of Borrower, each Borrower Principal and Affiliated Lessee, as applicable, enforceable against each, as applicable, in accordance with their respective terms, subject only to applicable

42

bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

Section 4.4.        NO CONFLICTS

The execution, delivery and performance of this Agreement and the other Loan Documents to be executed by Borrower, each Borrower Principal and/or Affiliated Lessee will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of Borrower, Borrower Principal or Affiliated Lessee pursuant to the terms of any agreement or instrument to which Borrower, Borrower Principal or Affiliated Lessee is a party or by which any of Borrower’s, Borrower Principal’s or Affiliated Lessee’s property or assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower, Borrower Principal or Affiliated Lessee or any of Borrower’s, Borrower Principal’s or Affiliated Lessee’s properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrower, Borrower Principal or Affiliated Lessee of this Agreement or any of the other Loan Documents has been obtained and is in full force and effect.

Section 4.5.        LITIGATION

There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or, to Borrower’s, Borrower Principal’s or Affiliated Lessee’s knowledge, threatened against or affecting Borrower, Borrower Principal, any Operating Lessee, any Manager or any Property, which actions, suits or proceedings, if determined against Borrower, Borrower Principal, any Operating Lessee, any Manager or any Property, would materially adversely affect the condition (financial or otherwise) or business of Borrower, Borrower Principal or Affiliated Lessee or the condition or ownership of any Property.

Section 4.6.        AGREEMENTS

Neither Borrower nor any Affiliated Lessee is a party to any agreement or instrument or subject to any restriction which would materially and adversely affect Borrower, Affiliated Lessee or any Property, or Borrower’s or Affiliated Lessee’s business, properties or assets, operations or condition, financial or otherwise.  Neither Borrower nor Affiliated Lessee is in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which either is a party or by which Borrower, Affiliated Lessee or any Property is bound.  Neither Borrower nor Affiliated Lessee has any material financial obligation under any agreement or instrument to which Borrower or Affiliated Lessee is a party or by which Borrower, Affiliated Lessee or any Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of each Property and (b) obligations under the Loan Documents.

43

Section 4.7.        SOLVENCY

Neither Borrower, Borrower Principal nor Affiliated Lessee has (a) entered into the transaction or executed the Note (if applicable), this Agreement or any other Loan Documents to which any such Person is a party, with the actual intent to hinder, delay or defraud any creditor and (b) received reasonably equivalent value in exchange for their respective obligations under such Loan Documents.  Giving effect to the Loan, the fair saleable value of the assets of each of Borrower, each Borrower Principal and Affiliated Lessee exceeds and will, immediately following the making of the Loan, exceed the total liabilities of each of Borrower, each Borrower Principal and Affiliated Lessee, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities.  No petition in bankruptcy has been filed against Borrower, Borrower Principal, Affiliated Lessee or any SPE Component Entity (if any) in the last ten (10) years, and neither Borrower nor Borrower Principal, Affiliated Lessee nor any SPE Component Entity in the last ten (10) years has made an assignment for the benefit of creditors or taken advantage of any Creditors Rights Laws.  Neither Borrower nor Borrower Principal, Affiliated Lessee or any SPE Component Entity (if any) is contemplating either the filing of a petition by it under any Creditors Rights Laws or the liquidation of all or a major portion of Borrower’s, Affiliated Lessee’s or SPE Component Entity’s assets or property, and neither Borrower nor Affiliated Lessee has any knowledge of any Person contemplating the filing of any such petition against Borrower, Borrower Principal, Affiliated Lessee or any SPE Component Entity (if any).

Section 4.8.        FULL AND ACCURATE DISCLOSURE

No statement of fact made by or on behalf of Borrower, Borrower Principal, any SPE Component Entity or Affiliated Lessee in this Agreement or in any of the other Loan Documents or in any other document or certificate delivered by or on behalf of Borrower, Borrower Principal or Affiliated Lessee contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading.  There is no material fact presently known to Borrower, Borrower Principal, any SPE Component Entity or Affiliated Lessee which has not been disclosed to Lender which adversely affects, nor as far as Borrower, Borrower Principal or Affiliated Lessee can reasonably foresee, might adversely affect, any Property or the business, operations or condition (financial or otherwise) of Borrower, Borrower Principal or Affiliated Lessee.

Section 4.9.        NO PLAN ASSETS

Neither Borrower nor Affiliated Lessee is an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of Borrower or Affiliated Lessee constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101.  In addition, (a) neither Borrower nor Operating Lessee is a “governmental plan” within the meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower or Affiliated Lessee are not subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Internal Revenue Code currently in effect, which prohibit or otherwise restrict the transactions contemplated by this Agreement.

44

Section 4.10.      NOT A FOREIGN PERSON

Neither Borrower, Borrower Principal nor Affiliated Lessee is a “foreign person” within the meaning of §1445(f)(3) of the Internal Revenue Code.

Section 4.11.      ENFORCEABILITY

The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower, Borrower Principal or Affiliated Lessee, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable, and neither Borrower, Borrower Principal nor Affiliated Lessee has asserted any right of rescission, set-off, counterclaim or defense with respect thereto.  No Default or Event of Default exists under or with respect to any Loan Document.

Section 4.12.      BUSINESS PURPOSES

The Loan is solely for the business purpose of Borrower, and is not for personal, family, household, or agricultural purposes.

Section 4.13.      COMPLIANCE

Borrower, Affiliated Lessee and each Property, and the use and operation thereof, comply in all material respects with all Legal Requirements, including, without limitation, building and zoning ordinances and codes and the Americans with Disabilities Act.  Neither Borrower nor Affiliated Lessee has any knowledge that either is in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority and neither Borrower nor Affiliated Lessee has received any written notice of any such default or violation.  There has not been committed by Borrower or Affiliated Lessee or, to Borrower’s or Affiliated Lessee’s respective knowledge, any other Person in occupancy of or involved with the operation or use of any Property, any act or omission affording any Governmental Authority the right of forfeiture as against any Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.

Section 4.14.      FINANCIAL INFORMATION

All financial data, including, without limitation, the balance sheets, statements of cash flow, statements of income and operating expense and rent rolls, that have been delivered to Lender in respect of Borrower, Borrower Principal, Affiliated Lessee and/or the Properties (a) are true, complete and correct in all material respects, (b) accurately represent the financial condition of Borrower, Borrower Principal, Affiliated Lessee or the Properties, as applicable, as of the date of such reports, and (c) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein.  Neither Borrower nor Affiliated Lessee has any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower or Affiliated Lessee and reasonably likely to have a material adverse effect on any Property or the current and/or intended operation thereof, except as referred to or reflected in said financial statements.

45

Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower, Borrower Principal or Affiliated Lessee from that set forth in said financial statements.

Section 4.15.      CONDEMNATION

No Condemnation or other proceeding has been commenced or, to Borrower’s or Affiliated Lessee’s best knowledge, is threatened or contemplated with respect to all or any portion of any Property or for the relocation of roadways providing access to any Property.

Section 4.16.      UTILITIES AND PUBLIC ACCESS; PARKING

Each Property has adequate rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service each Property for full utilization of each Property for its intended uses.  All public utilities necessary to the full use and enjoyment of each Property as currently used and enjoyed are located either in the public right-of-way abutting each Property (which are connected so as to serve such Property without passing over other property) or in recorded easements serving such Property and such easements are set forth in and insured by the applicable Title Insurance Policy.  All roads necessary for the use of each Property for its current purposes have been completed and dedicated to public use and accepted by all Governmental Authorities.  Each Property has, or is served by, parking to the extent required to comply in all material respects with all Legal Requirements.

Section 4.17.      SEPARATE LOTS

Each Property is assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a part of such lot or lots, and no other land or improvements is assessed and taxed together with any Property or any portion thereof.

Section 4.18.      ASSESSMENTS

To Borrower’s knowledge after due inquiry, except as disclosed in any Title Insurance Policy provided pursuant to Section 3.2(b) hereof, there are no pending or proposed special or other assessments for public improvements or otherwise affecting any Property, nor are there any contemplated improvements to any Property that may result in such special or other assessments.

Section 4.19.      INSURANCE

Borrower has obtained and has delivered to Lender certified copies of all Policies or, to the extent such Policies are not available as of the Closing Date, certificates of insurance with respect to all such Policies reflecting the insurance coverages, amounts and other requirements set forth in this Agreement.  No claims have been made under any of the Policies, and to Borrower’s and Affiliated Lessee’s knowledge, no Person, including Borrower or Affiliated Lessee, has done, by act or omission, anything which would impair the coverage of any of the Policies.

46

Section 4.20.      USE OF PROPERTY

Each Property is used exclusively for hotel purposes and other appurtenant and related uses.

Section 4.21.      CERTIFICATE OF OCCUPANCY; LICENSES

All certifications, permits, licenses and approvals, including, without limitation, certificates of completion or occupancy and any applicable liquor license required for the legal use, occupancy and operation of each Property for the purpose intended herein, have been obtained and are valid and in full force and effect.  Borrower and Affiliated Lessee, as applicable, shall keep and maintain all licenses necessary for the operation of each Property for the purpose intended herein.  The use being made of each Property is in conformity with the certificate of occupancy and any permits or licenses issued for such Property.

Section 4.22.      FLOOD ZONE

Except as disclosed in any survey provided pursuant to Section 3.2(c) hereof, no Improvements on any Property are located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards, or, if any Improvements or any Property or portion of any Improvements is located within such area, Borrower has obtained the insurance prescribed in Section 8.1(a)(i).

Section 4.23.      PHYSICAL CONDITION

To Borrower’s and Affiliated Lessee’s knowledge after due inquiry and except as disclosed in the Property Condition Reports or PIP’s provided to Lender provided pursuant to Section 3.18 hereof, each Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects.  To Borrower’s and Affiliated Lessee’s knowledge after due inquiry, there exists no structural or other material defects or damages in or to any Property, as a result of a Casualty or otherwise, and whether latent or otherwise.  Neither Borrower nor Affiliated Lessee has received any notice from any insurance company or bonding company of any defects or inadequacies in any Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.

47

Section 4.24.      BOUNDARIES

(a)           Except as disclosed in any survey provided pursuant to Section 3.2(c) hereof, none of the Improvements which were included in determining the appraised value of any Property lie outside the boundaries and building restriction lines of any Property to any material extent, and (b) no improvements on adjoining properties encroach upon any Property and no easements or other encumbrances upon any Property encroach upon any of the Improvements so as to materially affect the value or marketability of any Property.

Section 4.25.      LEASES AND RENT ROLL

Borrower has delivered to Lender a true, correct and complete rent roll or lease summary in form acceptable to Lender for each Property (a “Rent Roll”) which includes all Leases affecting each Property (including, but not limited to, the applicable Operating Lease and schedules for all executed Leases for Tenants not yet in occupancy or under which the rent commencement date has not occurred).  Except as set forth in the Rent Roll (as same has been updated by written notice thereof to Lender) and estoppel certificates delivered to Lender on or prior to the Closing Date:  (a) each Lease is in full force and effect; (b) the premises demised under the Leases have been completed and the Tenants under the Leases have accepted possession of and are in occupancy of all of their respective demised premises; (c) the Tenants under the Leases have commenced the payment of rent under the Leases, there are no offsets, claims or defenses to the enforcement thereof, and neither Borrower nor to Borrower’s knowledge any Operating Lessee (with respect to any Lease other than the Operating Lease) has any monetary obligations to any Tenant under any Lease; (d) all Rents due and payable under the Leases have been paid and no portion thereof has been paid for any period more than thirty (30) days in advance; (e) the rent payable under each Lease is the amount of fixed or other rent set forth in the Rent Roll, and there is no claim or basis for a claim by the Tenant thereunder for an offset or adjustment to the rent; (f) no Tenant has made any written claim of a material default against the landlord under any Lease which remains outstanding nor has Borrower, or to Borrower’s knowledge Operating Lessee, Manager or any other Person involved in the operation and/or management of any Property received, by telephonic, in-person, e-mail or other communication, any notice of a material default under any Lease; (g) to Borrower’s knowledge there is no present material default by any Tenant under any Lease; (h) all security deposits under the Leases have been collected by Borrower or the applicable Operating Lessee, as landlord thereunder; (i) Borrower is the sole owner of the entire landlord’s interest in each Operating Lease and the applicable Operating Lessee is the sole owner of the entire landlord’s interest in each other Lease (other than either Ground Lease); (j) each Operating Lease is the valid, binding and enforceable obligation of Borrower and there are no agreements with any Operating Lessee than as expressly set forth in the Operating Leases; (k) no Person (other than Manager) has any possessory interest in, or right to occupy, any Property or any portion thereof except under the terms of any Lease; (l) none of the Leases contains any option or offer to purchase or right of first refusal to purchase any Property or any part thereof; and (m) neither the Leases nor the Rents have been assigned, pledged or hypothecated except to Lender, and no other Person has any interest therein except the Tenants thereunder.

48

Section 4.26.      FILING AND RECORDING TAXES

All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, each Mortgage, have been paid or will be paid, and, under current Legal Requirements, each Mortgage is enforceable in accordance with its terms by Lender (or any subsequent holder thereof).

Section 4.27.      MANAGEMENT AGREEMENT

Borrower and Affiliated Lessee hereby represent that to their respective knowledge, each Management Agreement is in full force and effect, there is no default thereunder by any party thereto, no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder, and no management fees under any Management Agreement are accrued and unpaid.

Section 4.28.      ILLEGAL ACTIVITY

No portion of any Property has been or will be purchased with proceeds of any illegal activity, and no part of the proceeds of the Loan will be used in connection with any illegal activity.

Section 4.29.      CONSTRUCTION EXPENSES

All costs and expenses of any and all labor, materials, supplies and equipment used in the construction maintenance or repair of the Improvements have been paid in full.  To each of Borrower’s and Affiliated Lessee’s knowledge after due inquiry, there are no claims for payment for work, labor or materials affecting any Property which are or may become a lien prior to, or of equal priority with, the Liens created by the Loan Documents.

Section 4.30.      PERSONAL PROPERTY

Borrower has paid in full for, and is the owner of, all Personal Property (other than (a) Tenants’ and Manager’s property and (b) personal property leases as customarily permitted by institutional hotel lenders) used in connection with the operation of any Property, free and clear of any and all security interests, liens or encumbrances, except for Permitted Encumbrances and the Lien and security interest created by the Loan Documents.

Section 4.31.      TAXES

Borrower, Borrower Principal and Affiliated Lessee have filed all federal, state, county, municipal, and city income, personal property and other tax returns required to have been filed by them and have paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by them. Neither Borrower, Borrower Principal nor Affiliated Lessee knows of any basis for any additional assessment in respect of any such taxes and related liabilities for prior years.

49

Section 4.32.      PERMITTED ENCUMBRANCES

None of the Permitted Encumbrances, individually or in the aggregate, materially interferes with the benefits of the security intended to be provided by the Loan Documents, materially and adversely affects the value of any Property, impairs the use or the operation of any Property or impairs Borrower’s ability to pay its obligations in a timely manner.

Section 4.33.      FEDERAL RESERVE REGULATIONS

Borrower will use the proceeds of the Loan for the purposes set forth in Section 2.1(d) hereof and not for any illegal activity.  No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or prohibited by the terms and conditions of this Agreement or the other Loan Documents.

Section 4.34.      INVESTMENT COMPANY ACT

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

Section 4.35.      RECIPROCAL EASEMENT AGREEMENTS

(a)           Neither Borrower, nor to the knowledge of Borrower upon due inquiry any other party is currently in default (nor has any notice been given or received with respect to an alleged or current default) under any of the terms and conditions of any REA which default would have a material and adverse effect on the ownership or operation of the applicable Property or Borrower’s ability to satisfy its obligations under the Loan Documents, and each REA remains unmodified and in full force and effect;

(b)           All easements, if any, granted pursuant to any REA which were to have survived any site preparation and completion of construction (to the extent that the same has been completed), remain in full force and effect and have not been released, terminated, extinguished or discharged by agreement or otherwise;

(c)           All sums due and owing by Borrower to the other parties to any REA (or by the other parties to any REA to the Borrower) pursuant to the terms of the applicable REA, including without limitation, all sums, charges, fees, assessments, costs, and expenses in connection with any taxes, site preparation and construction, non-shareholder contributions, and common area and other property management activities have been paid, are current, and no lien has attached on any Property (or threat thereof been made) for failure to pay any of the foregoing;

50

(d)           The terms, conditions, covenants, uses and restrictions contained in the REAs do not conflict in any material manner with any terms, conditions, covenants, uses and restrictions contained in any Lease or in any agreement between Borrower and occupant of any peripheral parcel, including without limitation, conditions and restrictions with respect to kiosk placement, tenant restrictions (type, location or exclusivity), sale of certain goods or services, and/or other use restrictions; and

(e)           The terms, conditions, covenants, uses and restrictions contained in each Lease do not conflict in any material manner with any terms, conditions, covenants, uses and restrictions contained in the REAs, any other Lease or in any agreement between Borrower and occupant of any peripheral parcel, including without limitation, conditions and restrictions with respect to kiosk placement, tenant restrictions (type, location or exclusivity), sale of certain goods or services, and/or other use restrictions.

Section 4.36.      NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE

All information submitted by Borrower or its agents to Lender and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by Borrower in this Agreement or in any other Loan Document, are accurate, complete and correct in all material respects.  There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or might materially and adversely affect any Property or the business operations or the financial condition of Borrower.  Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any representation or warranty made herein to be materially misleading.

Section 4.37.      INTELLECTUAL PROPERTY

All trademarks, trade names and service marks necessary to the business of Borrower and Affiliated Lessee as presently conducted or as Borrower or Affiliated Lessee contemplates conducting its business are in good standing and, to the extent of Borrower’s and Affiliated Lessee’s actual knowledge are uncontested.  Neither Borrower nor Affiliated Lessee has knowingly infringed, is knowingly infringing, or has received notice of infringement with respect to asserted trademarks, trade names and service marks of others.  To Borrower’s and Affiliated Lessee’s knowledge, there is no infringement by others of trademarks, trade names and service marks of Borrower or Affiliated Lessee.

Section 4.38.      SURVEY

To the knowledge of Borrower, the survey for each Property does not fail to reflect any material matter affecting such Property or the title thereto.

Section 4.39.      EMBARGOED PERSON

As of the date hereof and at all times throughout the term of the Loan, including after giving effect to any transfers of interests permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower, Borrower Principal or Affiliated Lessee constitute property

51

of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower, Borrower Principal or Affiliated Lessee, as applicable (whether directly or indirectly), is prohibited by law or the Loan made by Lender is in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in Borrower, Borrower Principal or Affiliated Lessee, as applicable, with the result that the investment in Borrower, Borrower Principal or Affiliated Lessee, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower, Borrower Principal or Affiliated Lessee, as applicable, have been derived from any unlawful activity with the result that the investment in Borrower, Borrower Principal or Affiliated Lessee, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law.

Section 4.40.      PATRIOT ACT

All capitalized words and phrases and all defined terms used in the USA Patriot Act of 2001, 107 Public Law 56 (October 26, 2001) and in other statutes and all orders, rules and regulations of the United States government and its various executive departments, agencies and offices related to the subject matter of the Patriot Act, including Executive Order 13224 effective September 24, 2001 (collectively referred to in this Section only as the “Patriot Act”) and are incorporated into this Section.  Each of Borrower, Borrower Principal and Affiliated Lessee hereby represents and warrants that Borrower, Borrower Principal and Affiliated Lessee and each and every Person Affiliated with Borrower, Borrower Principal or Affiliated Lessee or that to Borrower’s or Affiliated Lessee’s knowledge has an economic interest in Borrower, Borrower Principal or Affiliated Lessee, or, to Borrower’s, Borrower Principal’s, or Affiliated Lessee’s knowledge, that has or will have an interest in the transaction contemplated by this Agreement or in any Property or will participate, in any manner whatsoever, in the Loan (excluding any holders of publicly traded shares in CNL Hospitality Properties, Inc., a publicly traded real estate investment trust), is:  (i) not a “blocked” person listed in the Annex to Executive Order Nos. 12947, 13099 and 13224 and all modifications thereto or thereof (as used in this Section only, the “Annex”); (ii) in full compliance with the requirements of the Patriot Act and all other requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (as used in this Section only, “OFAC”); (iii) operated under policies, procedures and practices, if any, that are in compliance with the Patriot Act and available to Lender for Lender’s review and inspection during normal business hours and upon reasonable prior notice; (iv) not in receipt of any notice from the Secretary of State or the Attorney General of the United States or any other department, agency or office of the United States claiming a violation or possible violation of the Patriot Act; (v) not listed as a Specially Designated Terrorist or as a “blocked” person on any lists maintained by the OFAC pursuant to the Patriot Act or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of the OFAC issued pursuant to the Patriot Act or on any other list of terrorists or terrorist organizations maintained pursuant to the Patriot Act; (vi) not a person who has been determined by competent authority to be subject to any of the prohibitions contained in the Patriot Act; and (vii) not owned or controlled by or now acting and or will in the future act for or on behalf of any person named in the Annex or any other list promulgated under the Patriot Act

52

or any other person who has been determined to be subject to the prohibitions contained in the Patriot Act.  Borrower covenants and agrees that in the event Borrower receives any notice that Borrower Principal, Affiliated Lessee or Borrower (or any of their respective beneficial owners or Affiliates or participants) become listed on the Annex or any other list promulgated under the Patriot Act or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, Borrower shall immediately notify Lender.  It shall be an Event of Default hereunder if Borrower, Borrower Principal, Affiliated Lessee or any other party to any Loan Document becomes listed on any list promulgated under the Patriot Act or is indicted, arraigned or custodially detained on charges involving money laundering or predicate crimes to money laundering.

Section 4.41.      FRANCHISE AGREEMENTS.

Borrower and Affiliated Lessee hereby represent that to their respective knowledge, each Franchise Agreement is in full force and effect, there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder, and no fees under any Franchise Agreement are accrued and unpaid.

Section 4.42.      GROUND LEASE REPRESENTATIONS

Except as specifically provided below, Borrower hereby represents and warrants to Lender with respect to each Ground Lease and/or the estoppel letter delivered to Lender by the applicable ground lessor all of the following:

(a)           The Ground Lease is in full force and effect and has not been modified or amended in any manner whatsoever (with the exception of written instruments which have been recorded or otherwise disclosed to Lender in writing);

(b)           There are no defaults under the Ground Lease by Borrower, or, to the best of Borrower’s knowledge, ground lessor thereunder, and, to the best of Borrower’s knowledge, no event has occurred which but for the passage of time, or notice, or both would constitute a default under the Ground Lease;

(c)           All rents, additional rents and other sums due and payable under the Ground Lease have been paid in full;

(d)           Neither Borrower nor the ground lessor under the Ground Lease has commenced any action or given or received any notice for the purpose of terminating the Ground Lease;

(e)           The Ground Lease or a memorandum thereof has been duly recorded.  The Ground Lease permits the interest of Borrower to be encumbered by a mortgage.  The Ground Lease may not be canceled, terminated, surrendered or amended without the prior written consent of Lender;

(f)            Except for the Permitted Encumbrances, Borrower’s interest in the Ground Lease is not subject to any Liens or encumbrances superior to, or of equal priority with, the related Security Instrument other than the ground lessor’s related fee interest;

53

(g)           Borrower’s interest in the Ground Lease is assignable to Lender upon notice to, but without the consent of, the ground lessor thereunder (or, if any such consent is required, it has been obtained prior to the date hereof).  The Ground Lease is further assignable by Lender, and its successors and assigns, without the consent of the ground lessor or, where such consent is required, it cannot be unreasonably withheld by the ground lessor;

(h)           The Wilmington Ground Lease requires the ground lessor to give notice of any default by Borrower to Lender.  The Wilmington Ground Lease further provides that notice of termination given under the Wilmington Ground Lease is not effective as against Lender unless a copy of such notice has been delivered to Lender in the manner described in the Wilmington Ground Lease;

(i)            Lender is permitted the opportunity (including, where necessary, sufficient time to gain possession of the interest of Borrower under the Wilmington Ground Lease) to cure any default under the Wilmington Ground Lease, which is curable after the receipt of notice, before the ground lessor thereunder may terminate the Wilmington Ground Lease;

(j)            The Wilmington Ground Lease has a term which extends not less than twenty (20) years beyond the Maturity Date, as the same may be extended;

(k)           The Wilmington Ground Lease requires the ground lessor to enter into a new lease upon termination of the Wilmington Ground Lease for any reason, including rejection of the Wilmington Ground Lease in a bankruptcy proceeding;

(l)            Under the terms of the Wilmington Ground Lease, the related Security Instrument and the estoppel certificate from the ground lessor under the Wilmington Ground Lease, any related insurance and condemnation proceeds will be applied either to the repair or restoration of all or part of the related Property, with Lender having the right to hold and disburse the proceeds as the repair or restoration progresses, or to the payment of the outstanding principal balance of the Loan together with any accrued interest thereon; and

(m)          The Wilmington Ground Lease does not impose any restrictions on subleasing.

Section 4.43.      SURVIVAL; MISCELLANEOUS

Borrower and Affiliated Lessee agree that, unless expressly provided otherwise, all of the representations and warranties of Borrower, Borrower Principal and Affiliated Lessee set forth in this Agreement and in the other Loan Documents shall survive for so long as any portion of the Debt remains owing to Lender.  All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower and Affiliated Lessee shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.  Notwithstanding anything set forth herein to the contrary, the representations and warranties of Affiliated Lessee shall be deemed to be limited to any Property with respect to which it is the Operating Lessee and/or agreement to which it is a party.

54

ARTICLE 5
BORROWER COVENANTS

From the date hereof and until repayment of the Debt in full and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of each Mortgage (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, Borrower Principal (as to Sections 5.11 and  5.26 only) and Borrower hereby each covenants and agrees with Lender that:

Section 5.1.        EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS

(a)           Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply with all Legal Requirements applicable to it and each Property.  Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording any Governmental Authority the right of forfeiture as against any Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.  Borrower shall at all times maintain, preserve and protect all franchises and trade names used by it, its Affiliated Lessees and any Affiliated Manager in connection with the operation of each Property.

(b)           After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the Legal Requirements affecting any Property, provided that (i) no Default or Event of Default has occurred and is continuing; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower or the applicable Property is subject and shall not constitute a default thereunder; (iii) neither such Property, any part thereof or interest therein, any of the tenants or occupants thereof, including, but not limited to the applicable Operating Lessee and Manager, nor Borrower shall be affected in any material adverse way as a result of such proceeding; (iv) non-compliance with the Legal Requirements shall not impose civil or criminal liability on Borrower or Lender; (v) Borrower shall have furnished the security as may be required in the proceeding or by Lender to ensure compliance by Borrower with the Legal Requirements; and (vi) Borrower shall have furnished to Lender all other items reasonably requested by Lender.

Section 5.2.        MAINTENANCE AND USE OF PROPERTY

Borrower shall cause each Property to be maintained in a good and safe condition and repair. The Improvements and the Personal Property shall not be removed, demolished or other than in accordance with the provisions of Section 5.21, materially altered (except for normal replacement of the Personal Property) without the prior written consent of Lender.  If under applicable zoning provisions the use of all or any portion of any Property is or shall become a nonconforming use, Borrower will not cause or permit the nonconforming use to be discontinued or the nonconforming Improvement to be abandoned without the express written consent of Lender, such consent not to be unreasonably withheld.

55

Section 5.3.        WASTE

Borrower shall not commit or suffer any waste of any Property or make any change in the use of any Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of such Property, or take any action that might invalidate or give cause for cancellation of any Policy, or do or permit to be done thereon anything that may in any way impair the value of any Property or the security for the Loan.  Borrower will not, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of any Property, regardless of the depth thereof or the method of mining or extraction thereof.

Section 5.4.        TAXES AND OTHER CHARGES

(a)           Borrower shall pay (or cause to be paid) all Taxes and Other Charges now or hereafter levied or assessed or imposed against any Property or any part thereof as the same become due and payable; provided, however, Borrower’s obligation to directly pay (or cause to be paid) Taxes shall be suspended for so long as Borrower complies with the terms and provisions of Section 9.6 hereof.  Borrower shall furnish to Lender receipts for the payment of the Taxes and the Other Charges prior to the date the same shall become delinquent (provided, however, that Borrower is not required to furnish such receipts for payment of Taxes in the event that such Taxes have been paid by Lender pursuant to Section 9.6 hereof).  Borrower shall not suffer and shall promptly cause to be paid or transferred to bond and in either instance discharged (or fully and unconditionally released) any Lien or charge whatsoever which may be or become a Lien or charge against any Property, and shall promptly pay for (or cause to be paid for) all utility services provided to any Property.

(b)           After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, or any involuntary Lien or other charge, provided that (i) no Default or Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable Legal Requirements; (iii) neither the applicable Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost; (iv) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (v) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the applicable Property; and (vi) Borrower shall furnish such security as may be required in the proceeding, or deliver to Lender such reserve deposits or indemnification in lieu thereof as may be reasonably requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon (unless Borrower has paid all of the Taxes or Other Charges under protest).  Lender may pay over any such cash deposit or part thereof held by Lender to the claimant entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is established or the applicable Property (or part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, canceled or

56

lost or there shall be any danger of the Lien of the related Mortgage being primed by any related Lien.

Section 5.5.        LITIGATION

Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened in writing against Borrower which might materially adversely affect Borrower’s condition (financial or otherwise) or business or any Property.

Section 5.6.        ACCESS TO PROPERTY

Borrower shall permit agents, representatives and employees of Lender to inspect any Property or any part thereof at reasonable hours upon reasonable advance notice.

Section 5.7.        NOTICE OF DEFAULT

Borrower shall promptly advise Lender of any material adverse change in the condition (financial or otherwise) of Borrower, Borrower Principal, Affiliated Lessee or any Property or of the occurrence of any Default or Event of Default of which Borrower has knowledge.

Section 5.8.        COOPERATE IN LEGAL PROCEEDINGS

Borrower shall at Borrower’s expense cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings.

Section 5.9.        PERFORMANCE BY BORROWER

Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term and provision to be observed and performed by Borrower under this Agreement and the other Loan Documents and any other agreement or instrument affecting or pertaining to any Property and any amendments, modifications or changes thereto.

Section 5.10.      AWARDS; INSURANCE PROCEEDS

Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with any Property, and Lender shall be reimbursed for any reasonable out-of-pocket expenses incurred in connection therewith (including reasonable, actual attorneys’ fees and disbursements, and the payment by Borrower of the expense of an appraisal on behalf of Lender in case of a Casualty or Condemnation materially affecting any Property or any material part thereof) out of such Awards or Insurance Proceeds.

57

Section 5.11.      FINANCIAL REPORTING

(a)           Borrower and Borrower Principal shall keep adequate books and records of account in accordance with GAAP, or in accordance with other methods acceptable to Lender in its sole discretion, consistently applied and shall furnish to Lender:

(i)            quarterly and annual certified rent rolls signed and dated by Borrower, detailing the names of all Tenants under Major Leases, the portion of the Improvements (in terms of square footage) occupied by each such Tenant, the base rent, additional rent and any other charges payable under each such Major Lease (including annual store sales required to be reported by Tenant under any Lease), and the term of each such Major Lease, including the commencement and expiration dates and any tenant extension, expansion or renewal options, the extent to which any Tenant is in default under any such Major Lease, and any other information as is reasonably required by Lender, within forty-five (45) days after the end of each fiscal quarter or ninety (90) days after the close of each fiscal year of Borrower, as applicable;

(ii)           quarterly and annual operating statements of each Property, prepared by Borrower or, if applicable, by Manager in form reasonably satisfactory to Lender and certified by Borrower in the form required by Lender, detailing the revenues received, the expenses incurred and the net operating income before and after debt service (principal and interest) and major capital improvements for the period of calculation and containing appropriate year-to-date information, within forty-five (45) days after the end of each fiscal quarter or ninety (90) days after the close of each fiscal year of Borrower, as applicable;

(iii)          quarterly and annual balance sheets, profit and loss statements, statements of cash flows, and statements of change in financial position of Borrower and Borrower Principal in the form required by Lender (with the annual financial statements prepared and audited by an Acceptable Accountant), together with a certificate by an authorized officer of the general partner of Borrower Principal certifying at to Borrower Principal’s then Consolidated Tangible Net Worth, all within forty-five (45) days after the end of each fiscal quarter or ninety (90) days after the close of each fiscal year of Borrower and Borrower Principal, as applicable, as the case may be; and

(iv)          an Annual Budget in form reasonably satisfactory to Lender with respect to the operations of each Property, not later than the later of (i) five (5) Business Days after Borrower of any Affiliates receipt thereof and (ii) thirty (30) days or in the instance of each Marriott Managed Property fifteen (15) days prior to the commencement of each fiscal year of Borrower, but in no event later than February 15^th of any calendar year.  In the event that Lender reasonably objects to a proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of such objections within fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise such Annual Budget and resubmit the same to Lender.  Lender shall advise Borrower of any reasonable objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise

58

the same in accordance with the process described in this subsection until Lender approves such Annual Budget.  In the event Lender shall fail to respond in writing to any proposed Annual Budget or revised Annual Budget within the above-stated time period, Lender shall be deemed to have approved the same, provided that any proposed or revised Annual Budget submitted to Lender pursuant to the terms hereof shall state in bold face type, 16” font and all capital letters on the cover letter accompanying each such (A) proposed Annual Budget “ATTACHED IS A PROPOSED ANNUAL BUDGET FOR THE BELOW REFERENCED PROPERTY(IES), YOUR FAILURE TO RESPOND IN WRITING TO THE UNDERSIGNED REGARDING THE SAME WITHIN FIFTEEN (15) DAYS OF THE DATE OF YOUR RECEIPT OF SAID PROPOSED ANNUAL BUDGET, SHALL BE DEEMED TO CONSTITUTE YOUR APPROVAL OF THE SAME” and (B) revised Annual Budget “ATTACHED IS A REVISED ANNUAL BUDGET FOR THE BELOW REFERENCED PROPERTY(IES), YOUR FAILURE TO RESPOND IN WRITING TO THE UNDERSIGNED REGARDING THE SAME WITHIN FIFTEEN (15) DAYS OF THE DATE OF YOUR RECEIPT OF SAID REVISED ANNUAL BUDGET SHALL BE DEEMED TO CONSTITUTE YOUR APPROVAL OF THE SAME”.  Until such time that Lender approves a proposed or revised Annual Budget, which approval shall not be unreasonably withheld, conditioned or delayed, or is deemed to have approved the same, the most recent Annual Budget with respect to such Property shall apply; provided that, such approved Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance Premiums, utilities expenses and other expenses under the applicable Management Agreement, if any.

(b)           Upon request from Lender, Borrower shall promptly furnish to Lender:

(i)            a property management report regarding operating and financial performance for any Property, in reasonable detail and certified by Borrower under penalty of perjury to be true and complete, but no more frequently than quarterly;

(ii)           to the extent applicable, an accounting of all security deposits held in connection with any Lease of any part of any Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name of the Person to contact at such financial institution, along with any authority or release necessary for Lender to obtain information regarding such accounts directly from such financial institutions; and

(iii)          to the extent applicable, a report of all letters of credit provided by any Tenant in connection with any Lease of any part of any Property, including the account numbers of such letters of credit, the names and addresses of the financial institutions that issued such letters of credit and the names of the Persons to contact at such financial institutions, along with any authority or release necessary for Lender to obtain information regarding such letters of credit directly from such financial institutions.

(c)           Borrower shall comply with the following:

59

(i)            If requested by Lender in connection with a Securitization involving a public offering, and the filing of any related Disclosure Document, Borrower shall provide Lender, promptly upon request, with the following financial statements if, at the time a Disclosure Document is being prepared for a Securitization, it is expected that the principal amount of the Loan when combined with the principal amount of any Affiliated Loans at the time of Securitization may, or if the principal amount of the Loan when combined with the principal amount of any Affiliated Loans at any time during which the Loan and any Affiliated Loans are included in a Securitization does, equal or exceed 20% of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the Securitization:

(A)          A balance sheet for Borrower for the two most recent fiscal years, meeting the requirements of Section 210.3-01 of Regulation S-X of the Securities Act and statements of income and statements of cash flows with respect to each Property for the three most recent fiscal years, meeting the requirements of Section 210.3-02 of Regulation S-X, and, to the extent that such balance sheet is more than 135 days old as of the date of the document in which such financial statements are included, interim financial statements of each Property meeting the requirements of Section 210.3-01 and 210.3-02 of Regulation S-X (all of such financial statements, collectively, the “Standard Statements”); provided, however, that with respect to a Property (other than properties that are hotels, nursing homes, or other properties that would be deemed to constitute a business and not real estate under Regulation S-X or other legal requirements) that has been acquired by Borrower from an unaffiliated third party (such Property, “Acquired Property”), as to which the other conditions set forth in Section 210.3-14 of Regulation S-X for provision of financial statements in accordance with such Section have been met, in lieu of the Standard Statements otherwise required by this section, Borrower shall instead provide the financial statements required by such Section 210.3-14 of Regulation S-X (“Acquired Property Statements”).

(B)           Not later than 45 days after the end of each fiscal quarter following the date hereof, a balance sheet for Borrower as of the end of such fiscal quarter, meeting the requirements of Section 210.3-01 of Regulation S-X, and statements of income and statements of cash flows of the Properties for the period commencing following the last day of the most recent fiscal year and ending on the date of such balance sheet and for the corresponding period of the most recent fiscal year, meeting the requirements of Section 210.3-02 of Regulation S-X (provided, that if for such corresponding period of the most recent fiscal year Acquired Property Statements were permitted to be provided hereunder pursuant to subsection (i) above, Borrower shall instead provide Acquired Property Statements for such corresponding period).

(C)           Not later than 90 days after the end of each fiscal year following the date hereof, a balance sheet for Borrower as of the end of such fiscal year, meeting the requirements of Section 210.3-01 of Regulation S-X, and statements

60

of income and statements of cash flows of each Property for such fiscal year, meeting the requirements of Section 210.3-02 of Regulation S-X.

(D)          Within ten Business Days after notice from Lender in connection with the Securitization of this Loan, such additional financial statements, such that, as of the date (each an “Offering Document Date”) of each Disclosure Document, Borrower shall have provided Lender with all financial statements as described in this subsection (c)(i); provided that the fiscal year and interim periods for which such financial statements shall be provided shall be determined as of such Offering Document Date.

(ii)           If requested by Lender, Borrower shall provide Lender, promptly upon request, with summaries of the financial statements referred to in Section 5.11(c) hereof if, at the time a Disclosure Document is being prepared for a Securitization, it is expected that the principal amount of the Loan and any Affiliated Loans at the time of Securitization may, or if the principal amount of the Loan and any Affiliated Loans at any time during which the Loan and any Affiliated Loans are included in a Securitization does, equal or exceed 10% (but is less than 20%) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in a Securitization.  Such summaries shall meet the requirements for “summarized financial information,” as defined in Section 210.1-02(bb) of Regulation S-X, or such other requirements as may be determined to be necessary or appropriate by Lender.

(iii)          All financial statements provided by Borrower hereunder pursuant to Section 5.11(c)(i) and (ii) hereof shall be prepared in accordance with GAAP, and shall meet the requirements of Regulation S-X and other applicable legal requirements.  All financial statements referred to in Section 5.11(c)(i)(A)and (C) above shall be audited by Acceptable Accountants in accordance with Regulation S-X and all other applicable legal requirements, shall be accompanied by the manually executed report of the independent accountants thereon, which report shall meet the requirements of Regulation S-X and all other applicable legal requirements, and shall be further accompanied by a manually executed written consent of the Acceptable Accountants, in form and substance acceptable to Lender, to the inclusion of such financial statements in any Disclosure Document and any Exchange Act Filing and to the use of the name of such Acceptable Accountants and the reference to such Acceptable Accountants as “experts” in any Disclosure Document and Exchange Act Filing (as defined below), all of which shall be provided at the same time as the related financial statements are required to be provided.  All financial statements (audited or unaudited) provided by Borrower under this Section 5.11 shall be certified by the chief financial officer or administrative member of Borrower, which certification shall state that such financial statements meet the requirements set forth in the first sentence of this Section 5.11(c)(iii).

(iv)          If requested by Lender, Borrower shall provide Lender, promptly upon request, with any other or additional financial statements, or financial, statistical or operating information, as Lender shall determine to be required pursuant to Regulation S-X or any amendment, modification or replacement thereto or other legal requirements in connection with any Disclosure Document or any filing under or pursuant to the

61

Exchange Act in connection with or relating to a Securitization (hereinafter an “Exchange Act Filing”) or as shall otherwise be reasonably requested by Lender.

(v)           In the event Lender determines, in connection with a Securitization, that the financial statements required in order to comply with Regulation S-X or other legal requirements are other than as provided herein, then notwithstanding the provisions of Section 5.11(c) hereof, Lender may request, and Borrower shall promptly provide, such combination of Acquired Property Statement and/or Standard Statements or such other financial statements as Lender determines to be necessary or appropriate for such compliance.

(vi)          Any reports, statements or other information required to be delivered under this Agreement shall be delivered in paper form and in the event that Lender requires financial statements in connection with subsection (c) above because the Loan when combined with the principal amount of any Affiliated Loans equal or exceed 20% of the aggregate principal amount of all mortgage loans included in a Securitization (defined below), Borrower shall deliver such reports, statements and other information (A) on a diskette, and (B) if requested by Lender and within the capabilities of Borrower’s data systems without change or modification thereto, in electronic form and prepared and submitted in format acceptable to Lender.

(d)           Borrower and Borrower Principal shall furnish Lender with such other additional financial or management information (including state and federal tax returns) as may, from time to time, be reasonably required by Lender in form and substance satisfactory to Lender (including, without limitation, any financial reports required to be delivered by any Tenant or any guarantor of any Lease pursuant to the terms of such Lease), and shall furnish to Lender and its agents convenient facilities for the examination and audit of any such books and records.

(e)           All items requiring the certification of Borrower shall, except where Borrower is an individual, require a certificate executed by the general partner, managing member or chief executive officer of Borrower, as applicable (and the same rules shall apply to any sole shareholder, general partner or managing member which is not an individual).

Section 5.12.      ESTOPPEL STATEMENT

(a)           After request by Lender, Borrower shall within ten (10) Business Days furnish Lender with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, (ii) the rate of interest on the Note, (iii) the unpaid principal amount of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi) that the Note, this Agreement, each Mortgage and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification.

(b)           Borrower shall use its best efforts to deliver to Lender, promptly upon request, duly executed estoppel certificates from (i) the applicable lessor under either Ground Lease pursuant to the applicable terms and conditions of the applicable ground lease estoppel and agreement executed in connection herewith, and (ii) any one or more Tenants as required by

62

Lender attesting to such facts regarding the related Lease as Lender may require, including, but not limited to attestations that each Lease covered thereby is in full force and effect with no defaults thereunder on the part of any party, that none of the Rents have been paid more than one month in advance, except as security, and that the Tenant claims no defense or offset against the full and timely performance of its obligations under the Lease.

Section 5.13.      OPERATING LEASE; LEASING MATTERS

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

(b)           If at any time, (A)(i) an Operating Lessee shall become insolvent or a debtor in a bankruptcy proceeding or (ii) a default has occurred and is continuing under any Operating Lease and (B) an Event of Default has occurred and is continuing and Lender has accelerated the Loan and is exercising its rights under the Loan Documents to realize on its collateral under the Loan and is exercising its rights under the Loan Documents to realize on the collateral securing the Loan, Lender shall have the absolute right to (and Borrower shall reasonably cooperate and not in any way hinder, delay or otherwise interfere with Lender’s right to), (A) in the instance of an Operating Lease between Borrower and an Affiliated Lessee, immediately terminate the applicable Operating Lease under and in accordance with the terms of the applicable Subordination, Attornment and Security Agreement or (b) in the instance of an Operating Lease with a Non-Affiliated Lessee, terminate such Operating Lease to the extent permitted under the terms of such Operating Lease under and in accordance with terms of the applicable Subordination, Non-Disturbance and Attornment Agreement.

(c)           Borrower shall not, without the prior written consent of Lender (which consent shall not be unreasonably withheld, conditioned or delayed): (i) surrender, terminate or cancel any Operating Lease or otherwise replace any Operating Lessee or enter into any other operating lease with respect to any Property; (ii) reduce or consent to the reduction of the term of any Operating Lease; or (iii) enter into, renew, amend, modify, waive any provisions of , reduce Rents under, or shorten the term of any Operating Lease.

(d)           Any replacement Operating Lessee shall in all events be a Qualified Lessee, and shall be a party to an Operating Lease approved in writing by Lender, in its reasonable discretion.  In the event any new Operating Lease with respect to a Property(ies) not subject to an approved Management Agreement does not provide for the payment of Operating Expenses prior to the distribution of any amounts to Borrower and/or for a reserve for Replacements that may be controlled by Lender, in all instances acceptable to Lender in its reasonable discretion, the

63

Lender shall have the right to require adequate Operating Expenses to be reserved pursuant to Section 9.8(a) hereof with respect to such Property(ies) and/or, as applicable, require additional Replacement Reserve Funds to be deposited with Lender based on Lender’s reasonable determination with respect to the Replacement needs of such Property(ies).  In addition, any new or replacement Operating Lessee (i) Affiliated with Borrower, shall execute a form of Subordination, Attornment and Security Agreement substantially in the same form as the one delivered in connection with the closing of the Loan and (ii) not Affiliated with Borrower, shall execute a subordination, non-disturbance and attornment agreement in a form as may be approved by Lender in its reasonable discretion.

(e)           Other than any new or replacement Operating Lease, Borrower may enter into a proposed Lease (including the renewal or extension of an existing Lease (a “Renewal Lease”)) (or cause or permit any Operating Lessee to enter into a proposed Lease or Renewal Lease) without the prior written consent of Lender, provided such proposed Lease or Renewal Lease (i) provides for rental rates and terms comparable to existing local market rates and terms (taking into account the type and quality of the tenant) as of the date such Lease is executed by Borrower or Operating Lessee, as the case may be (unless, in the case of a Renewal Lease, the rent payable during such renewal, or a formula or other method to compute such rent, is provided for or contemplated in the original Lease), (ii) is an arm’s-length transaction with a bona fide, independent third party tenant, (iii) does not have a materially adverse effect on the value of the applicable Property taken as a whole, (iv) is subject and subordinate to the applicable Mortgage and the Tenant thereunder agrees to attorn to Lender (provided such agreement may be conditioned upon receipt of a reasonable and customary non-disturbance agreement from Lender), (v) does not contain any option, offer, right of first refusal, or other similar right to acquire all or any portion of the applicable Property, (vi) has a base term of less than fifteen (15) years including options to renew, (vii) as to Major Leases, has no rent, credits, free rents or concessions granted thereunder, and (viii) as to Major Leases, is written on customary form of lease reasonably acceptable to Lender.  All proposed Leases which do not satisfy the requirements set forth in this subsection shall be subject to the prior approval of Lender and its counsel, at Borrower’s expense.  Borrower shall promptly deliver to Lender copies of all Major Leases and to the extent requested by Lender other Leases which are entered into pursuant to this subsection together with Borrower’s certification that such Leases satisfy all of the conditions of this Section.

(f)            Without limiting any other provision contained herein, Borrower (i) shall (or shall cause the applicable Operating Lessee to) observe and perform all the obligations imposed upon the landlord under the Leases and shall not do or permit to be done anything to impair the value of any of the Leases as security for the Debt; (ii) shall promptly send copies to Lender of all notices of default which Borrower shall send or receive under any Major Lease (and any other Lease to pursuant to any request made by Lender); (iii) shall enforce (or cause or permit the applicable Operating Lessee to enforce) all of the material terms, covenants and conditions contained in the Leases upon the part of the tenant thereunder to be observed or performed; (iv) shall not collect (or cause or permit any Operating Lessee to collect) any of the Rents more than one (1) month in advance (except security deposits shall not be deemed Rents collected in advance); (v) shall not execute (or cause or permit any Operating Lessee to execute) any other assignment of the landlord’s interest in any of the Leases or the Rents; and (vi) shall not consent

64

(or cause or permit any Operating Lessee to consent) to any assignment of or subletting under any Leases not in accordance with their terms, without the prior written consent of Lender.

(g)           Notwithstanding any other provision contained herein, other than with respect to a Major Lease (including, but not limited to, any Operating Lease) Borrower may, without the prior written consent of Lender, amend, modify or waive the provisions of any Lease or terminate, reduce Rents under, accept a surrender of space under, or shorten the term of, any Lease (including any guaranty, letter of credit or other credit support with respect thereto) (or cause or permit any Operating Lessee to do any of the foregoing) provided that such action (taking into account, in the case of a termination, reduction in rent, surrender of space or shortening of term, the planned alternative use of the affected space) does not have a materially adverse effect on the value of the applicable Property taken as a whole, and provided that such Lease, as amended, modified or waived, is otherwise in compliance with the requirements of this Agreement and any subordination agreement binding upon Lender with respect to such Lease.  A termination of a Lease (other than an Operating Lease) with a tenant who is in default beyond applicable notice and grace periods shall not be considered an action which has a materially adverse effect on the value of the applicable Property taken as a whole.  Any amendment, modification, waiver, termination, rent reduction, space surrender or term shortening which does not satisfy the requirements set forth in this subsection shall be subject to the prior approval of Lender and its counsel (not to be unreasonably withheld), at Borrower’s expense.  Borrower shall promptly deliver to Lender copies of amendments, modifications and waivers for Major Leases (and any other Lease pursuant to any request made by Lender) which are entered into pursuant to this subsection together with Borrower’s certification that all conditions of this subsection have been satisfied.

(h)           Notwithstanding anything contained herein to the contrary, Borrower shall not, without the prior written consent of Lender, enter into, renew, extend, amend, modify, waive any provisions of, terminate, reduce Rents under, accept a surrender of space under, or shorten the term of any Major Lease (or in the instance of a Major Lease other than an Operating Lease, cause or permit the applicable Operating Lessee to do any of the foregoing).

(i)            Notwithstanding anything contained herein to the contrary, Borrower shall not, without the prior written consent of Lender, enter into, renew, extend, amend, modify, waive any provisions of, terminate, reduce Rents under, accept a surrender of space under, or shorten the term of any Lease during a Excess Cash Flow Sweep Period (or cause or permit the applicable Operating Lessee to do any of the foregoing).

Section 5.14.      PROPERTY MANAGEMENT

(a)           Borrower shall or shall cause the applicable Operating Lessee to (i) promptly perform and observe all of the covenants required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any default under the Management Agreement of which it is aware; (iii) promptly deliver to Lender a copy of any notice of default or other material notice received by Borrower under the Management Agreement; (iv) promptly give notice to Lender of any notice or information that Borrower receives which indicates that Manager is terminating the Management Agreement or that Manager is otherwise discontinuing

65

its management of the applicable Property; and (v) promptly enforce the performance and observance of all of the covenants required to be performed and observed by Manager under the Management Agreement.

(b)           If at any time, an event shall occur (i) under any Management Agreement which constitutes a material monetary default by Manager as determined by Lender or a material non-monetary default by Manager as determined by Lender which default materially and adversely affects the value, use or operation of any Property or the Borrower’s obligations to pay the Debt which permits Borrower or Operating Lessee to terminate the applicable Manager or (ii) under any Assignment of Management Agreement which permits Lender, Borrower or Operating Lessee to terminate the applicable Manager, Borrower shall, at the request of Lender, promptly terminate (or cause Operating Lessee to terminate) the applicable Management Agreement in accordance with the terms (including the minimum time periods for termination) of such Management Agreement and/or Assignment of Management Agreement, and replace Manager with a Qualified Manager approved by Lender on terms and conditions satisfactory to Lender, it being understood and agreed that the management fee for such replacement manager shall not exceed then prevailing market rates.  Without limiting the foregoing, in the event any Assignment of Management Agreement shall permit Lender to terminate the Management Agreement directly, upon Lender’s election to so terminate any such Management Agreement, Borrower shall reasonably cooperate and not in any way interfere with any act by Lender’s to so terminate such Management Agreement.

(c)           Borrower shall not, without the prior written consent of Lender (which consent shall not be unreasonably withheld, conditioned or delayed): (i) surrender, terminate or cancel the Management Agreement or otherwise replace any Manager or enter into any other management agreement with respect to any Property (or cause or permit the applicable Operating Lessee to do any of the foregoing); (ii) reduce or consent to the reduction of the term of any Management Agreement (or cause or permit the applicable Operating Lessee to do any of the foregoing); (iii) increase or consent to the increase of the amount of any charges under any Management Agreement (or cause or permit the applicable Operating Lessee to do any of the foregoing); or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, any Management Agreement in any material respect (or cause or permit the applicable Operating Lessee to do any of the foregoing).

(d)           Any replacement Manager shall in all events be a Qualified Manager, and shall be a party to a Management Agreement approved in writing by Lender, in its reasonable discretion.  In the event any new Management Agreement does not provide for the payment of Operating Expenses prior to the distribution of any amounts to Operating Lessee or Borrower and/or for a reserve for Replacements that may be controlled by Lender, in all instances acceptable to Lender in its reasonable discretion, the Lender shall have the right to require adequate Operating Expenses to be reserved pursuant to Section 9.8(a) hereof with respect to such Properties and/or, as applicable, require additional Replacement Reserve Funds in accordance with Section 9.2(b) hereof to be deposited with Lender based on Lender’s reasonable determination with respect to the Replacement needs of such Property(ies).  In addition, any new or replacement Manager shall execute the form of assignment and subordination of management agreement in a form as may be approved by Lender in its reasonable discretion.

66

Section 5.15.      LIENS

Borrower shall not, without the prior written consent of Lender, create, incur, assume or suffer to exist any Lien on any portion of any Property or permit any such action to be taken, except Permitted Encumbrances.

Section 5.16.      DEBT CANCELLATION

Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower’s business.

Section 5.17.      ZONING

Borrower shall not initiate or consent to any zoning reclassification of any portion of any Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of any Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior written consent of Lender.

Section 5.18.      ERISA

(a)           Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA.

(b)           Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of the Loan, as requested by Lender in its sole discretion, that (i) Borrower is not and does not maintain an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(3) of ERISA; (ii) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true:

(A)          Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

(B)           Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

(C)           Borrower qualifies as an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).

67

Section 5.19.      NO JOINT ASSESSMENT

Borrower shall not suffer, permit or initiate the joint assessment of any Property with (a) any other real property constituting a tax lot separate from such Property, or (b) any portion of such Property which may be deemed to constitute personal property, or any other procedure whereby the Lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such Property.

Section 5.20.      RECIPROCAL EASEMENT AGREEMENTS

Borrower shall not enter into, terminate or modify any REA without Lender’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.  Borrower shall enforce, comply with, and cause each of the parties to each REA to comply with all of the material economic terms and conditions contained in each REA.

Section 5.21.      ALTERATIONS

Lender’s prior approval (which shall not be unreasonably withheld) shall be required in connection with any alterations to any Improvements, exclusive of alterations to tenant spaces required under any Lease, (a) that may have a material adverse effect on any Property, (b) that are structural in nature or (c) that, together with any other alterations undertaken at the same time (including any related alterations, improvements or replacements), are reasonably anticipated to have a cost in excess of the Alteration Threshold.  If the total unpaid amounts incurred and to be incurred with respect to such alterations to the Improvements shall at any time exceed the Alteration Threshold, Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrower’s obligations under the Loan Documents any of the following: (i) cash, (ii) direct non-callable obligations of the United States of America or other obligations which are “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, to the extent acceptable to the applicable Rating Agencies, (iii) other securities acceptable to Lender and the Rating Agencies, (iv) Letter of Credit acceptable to Lender and the Rating Agencies or (v) a completion bond, provided that such completion bond is acceptable to the Lender and the Rating Agencies.  Such security shall be in an amount equal to the excess of the total unpaid amounts incurred and to be incurred with respect to such alterations to the Improvements over the Alteration Threshold.

Section 5.22.      FRANCHISE AGREEMENTS.

(a)           Each Property (other than any Property for which with Lender’s consent there is no Franchise Agreement in place) shall be operated under the terms and conditions of the applicable Franchise Agreement.  Borrower shall or shall cause the applicable Operating Lessee to (i) pay all sums required to be paid by the franchisee under each Franchise Agreement, (ii) diligently perform, observe and enforce all of the terms, covenants and conditions of each Franchise Agreement on the part of the franchisee thereunder to be performed, observed and enforced to the end that all things shall be done which are necessary to keep unimpaired the rights of said franchisee under each Franchise Agreement, (iii) promptly notify Lender of the giving of any notice to Borrower and/or Operating Lessee of any default by the franchisee in the performance or observance of any of the terms, covenants or conditions of any Franchise

68

Agreement on the part of the franchisee thereunder to be performed and observed and deliver to Lender a true copy of each such notice, and (iv) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditure plan, notice of a default under the Franchise Agreement, report regarding operations at the related Property, estimates of any monetary nature and any other items reasonably requested by Lender, in each case received by Borrower or Affiliated Lessee under any Franchise Agreement.

(b)           Borrower shall not (and shall not cause or permit any Operating Lessee to), without the prior consent of the Lender, surrender any Franchise Agreement or terminate or cancel any Franchise Agreement or modify, change, supplement, alter or amend any Franchise Agreement, in any respect, either orally or in writing, and Borrower hereby assigns to Lender as further security for the payment of the Debt and for the performance and observance of the terms, covenants and conditions of this Agreement, any and all rights, privileges and prerogatives of Borrower to surrender any Franchise Agreement or to terminate, cancel, modify, change, supplement, alter or amend any Franchise Agreement in any respect, and any such surrender of any Franchise Agreement or termination, cancellation, modification, change, supplement, alteration or amendment of any Franchise Agreement without the prior consent of Lender shall be void and of no force and effect.

(c)           If any franchisee shall default in the performance or observance of any material term, covenant or condition of any Franchise Agreement on the part of the franchisee thereunder to be performed or observed, then, without limiting the generality of the other provisions of this Agreement, and without waiving or releasing Borrower from any of its obligations hereunder, Lender shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of such Franchise Agreement on the part of the franchisee to be performed or observed to be promptly performed or observed on behalf of Borrower, to the end that the rights of said franchisee (and/or Borrower and/or Operating Lessee) in, to and under such Franchise Agreement shall be kept unimpaired and free from default.  Any such amounts so advanced by Lender together with interest thereon from the date expended by Lender of the Default Rate shall be part of the Debt and Borrower shall immediately repay such amounts to Lender upon demand.  Pursuant to the terms of the applicable Subordination Non-Disturbance Attornment Agreement, Subordination Attornment and Security Agreement and/or Assignment of Management Agreement, Lender and any person designated by Lender shall have, and are hereby granted, the right to enter upon the applicable Property at any time and from time to time for the purpose of taking any such action.  If any Franchisor shall deliver to Lender a copy of any notice sent to Borrower and/or Operating Lessee of any default under any Franchise Agreement, such notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender in good faith, in reliance thereon.

(d)           Borrower shall (or shall cause the applicable Operating Lessee to) exercise each individual option, if any, to extend or renew the term of each Franchise Agreement upon demand by Lender made at any time within ninety (90) days prior to the last day upon which any such option may be exercised, and Borrower hereby expressly authorizes and appoints Lender as its attorney-in-fact to exercise (or cause the applicable Operating Lessee to exercise) any such option in the name of and upon behalf of Borrower should Borrower fail to do so, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest.

69

(e)           Any sums expended by Lender pursuant to this Section shall bear interest at the Default Rate from the date such cost is incurred to the date of payment to Lender, shall be deemed to constitute a portion of the Debt , shall be secured by the lien of the Mortgage and the other Loan Documents and shall be immediately due and payable upon demand by Lender therefor.

(f)            Borrower shall, promptly upon request of Lender, use its diligent best efforts to obtain and deliver (or cause to be delivered) an estoppel certificate from each Franchisor stating that (i) each applicable Franchise Agreement is in full force and effect and has not been modified, amended or assigned, (ii) neither such Franchisor nor the franchisee named thereunder is in default under any of the terms, covenants or provisions of each applicable Franchise Agreement and such Franchisor knows of no event which, but for the passage of time or the giving of notice or both, would constitute an event of default under each applicable Franchise Agreement, (iii) neither such Franchisor nor the franchisee thereunder has commenced any action or given or received any notice for the purpose of terminating any applicable Franchise Agreement and (iv) all sums due and payable to such Franchisor under each applicable Franchise Agreement have been paid in full.

(g)           Upon the termination of any Franchise Agreement, Borrower shall (or shall cause Operating Lessee to) promptly enter into a new Franchise Agreement with a replacement Franchisor, which shall deliver a comfort or similar letter to and in favor of Lender, all upon terms and conditions acceptable to Lender in its discretion.

Section 5.23.      GROUND LEASE

(a)           With respect to each Ground Lease, Borrower shall (i) subject to Section 9.10 pay all rents, additional rents and other sums required to be paid by Borrower, as tenant under and pursuant to the provisions of the Ground Lease, (ii) diligently perform and observe all of the terms, covenants and conditions of the Ground Lease on the part of Borrower, as tenant thereunder, (iii) promptly notify Lender of the giving of any notice by the landlord under the Ground Lease to Borrower of any default by Borrower, as tenant thereunder, and deliver to Lender a true copy of each such notice within five (5) Business Days of receipt and (iv) promptly notify Lender of any bankruptcy, reorganization or insolvency of the landlord under the Ground Lease or of any notice thereof, and deliver to Lender a true copy of such notice within five (5) Business Days of Borrower’s receipt.  Borrower shall not, without the prior written consent of Lender, surrender the leasehold estate created by the Ground Lease or terminate or cancel the Ground Lease or modify, change, supplement, alter or amend the Ground Lease, either orally or in writing, and if Borrower shall default in the performance or observance of any term, covenant or condition of the Ground Lease on the part of Borrower, as tenant thereunder, and shall fail to cure the same prior to the expiration of any applicable cure period provided thereunder, Lender shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all of the terms, covenants and conditions of the Ground Lease on the part of Borrower to be performed or observed on behalf of Borrower, to the end that the rights of Borrower in, to and under the Ground Lease shall be kept unimpaired and free from default.  If the landlord under the Ground Lease shall deliver to Lender a copy of any notice of default under the Ground Lease, such notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender, in good faith, in reliance thereon.

70

Borrower shall exercise each individual option, if any, to extend or renew the term of the Ground Lease upon demand by Lender made at any time within ninety (90) days prior to the last day upon which any such option may be exercised, and Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to exercise any such option in the name of and upon behalf of Borrower should Borrower fail to do so, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest.

(b)           Other than as permitted by this Agreement, notwithstanding anything contained in either Ground Lease to the contrary, Borrower shall not further sublet any portion of the applicable Property subject to such Ground Lease (other than as permitted pursuant to the applicable terms and conditions hereof) without prior written consent of Lender.  In addition, (i) any such sublease shall not terminate or be terminable by the lessee thereunder, including, but not limited to, in the event of any action for the foreclosure of the Security Instrument (unless a judgment is obtained therein against such sublessee); and (ii) in the event that the Ground Lease is terminated as aforesaid, the sublessee under the sublease shall attorn to the lessor under the Ground Lease or to the purchaser at the sale of the applicable Property on such foreclosure, as the case may be.  In the event that any portion of the applicable Property shall be sublet pursuant to the terms of this subsection, such sublease shall be deemed to be included in the applicable Property.

Section 5.24.      INTEREST RATE CAP AGREEMENT

(a)           Prior to or contemporaneously with the Closing Date, Borrower shall have obtained the Rate Cap, which shall continue until the end of the Interest Period in which the Maturity Date of the Loan shall occur and have a notional amount which shall not at any time be less than the outstanding principal balance of the Loan.  The Rate Cap shall be maintained throughout the term of the Loan with an Acceptable Counterparty.  If the provider of the Rate Cap or any Replacement Rate Cap ceases to be an Acceptable Counterparty, Borrower shall obtain a Replacement Rate Cap at Borrower’s sole cost and expense within ten (10) days of receipt of notice from Lender or Borrower’s obtaining knowledge that the provider is no longer an Acceptable Counterparty.

(b)           Borrower shall collaterally assign to Lender pursuant to the Collateral Assignment of Interest Rate Cap Agreement all of its right, title and interest to receive any and all payments under the Rate Cap or any Replacement Rate Cap (and any related guarantee, if any) and shall deliver to Lender counterparts of such Collateral Assignment of Interest Rate Cap Agreement executed by the Borrower and by the Acceptable Counterparty and notify the Acceptable Counterparty of such collateral assignment (either in such Rate Cap or by separate instrument).  At such time as the Loan is repaid in full, all of Lender’s right, title and interest in the Rate Cap and any Replacement Rate Cap shall terminate and Lender shall execute and deliver at Borrower’s sole cost and expense, such documents as may be required to evidence Lender’s release of the Rate Cap and any Replacement Rate Cap and to notify the Acceptable Counterparty of such release.

(c)           Borrower shall comply with all of its obligations under the terms and provisions of the Rate Cap and any Replacement Rate Cap.  All amounts paid by the Acceptable Counterparty under the Rate Cap to Borrower or Lender shall be deposited immediately into the

71

Cash Management Account.  Borrower shall take all actions reasonably requested by Lender to enforce Lender’s rights under the Rate Cap and any Replacement Rate Cap in the event of a default by the Acceptable Counterparty and shall not waive, amend or otherwise modify any of its rights thereunder.

(d)           In the event that Borrower fails to purchase and deliver to Lender the Rate Cap or any Replacement Rate Cap as and when required hereunder, or fails to maintain such agreement in accordance with the terms and provisions of this Agreement, Lender may purchase the Rate Cap or any Replacement Rate Cap, as applicable, and the cost incurred by Lender in purchasing the Rate Cap or any Replacement Rate Cap, as applicable, shall be paid by Borrower to Lender with interest thereon at the Default Rate from the date such cost was incurred by Lender until such cost is reimbursed by Borrower to Lender.

(e)           In connection with the Rate Cap and any Replacement Rate Cap, Borrower shall obtain and deliver to Lender an opinion from counsel (which counsel may be in house counsel for the Acceptable Counterparty) for the Acceptable Counterparty (upon which Lender and its successors and assigns may rely) which shall provide, in relevant part, that:

(i)            the Acceptable Counterparty is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has the organizational power and authority to execute and deliver, and to perform its obligations under, the Rate Cap or the Replacement Rate Cap, as applicable;

(ii)           the execution and delivery of the Rate Cap or the Replacement Rate Cap, as applicable, by the Acceptable Counterparty, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been and remain duly authorized by all necessary action and do not contravene any provision of its certificate of incorporation or by laws (or equivalent organizational documents) or any law, regulation or contractual restriction binding on or affecting it or its property;

(iii)          all consents, authorizations and approvals required for the execution and delivery by the Acceptable Counterparty of the Rate Cap or the Replacement Rate Cap, as applicable, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been obtained and remain in full force and effect, all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with any governmental authority or regulatory body is required for such execution, delivery or performance; and

(iv)          the Rate Cap or the Replacement Cap, as applicable, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, has been duly executed and delivered by the Acceptable Counterparty and constitutes the legal, valid and binding obligation of the Acceptable Counterparty, enforceable against the Acceptable Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

72

Section 5.25.      MANAGER OF FLINT PROPERTY

The initial Manager of the Flint Property as of the Closing Date is Flagstone.  Borrower anticipates entering into with Interstate a new Management Agreement (“Flint Interstate Management Agreement”) in the exact same form as the form in place on the Closing Date with Interstate on the other Interstate Properties.  On or before December 31, 2003, Borrower shall provide Lender with a copy of the executed Flint Interstate Management Agreement as well as the Assignment of Management Agreement in the form delivered on the Closing Date and executed by Interstate for the other Interstate Managed Properties.

Section 5.26.      CONSOLIDATED TANGIBLE NET WORTH

Borrower Principal shall not permit the Consolidated Tangible Net Worth of Borrower Principal and its Subsidiaries on a consolidated basis at any time to be less than the sum of $150,000,000 plus the cost basis of the Properties subject to the Lien of the Mortgage at such time as set forth on Schedule III hereof minus the aggregate then outstanding principal balance of the Loan and Mezzanine Loan.

ARTICLE 6
ENTITY COVENANTS

Section 6.1.        SINGLE PURPOSE ENTITY/SEPARATENESS

Until the Debt has been paid in full, Borrower represents, warrants and covenants as follows:

(a)           Borrower has not and will not:

(i)            engage in any business or activity other than the ownership, operation and maintenance of the Properties, and activities incidental thereto;

(ii)           acquire or own any assets other than (A) the Properties, and (B) such incidental Personal Property as may be necessary for the operation of each Property;

(iii)          merge into or consolidate with any Person, or dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without the prior written consent of Lender and after a Securitization written confirmation from each of the applicable Rating Agencies that the same shall not result in the qualification, withdrawal or downgrade of the initial, or if higher, then current ratings issued in connection with a Securitization;

(iv)          fail to observe all organizational formalities, or fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the applicable Legal Requirements of the jurisdiction of its organization or formation, or amend, modify, terminate or fail to comply with the provisions of its organizational documents;

73

(v)           own any subsidiary, or make any investment in, any Person, without the prior written consent of Lender and after a Securitization written confirmation from each of the applicable Rating Agencies that said ownership or investment shall not result in the qualification, withdrawal or downgrade of the initial, or if higher, then current ratings issued in connection with a Securitization;

(vi)          commingle its assets with the assets of any other Person;

(vii)         incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (A) the Debt, (B) trade and operational indebtedness incurred in the ordinary course of business with trade creditors (including obligations in respect of alterations, replacements and capital improvements permitted under the Loan Documents), provided such indebtedness is (1) unsecured, (2) not evidenced by a note, (3) on commercially reasonable terms and conditions, and (4) due not more than sixty (60) days past the date incurred and paid on or prior to such date, and/or (C) financing leases and purchase money indebtedness incurred in the ordinary course of business relating to Personal Property on commercially reasonable terms and conditions; provided however, the aggregate amount of the indebtedness described in (B) and (C) shall when combined with any similar indebtedness then held by the Affiliated Lessee not exceed at any time five percent (5%) of the outstanding principal amount of the Note;

(viii)        fail to maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person; except that Borrower’s financial position, assets, liabilities, net worth and operating results may be included in the consolidated financial statements of an Affiliate, provided that such consolidated financial statements clearly and conspicuously identify the Borrower as a separate legal entity;

(ix)           enter into any contract or agreement with any general partner, member, shareholder, principal, guarantor of the obligations of Borrower, or any Affiliate of the foregoing, except upon terms and conditions that are intrinsically fair, commercially reasonable and substantially similar to those that would be available on an arm’s-length basis with unaffiliated third parties;

(x)            maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

(xi)           except as otherwise expressly permitted by the Loan Documents, assume or guaranty the debts of any other Person (other than any commercially reasonable guaranty of any Affiliated Lessee’s obligations under any Franchise Agreement or Management Agreement consented to by Lender), hold itself out to be responsible for the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person;

74

(xii)          make any loans or advances to any Person, without the prior written consent of Lender and after a Securitization written confirmation from each of the applicable Rating Agencies that the same shall not result in the qualification, withdrawal or downgrade of the initial, or if higher, then current ratings issued in connection with a Securitization;

(xiii)         fail to file its own tax returns or fails to file a consolidated federal income tax return with any Person (unless prohibited or required, as the case may be, by applicable Legal Requirements);

(xiv)        fail either to hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

(xv)         fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

(xvi)        if it is a partnership or limited liability company, without the unanimous written consent of all of its partners or members, as applicable, and the written consent of 100% of the directors or managers as applicable, of each SPE Component Entity (if any), including, without limitation, each Independent Director, (a) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any Creditors Rights Laws, (b) seek or consent to the appointment of a receiver, liquidator or any similar official, (c) take any action that might cause such entity to become insolvent, or (d) make an assignment for the benefit of creditors;

(xvii)       fail to allocate shared expenses (including, without limitation, shared office space and services performed by an employee of an Affiliate) among the Persons sharing such expenses and to use separate stationery, invoices and checks;

(xviii)      (A) fail to remain solvent or (B) pay its own liabilities (including, without limitation, salaries of its own employees) only from its own funds;

(xix)         acquire obligations or securities of its partners, members, shareholders or other Affiliates, as applicable;

(xx)          violate or cause to be violated the assumptions made with respect to Borrower and its principals in any opinion letter pertaining to substantive consolidation delivered to Lender in connection with the Loan; or

(xxi)         fail to maintain a sufficient number of employees in light of its contemplated business operations.

(b)           If Borrower is a partnership or limited liability company which is not a single member limited liability company, each general partner in the case of a general partnership, each general partner in the case of a limited partnership, or the managing member in the case of a limited liability company (each an “SPE Component Entity”) of Borrower, as applicable, shall

75

be a corporation or a single member Delaware limited liability company (which shall comply with all additional provisions contained herein with respect to Delaware limited liability companies) whose sole asset is its interest in Borrower.  Each SPE Component Entity (i) will at all times comply with each of the covenants, terms and provisions contained in Section 6.1(a)(iii) - (vi) and (viii) - (xxi), as if such representation, warranty or covenant was made directly by such SPE Component Entity; (ii) will not engage in any business or activity other than owning an interest in Borrower; (iii) will not acquire or own any assets other than its partnership, membership, or other equity interest in Borrower; (iv) will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation); and (v) will cause Borrower to comply with the provisions of this Section 6.1 and Section 6.4.  Prior to the withdrawal or the disassociation of any SPE Component Entity from Borrower, Borrower shall immediately appoint a new general partner or managing member whose articles of incorporation (or other applicable formation and entity documentation) are substantially similar to those of such SPE Component Entity and, if an opinion letter pertaining to substantive consolidation was required at closing, deliver a new opinion letter acceptable to Lender and the Rating Agencies with respect to the new SPE Component Entity and its equity owners.  Notwithstanding the foregoing, to the extent Borrower is a single member Delaware limited liability company, so long as Borrower maintains such formation status no SPE Component Entity shall be required.

(c)           In the event Borrower is a single member Delaware limited liability company, the limited liability company agreement of Borrower (the “LLC Agreement”) shall provide that (i) upon the occurrence of any event that causes the sole member of Borrower (“Member”) to cease to be the member of Borrower (other than (A) upon an assignment by Member of all of its limited liability company interest in Borrower and the admission of the transferee in accordance with the Loan Documents and the LLC Agreement, or (B) the resignation of Member and the admission of an additional member of Borrower in accordance with the terms of the Loan Documents and the LLC Agreement), any person acting as Independent Director of Borrower shall, without any action of any other Person and simultaneously with the Member ceasing to be the member of Borrower, automatically be admitted to Borrower as a member thereof (“Special Member”) and shall continue Borrower without dissolution and (ii) Special Member may not resign from Borrower or transfer its rights as Special Member unless (A) a successor Special Member has been admitted to Borrower as Special Member in accordance with requirements of Delaware law and (B) such successor Special Member has also accepted its appointment as an Independent Director.  The LLC Agreement shall further provide that (i) Special Member shall automatically cease to be a member of Borrower upon the admission to Borrower of a substitute Member, (ii) Special Member shall be a member of Borrower that has no interest in the profits, losses and capital of Borrower and has no right to receive any distributions of Borrower assets, (iii) pursuant to Section 18-301 of the Delaware Limited Liability Company Act (the “Act”), Special Member shall not be required to make any capital contributions to Borrower and shall not receive a limited liability company interest in Borrower, (iv) Special Member, in its capacity as Special Member, may not bind Borrower and (v) except as required by any mandatory provision of the Act, Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, Borrower, including, without limitation, the merger, consolidation or conversion of Borrower; provided, however, such prohibition shall not limit the obligations of Special Member, in its capacity as Independent Director, to vote on such matters required by the Loan Documents or the LLC Agreement.  In order to implement the admission to Borrower of Special Member, Special

76

Member shall execute a counterpart to the LLC Agreement.  Prior to its admission to Borrower as Special Member, Special Member shall not be a member of Borrower.

Upon the occurrence of any event that causes the Member to cease to be a member of Borrower, to the fullest extent permitted by law, the personal representative of Member shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of Member in Borrower, agree in writing (i) to continue Borrower and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of Borrower, effective as of the occurrence of the event that terminated the continued membership of Member of Borrower in Borrower.  Any action initiated by or brought against Member or Special Member under any Creditors Rights Laws shall not cause Member or Special Member to cease to be a member of Borrower and upon the occurrence of such an event, the business of Borrower shall continue without dissolution.  The LLC Agreement shall provide that each of Member and Special Member waives any right it might have to agree in writing to dissolve Borrower upon the occurrence of any action initiated by or brought against Member or Special Member under any Creditors Rights Laws, or the occurrence of an event that causes Member or Special Member to cease to be a member of Borrower.

Section 6.2.        CHANGE OF NAME, IDENTITY OR STRUCTURE

Borrower shall not change or permit to be changed (a) Borrower’s name, (b) Borrower’s identity (including its trade name or names), (c) Borrower’s principal place of business set forth on the first page of this Agreement, (d) the corporate, partnership or other organizational structure of Borrower, each SPE Component Entity (if any), or Borrower Principal, (e) Borrower’s state of organization, or (f) Borrower’s organizational identification number, without in each case notifying Lender of such change in writing at least thirty (30) days prior to the effective date of such change and, in the case of a change in Borrower’s structure, without first obtaining the prior written consent of Lender.  In addition, Borrower shall not change or permit to be changed any organizational documents of Borrower or any SPE Component Entity (if any) if such change would adversely impact the covenants set forth in Section 6.1 and Section 6.4 hereof.  Borrower authorizes Lender to file any financing statement or financing statement amendment required by Lender to establish or maintain the validity, perfection and priority of the security interest granted herein.  At the request of Lender, Borrower shall execute a certificate in form satisfactory to Lender listing the trade names under which Borrower intends to operate each Property, and representing and warranting that Borrower does business under no other trade name with respect to such Property.  If Borrower does not now have an organizational identification number and later obtains one, or if the organizational identification number assigned to Borrower subsequently changes, Borrower shall promptly notify Lender of such organizational identification number or change.

Section 6.3.        BUSINESS AND OPERATIONS

Borrower will qualify to do business and will remain in good standing under the laws of the applicable State as and to the extent the same are required for the ownership, maintenance, management and operation of each Property.

77

Section 6.4.INDEPENDENT DIRECTOR

(a)The organizational documents of each SPE Component Entity (if any) shall provide that at all times there shall be, and Borrower shall cause there to be, at least two duly appointed members of the board of directors, board of managers or equivalent governing board (each an “Independent Director”) of such SPE Component Entity reasonably satisfactory to Lender each of whom are not at the time of such individual’s initial appointment, and shall not have been at any time during the preceding five (5) years, and shall not be at any time while serving as an Independent Director of such SPE Component Entity, either (i) a shareholder (or other equity owner) of, or an officer, director, partner, manager, member (other than as a Special Member in the case of a single member Delaware limited liability company, or in the instance in which such Independent Director is an employee, representative or officer of a corporate service company which in the ordinary course of business serves as Independent Director for an Affiliate of Borrower other than any Affiliate which has a direct interest in Borrower, Affiliated Lessee or any of Borrower’s constituent entities), employee, attorney or counsel of, Borrower, such SPE Component Entity or any of  their respective shareholders, partners, members, subsidiaries or Affiliates; (ii) a customer or creditor of, or supplier to, Borrower or any of its respective shareholders, partners, members, subsidiaries or Affiliates who derives any of its purchases or revenue from its activities with Borrower or such SPE Component Entity or any Affiliate of any of them; (iii) a Person who Controls or is under common Control with any such shareholder, officer, director, partner, manager, member, employee, supplier, creditor or customer; or (iv) a member of the immediate family of any such shareholder, officer, director, partner, manager, member, employee, supplier, creditor or customer.

(b)The organizational documents of each SPE Component Entity (if any) shall provide that the board of directors, board of managers or equivalent governing board of such SPE Component Entity shall not take any action which, under the terms of any certificate of incorporation, certificate of formation, limited liability company agreement, by-laws, similar entity governance document or any voting trust agreement with respect to any common stock, requires an unanimous vote of the board of directors of such SPE Component Entity of Borrower unless at the time of such action there shall be at least two members of the board of directors who are Independent Directors.  Such SPE Component Entity will not, without the unanimous written consent of its board of directors, board of managers or other equivalent governing board including each Independent Director, on behalf of itself or Borrower, (i) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any applicable Creditors Rights Laws; (ii) seek or consent to the appointment of a receiver, liquidator or any similar official; (iii) take any action that might cause such entity to become insolvent; or (iv) make an assignment for the benefit of creditors.

ARTICLE 7
NO SALE OR ENCUMBRANCE

Section 7.1.TRANSFER DEFINITIONS

For purposes of this Article 7 an “Affiliated Manager” shall mean any managing agent in which Borrower, Affiliated Lessee, Borrower Principal, any SPE Component Entity (if any) or any Affiliate of such entities has, directly or indirectly, any legal, beneficial or economic interest;

78

“Control” shall mean the power to direct the management and policies of a Restricted Party, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise; “Restricted Party” shall mean Borrower, Affiliated Lessee, Borrower Principal, any SPE Component Entity (if any), any Affiliated Manager, or any shareholder, partner, member or non-member manager, or any direct or indirect legal or beneficial owner of Borrower, Affiliated Lessee, Borrower Principal, any SPE Component Entity (if any), any Affiliated Manager or any non-member manager; and a “Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, grant of any options with respect to, or any other transfer or disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) of a legal or beneficial interest.

Section 7.2.NO SALE/ENCUMBRANCE

(a)Borrower shall not cause or permit a Sale or Pledge of any Property or any part thereof or any legal or beneficial interest therein held by Borrower nor permit a Sale or Pledge of an interest in any Restricted Party (in each case, a “Prohibited Transfer”), other than pursuant to Leases of space in the Improvements to Tenants in accordance with the provisions of Section 5.13, without the prior written consent of Lender.  Nothing set forth herein shall or shall be deemed to prohibit the sale of publicly traded shares in CNL Hospitality Properties, Inc.

(b)A Prohibited Transfer shall include, but not be limited to, (i) an installment sales agreement wherein Borrower agrees to sell any Property or any part thereof for a price to be paid in installments; (ii) other than an Operating Lease, an agreement by Borrower leasing all or a substantial part of any Property for other than actual occupancy by a Tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge of such corporation’s stock or the creation or issuance of new stock in one or a series of transactions; (iv) if a Restricted Party is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership interest of any general or limited partner or any profits or proceeds relating to such partnership interests or the creation or issuance of new partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of any member or any profits or proceeds relating to such membership interest; (vi) if a Restricted Party is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests; or (vii) the removal of Manager, the acceptance by Borrower of the resignation of Manager when such Manager was not entitled under the applicable Management Agreement to resign or the resignation of the Manager in collusion with the Borrower, in each case other than in accordance with Section 5.14.

Section 7.3.PERMITTED TRANSFERS

Notwithstanding the provisions of Section 7.2, the following transfers shall not be deemed to be a Prohibited Transfer: (a) a transfer by devise or descent or by operation of law

79

upon the death of a member, partner or shareholder of a Restricted Party; (b) the transfer, in one or a series of transactions, of not more than forty-nine percent (49%) of the stock, limited partnership interests or non-managing membership interests (as the case may be) in a Restricted Party; provided, however, no such transfers shall result in a change in Control in the Restricted Party or change in control of any Property, and as a condition to each such transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed transfer; (c) the pledge by Borrower’s limited partner of its interest in Borrower and by the sole member of Borrower’s general partner of its interest in Borrower’s general partner as security for the Mezzanine Loan; (d) upon receipt of Lender’s prior written consent and after a Securitization written confirmation from each of the applicable Rating Agencies that the same shall not result in the qualification, withdrawal or downgrade of the initial, or if higher, then current ratings issued in connection with such Securitization, in connection with any refinance of the Mezzanine Loan, the pledge by Borrower’s limited partner of its interest in Borrower and by the sole member of Borrower’s general partner of its interest in Borrower’s general partner as security for such refinancing; (e) a transfer permitted under the Intercreditor Agreement; (f) a transfer in a transaction (including, without limitation, a merger or consolidation) whereby CNL Rose Acquisition Corp., CNL Rose GP Corp. or CNL Hospitality Properties, Inc. transfer their interests in Borrower Principal provided that following such transaction a majority of the interests in Borrower Principal continue to be owned, directly or indirectly, by CNL Hospitality Properties, Inc. and CNL Hospitality Properties, Inc. shall continue to Control Borrower Principal; or (g) other than as to Borrower Principal or any of Borrower Principal’s Subsidiaries, any transaction, including, without limitation, a merger or consolidation involving a Restricted Party, whereby, immediately following such transaction (i) a majority of the ownership interests in such Restricted Party are owned, directly or indirectly, by Persons who owned, directly or indirectly, a majority of the ownership interests of such Restricted Party immediately prior to such transaction, and (ii) as to any entity other than CNL Hospitality Properties, Inc., there is no resulting change in Control.  Notwithstanding the foregoing, any transfer (other than a transfer expressly permitted under the Intercreditor Agreement) that results in any Person owning in excess of forty-nine percent (49%) of the ownership interest in a Restricted Party other than a transfer permitted under the Intercreditor Agreement shall comply with the requirements of Section 7.4 hereof.

Section 7.4.LENDER’S RIGHTS

Lender reserves the right to condition the consent to a Prohibited Transfer requested hereunder upon (a) a modification of the terms hereof and an assumption of the Note and the other Loan Documents as so modified by the proposed Prohibited Transfer, (b) receipt of payment of a transfer fee equal to one percent (1%) of the outstanding principal balance of the Loan and all of Lender’s expenses incurred in connection with such Prohibited Transfer, (c) receipt of written confirmation from the Rating Agencies that the Prohibited Transfer will not result in a downgrade, withdrawal or qualification of the initial, or if higher, then current ratings issued in connection with a Securitization, or if a Securitization has not occurred, any ratings to be assigned in connection with a Securitization, (d) the proposed transferee’s continued compliance with the covenants set forth in this Agreement (including, without limitation, the covenants in Article 6) and the other Loan Documents, and (e) the satisfaction of such other conditions and/or legal opinions as Lender shall determine in its sole discretion to be in the interest of Lender.  All expenses incurred by Lender shall be payable by Borrower whether or not Lender consents to the Prohibited Transfer.  Lender shall not be required to demonstrate any

80

actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon a Prohibited Transfer made without Lender’s consent. This provision shall apply to each and every Prohibited Transfer, whether or not Lender has consented to any previous Prohibited Transfer.  Notwithstanding anything to the contrary contained in this Section 7.4, in the event a substantive non-consolidation opinion was delivered to Lender and the Rating Agencies in connection with the closing of the Loan, and if any Sale or Pledge permitted under this Article 7 results in any Person and its Affiliates owning in excess of forty-nine percent (49%) of the ownership interests in a Restricted Party, Borrower shall, prior to such transfer, and in addition to any other requirement for Lender consent contained herein, deliver a revised substantive non-consolidation opinion to Lender reflecting such Prohibited Transfer, which opinion shall be in form, scope and substance acceptable in all respects to Lender and the Rating Agencies.

Section 7.5.ASSUMPTION

Notwithstanding the foregoing provisions of this Article 7, following the date which is six (6) months from the Closing Date, Lender shall not unreasonably withhold consent to a transfer of the Properties in its entirety to, and the related assumption of the Loan by, any Person (a “Transferee”) provided that each of the following terms and conditions are satisfied:

(a)no Default or Event of Default has occurred;

(b)Borrower shall have (i) delivered written notice to Lender of the terms of such prospective transfer not less than sixty (60) days before the date on which such transfer is scheduled to close and, concurrently therewith, all such information concerning the proposed Transferee as Lender shall reasonably require and (ii) paid to Lender a non-refundable processing fee in the amount of $25,000.  Lender shall have the right to approve or disapprove the proposed transfer based on its then current underwriting and credit requirements for similar loans secured by similar properties which loans are sold in the secondary market, such approval not to be unreasonably withheld.  In determining whether to give or withhold its approval of the proposed transfer, Lender shall consider the experience and track record of Transferee and its principals in owning and operating facilities similar to the Properties, the financial strength of Transferee and its principals, the general business standing of Transferee and its principals and Transferee’s and its principals’ relationships and experience with contractors, vendors, tenants, lenders and other business entities; provided, however, that, notwithstanding Lender’s agreement to consider the foregoing factors in determining whether to give or withhold such approval, such approval shall be given or withheld based on what Lender determines to be commercially reasonable and, if given, may be given subject to such conditions as Lender may deem reasonably appropriate;

(c)Borrower shall have paid to Lender, concurrently with the closing of such Transfer, (i) a non-refundable assumption fee in an amount equal to one percent (1.0%) of the then outstanding principal balance of the Note and (ii) all out-of-pocket costs and expenses, including reasonable attorneys’ fees, incurred by Lender in connection with the transfer;

(d)Transferee assumes and agrees to pay the Debt as and when due subject to the provisions of Article 15 hereof and, prior to or concurrently with the closing of such transfer,

81

Transferee and its constituent partners, members or shareholders as Lender may require,  shall execute, without any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to evidence and effectuate said assumption;

(e)Borrower and Transferee, without any cost to Lender, shall furnish any information requested by Lender for the preparation of, and shall authorize Lender to file, new financing statements and financing statement amendments and other documents to the fullest extent permitted by applicable law, and shall execute any additional documents reasonably requested by Lender;

(f)Borrower shall have delivered to Lender, without any cost or expense to Lender, such endorsements to Lender’s Title Insurance Policy insuring that fee simple and/or leasehold title to the Properties, as applicable, is vested in Transferee (subject to Permitted Encumbrances), hazard insurance endorsements or certificates and other similar materials as Lender may deem necessary at the time of the transfer, all in form and substance satisfactory to Lender;

(g)Transferee shall have furnished to Lender, if Transferee is a corporation, partnership, limited liability company or other entity, all appropriate papers evidencing Transferee’s organization and good standing, and the qualification of the signers to execute the assumption of the Debt, which papers shall include certified copies of all documents relating to the organization and formation of Transferee and of the entities, if any, which are partners or members of Transferee.  Transferee and such constituent partners, members or shareholders of Transferee (as the case may be), as Lender shall require, shall comply with the covenants set forth in Article 6 hereof;

(h)Transferee shall assume the obligations of Borrower under any Management Agreement or provide a new management agreement with a new manager which meets with the requirements of Section 5.14 hereof and assign to Lender as additional security such new management agreement;

(i)Transferee shall furnish an opinion of counsel satisfactory to Lender and its counsel (A) that Transferee’s formation documents provide for the matters described in subparagraph (g) above, (B) that the assumption of the Debt has been duly authorized, executed and delivered, and that the Note, each Mortgage, this Agreement, the assumption agreement and the other Loan Documents are valid, binding and enforceable against Transferee in accordance with their terms, (C) that Transferee and any entity which is a controlling stockholder, member or general partner of Transferee, have been duly organized, and are in existence and good standing, and (E) with respect to such other matters as Lender may reasonably request;

(j)if required by Lender, Lender shall have received confirmation in writing from the Rating Agencies that rate the Securities to the effect that the transfer will not result in a qualification, downgrade or withdrawal of any rating initially assigned or to be assigned to the Securities;

(k)Borrower’s obligations under the contract of sale pursuant to which the transfer is proposed to occur shall expressly be subject to the satisfaction of the terms and conditions of this Section 7.5; and

82

(l)Transferee shall, prior to such transfer, deliver a substantive non-consolidation opinion to Lender, which opinion shall be in form, scope and substance acceptable in all respects to Lender and the Rating Agencies.

A consent by Lender with respect to a transfer of the Properties in its entirety to, and the related assumption of the Loan by, a Transferee pursuant to this Section 7.5 shall not be construed to be a waiver of the right of Lender to consent to any subsequent transfer of any Property.

ARTICLE 8
INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

Section 8.1.INSURANCE

(a)Borrower shall obtain and maintain, or cause to be maintained, at all times insurance for Borrower and each Property providing at least the following coverages:

(i)comprehensive “all risk” insurance on the Improvements and the Personal Property, in each case (A) in an amount equal to one hundred percent (100%) of the “Full Replacement Cost,” which for purposes of this Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation; (B) containing an agreed amount endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions; (C) providing for no deductible in excess of $50,000 for all such insurance coverage; and (D)  if any of the Improvements or the use of such Property shall at any time constitute legal non-conforming structures or uses, providing coverage for contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements and containing an “Ordinance or Law Coverage” or “Enforcement” endorsement.  In addition, Borrower shall obtain: (y) if any portion of the Improvements is currently or at any time in the future located in a  “special flood hazard area” designated by the Federal Emergency Management Agency, flood hazard insurance in an amount equal to the maximum amount of such insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended; and (z) earthquake insurance in amounts and in form and substance reasonably satisfactory to Lender in the event such Property is located in an area with a high degree of seismic risk, provided that the insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this subsection (i);

(ii)Commercial General Liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about such Property, including “Dram Shop” or other liquor liability coverage if alcoholic beverages are sold from or may be consumed at such Property, with such insurance (A) to be on the so-called “occurrence” form with a general aggregate limit of not less than $2,000,000 and a per occurrence limit of not less than $1,000,000; (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations;

83

(3) independent contractors; (4) blanket contractual liability; and (5) contractual liability covering the indemnities contained in Article 12 and Article 14 hereof to the extent the same is available;

(iii)loss of rents insurance or business income insurance, as applicable, (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; and (C) which provides that after the physical loss to the Improvements and Personal Property occurs, the loss of rents or income, as applicable, will be insured until completion of Restoration or the expiration of eighteen (18) months, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) which contains an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of six (6) months from the date that such Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period.  The amount of such loss of rents or business income insurance, as applicable, shall be determined prior to the date hereof and at least once each year thereafter based on Borrower’s reasonable estimate of the gross income from such Property for the succeeding period of coverage required above.  All proceeds payable to Lender pursuant to this subsection shall be held by Lender and shall be applied to the obligations secured by the Loan Documents from time to time due and payable hereunder and under the Note; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in the Note, this Agreement and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such loss of rents or business income insurance, as applicable;

(iv)at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if such Property coverage form does not otherwise apply, (A) owner’s contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the above mentioned commercial general liability insurance policy; and (B) the insurance provided for in subsection (i) above written in a so-called Builder’s Risk Completed Value form (1) on a non-reporting basis, (2) against “all risks” insured against pursuant to subsection (i) above, (3) including permission to occupy such Property, and (4) with an agreed amount endorsement waiving co-insurance provisions;

(v)workers’ compensation, subject to the statutory limits of the State, and employer’s liability insurance in respect of any work or operations on or about such Property, or in connection with such Property or its operation (if applicable);

(vi)comprehensive boiler and machinery insurance, if applicable, in amounts as shall be reasonably required by Lender on terms consistent with the commercial property insurance policy required under subsection (i) above;

84

(vii)excess liability insurance in an amount not less than $50,000,000 per occurrence on terms consistent with the commercial general liability insurance required under subsection (ii) above or as otherwise approved by Lender;

(viii)sinkhole and mine subsidence insurance, if required, and such Property is located in an “earthquake” prone zone as determined by the U.S. Geological Survey, earthquake insurance in amount not less than the probable maximum loss, all as determined by a recognized earthquake engineering firm acceptable to and approved by Lender, less any applicable deductibles, including business interruption coverage in an amount not less than that set forth in clause (iii) above;

(ix)a blanket fidelity bond and errors and omissions insurance coverage insuring against losses resulting from dishonest or fraudulent acts committed by (A) Borrower’s personnel; (B) any employees of outside firms that provide appraisal, legal, data processing or other services for Borrower or (C) temporary contract employees or student interns;

(x)motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence, including umbrella coverage, of One Million and No/100 Dollars ($1,000,000);

(xi)environmental insurance for the Louisville Property in form acceptable to Lender for an initial term of two years past the initial Maturity Date and, if Borrower extends the Maturity Date in accordance with Section 2.3(b) hereof, for each Extended Maturity Date, for two years from such Extended Maturity Date; and

(xii)upon sixty (60) days’ written notice, such other reasonable insurance and in such reasonable amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to such Property located in or around the region in which such Property is located.

With respect to the Policies required to be maintained pursuant to clauses (i), (iii) and (vi) above, Borrower shall maintain insurance coverage against Losses resulting from acts of terrorism.

(b)All insurance provided for in Section 8.1(a) shall be obtained under valid and enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and shall be subject to the approval of Lender as to insurance companies, amounts, deductibles, loss payees and insureds.  The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a claims paying ability rating of “A” or better by S&P (or such other ratings approved by Lender) and a general policy rating of “A” or better and a financial class of VIII or better by A.M. Best Company, Inc.  The Policies described in Section 8.1(a) shall designate Lender and its successors and assigns as additional insureds, mortgagees and/or loss payee as deemed appropriate by Lender.  To the extent such Policies are not available as of the Closing Date, Borrower shall deliver to Lender certified copies of all Policies or other evidence of insurance reasonably acceptable to Lender not later than thirty (30) days after the Closing Date.  Not less than ten (10) days prior to the expiration

85

dates of the Policies theretofore furnished to Lender, renewal Policies or other evidence of insurance reasonably acceptable to Lender accompanied by evidence satisfactory to Lender of payment of the premiums due thereunder (the “Insurance Premiums”) shall be delivered by Borrower to Lender.

(c)Any blanket insurance Policy shall specifically allocate to each Property the amount of coverage from time to time required hereunder and shall otherwise provide the same protection as would a separate Policy insuring only the applicable Property in compliance with the provisions of Section 8.1(a).

(d)All Policies provided for or contemplated by Section 8.1(a), except for the Policy referenced in Section 8.1(a)(v), shall name Borrower as the insured and Lender as the additional insured, as its interests may appear, and in the case of property damage, boiler and machinery, flood and earthquake insurance, shall contain a so-called New York standard non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender.

(e)All Policies provided for in Section 8.1(a) shall contain clauses or endorsements to the effect that:

(i)no act or negligence of Borrower, or anyone acting for Borrower, or of any Tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned;

(ii)the Policies shall not be materially changed (other than to increase the coverage provided thereby) or canceled without at least thirty (30) days’ prior written notice to Lender and any other party named therein as an additional insured;

(iii)the issuers thereof shall give written notice to Lender if the Policies have not been renewed thirty (30) days prior to its expiration;

(iv)Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder; and

(v)the Policies described in clauses (i), (iii) and (vi) above do not contain an exclusion for acts of terror or similar acts of sabotage.

(f)If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right, without notice to Borrower, to take such action as Lender deems necessary to protect its interest in the applicable Property, including, without limitation, obtaining such insurance coverage as Lender in its sole discretion deems appropriate.  All premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, shall be secured by the Mortgages and shall bear interest at the Default Rate.

86

(g)Borrower shall cause any payments paid under the Policy described in Section 8.1(a)(xi) to be paid to Lender.

Section 8.2.CASUALTY

If any Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give prompt notice of such damage to Lender and shall promptly commence and diligently prosecute the Restoration of such Property in accordance with Section 8.4, whether or not Lender makes any Net Proceeds available pursuant to Section 8.4.  Borrower shall pay all costs of such Restoration whether or not such costs are covered by insurance.  Lender may, but shall not be obligated to make proof of loss if not made promptly by Borrower.  Borrower shall adjust all claims for Insurance Proceeds in consultation with, and approval of, Lender; provided, however, if an Event of Default has occurred and is continuing, Lender shall have the exclusive right to participate in the adjustment of all claims for Insurance Proceeds.  Without limiting any other provision contained herein, in the event Lender shall not make Net Proceeds available to Borrower for the restoration of any Property, Borrower may obtain a partial release of such Property in accordance with and to the extent permitted under Section 2.4(c)(ii).

Section 8.3.CONDEMNATION

Borrower shall promptly give Lender notice of the actual or threatened commencement of any proceeding for the Condemnation of any Property of which Borrower has knowledge and shall deliver to Lender copies of any and all papers served in connection with such proceedings.  Lender may participate in any such proceedings, and Borrower shall from time to time deliver to Lender all instruments requested by it to permit such participation.  Borrower shall, at its expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings.  Notwithstanding any taking by any public or quasi-public authority through Condemnation or otherwise (including but not limited to any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until any Award shall have been actually received and applied by Lender, after the deduction of expenses of collection, to the reduction or discharge of the Debt.  Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note.  If any Property or any portion thereof is taken by a condemning authority, Borrower shall promptly commence and diligently prosecute the Restoration of such Property and otherwise comply with the provisions of Section 8.4, whether or not Lender makes any Net Proceeds available pursuant to Section 8.4.  If such Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt.  Without limiting any other provision contained herein, in the event Lender shall not make Net Proceeds available to Borrower for the restoration of any Property, Borrower may obtain a partial release of such Property in accordance with and to the extent permitted under Section 2.4(c)(ii).

87

Section 8.4.RESTORATION

The following provisions shall apply in connection with any Restoration of a Property:

(a)If the costs of completing the Restoration shall be less than five percent (5%) of the Allocated Loan Amount with respect to the affected Property, the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided that all of the conditions set forth in Section 8.4(b)(i) are met and Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of this Agreement.

(b)If the costs of completing the Restoration are equal to or greater than five percent (5%) of the Allocated Loan Amount with respect to the affected Property, Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 8.4.  The term “Net Proceeds” for purposes of this Section 8.4 shall mean: (1) the net amount of all insurance proceeds received by Lender pursuant to Section 8.1(a)(i), (iv), (vi) and (vii) as a result of a Casualty, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting the same (“Insurance Proceeds”), or (2) the net amount of the Award as a result of a Condemnation, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting the same (“Condemnation Proceeds”), whichever the case may be.

(i)The Net Proceeds shall be made available to Borrower for Restoration provided that each of the following conditions are met:

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

(B)(1) in the event the Net Proceeds are Insurance Proceeds, less than ten percent (10%) of the aggregate fair market value of the Improvements at all the Properties (immediately prior to the applicable Casualty) has been damaged, destroyed or rendered unusable as a result of a Casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less than ten percent (10%) of the land constituting the affected Property is taken, such land is located along the perimeter or periphery of the affected Property, and no portion of the Improvements is located on such land;

(C)the Operating Leases of the affected Property in effect as of the date of the occurrence of such Casualty or Condemnation, whichever the case may be, and each other Major Lease, if any, in effect as of such date shall remain in full force and effect during and after the completion of the Restoration without abatement of rent beyond the time required for Restoration;

(D)Borrower shall commence the Restoration as soon as reasonably practicable (but in no event later than ninety (90) days after such Casualty or Condemnation, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion;

88

(E)Lender shall be satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note, which will be incurred with respect to the affected Property as a result of the occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of the insurance coverage referred to in Section 8.1(a)(iii) above;

(F)Lender shall be satisfied that the Restoration will be completed on or before the earliest to occur of (1) six (6) months prior to the Maturity Date, (2) the earliest date required for such completion under the terms of any Leases (including, without limitation, any Ground Lease) or material agreements affecting the affected Property, (3) such time as may be required under applicable zoning law, ordinance, rule or regulation, or (4) the expiration of the insurance coverage referred to in Section 8.1(a)(iii);

(G)the affected Property and the use thereof after the Restoration will be in compliance with and permitted under all Legal Requirements;

(H)the Restoration shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable Legal Requirements;

(I)such Casualty or Condemnation, as applicable, does not result in the loss of access to the affected Property or the Improvements;

(J)Borrower shall deliver, or cause to be delivered, to Lender a signed detailed budget approved in writing by Borrower’s architect or engineer stating the entire cost of completing the Restoration, which budget shall be acceptable to Lender; and

(K)the Net Proceeds together with any cash or cash equivalent deposited by Borrower with Lender are sufficient in Lender’s reasonable judgment to cover the cost of the Restoration.

(ii)The Net Proceeds shall be held by Lender until disbursements commence, and, until disbursed in accordance with the provisions of this Section 8.4, shall constitute additional security for the Debt and other obligations under the Loan Documents.  The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower from time to time during the course of the Restoration, upon receipt of evidence satisfactory to Lender that (A) all the conditions precedent to such advance, including those set forth in Section 8.4(b)(i), have been satisfied, (B) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the related Restoration item have been paid for in full, and (C) there exist no notices of pendency, stop orders, mechanic’s or materialman’s liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the affected Property which have not either been fully bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company issuing the Title Insurance Policy. 

89

Notwithstanding the foregoing, Insurance Proceeds from the Policies required to be maintained by Borrower pursuant to Section 8.1(a)(iii) shall be controlled by Lender at all times, shall not be subject to the provisions of this Section 8.4 and shall be used solely for the payment of the obligations under the Loan Documents and Operating Expenses.

(iii)All plans and specifications required in connection with the Restoration shall be subject to prior review and acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the “Restoration Consultant”).  Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration.  The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts in excess of $100,000 under which they have been engaged, shall be subject to prior review and acceptance by Lender and the Restoration Consultant.  All costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration, including, without limitation, reasonable counsel fees and disbursements and the Restoration Consultant’s fees, shall be paid by Borrower.

(iv)In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Restoration Consultant, minus the Restoration Retainage.  The term “Restoration Retainage” shall mean an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Restoration Consultant, until the Restoration has been completed.  The Restoration Retainage shall be reduced to five percent (5%) of the costs incurred upon receipt by Lender of satisfactory evidence that fifty percent (50%) of the Restoration has been completed.  The Restoration Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 8.4(b), be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration.  The Restoration Retainage shall not be released until the Restoration Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 8.4(b) and that all approvals necessary for the re-occupancy and use of the affected Property have been obtained from all appropriate Governmental Authorities, and Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Restoration Retainage; provided, however, that Lender will release the portion of the Restoration Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Restoration Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractor’s, subcontractor’s or materialman’s contract, the contractor, subcontractor or materialman delivers the lien waivers and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title company issuing the Title Insurance Policy, and Lender receives an endorsement to the Title Insurance Policy insuring the continued priority of the lien of each Mortgage and evidence of payment of any premium payable for such endorsement.  If required by Lender, the release of any such portion of the Restoration Retainage shall be approved by the surety company, if any, which has issued

90

a payment or performance bond with respect to the contractor, subcontractor or materialman.

(v)Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.

(vi)If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the reasonable opinion of Lender in consultation with the Restoration Consultant, be sufficient to pay in full the balance of the costs which are estimated by the Restoration Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (the “Net Proceeds Deficiency”) with Lender before any further disbursement of the Net Proceeds shall be made.  The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 8.4(b) shall constitute additional security for the Debt and other obligations under the Loan Documents.

(vii)The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender after the Restoration Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 8.4(b), and the receipt by Lender of evidence satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Lender to Borrower, provided no Event of Default shall have occurred and shall be continuing under the Note, this Agreement or any of the other Loan Documents.

(c)All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section 8.4(b)(vii) may (x) be retained and applied by Lender toward the payment of the Debt whether or not then due as an involuntary partial prepayment thereof, or, (y) at the sole discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes and upon such conditions as Lender shall designate.

(d)In the event of foreclosure of any Mortgage, or other transfer of title to the affected Property in extinguishment in whole or in part of the Debt, all right, title and interest of Borrower in and to the Policies then in force concerning each Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure, Lender or other transferee in the event of such other transfer of title.

ARTICLE 9
RESERVE FUNDS

Section 9.1.REQUIRED REPAIRS

(a)Borrower shall make (or cause to be made) the repairs and improvements set forth on Schedule I and as more particularly described in the Physical Conditions Report or any Environmental Report delivered in connection with the Closing of the Loan prepared in

91

connection with the closing of the Loan (such repairs hereinafter referred to as “Required Repairs”).  Borrower shall complete (or cause to be completed) the Required Repairs in a good and workmanlike manner on or before the date that is twelve (12) months from the date hereof or within such other time frame for completion specifically set forth on Schedule I.

(b)Borrower shall establish on the date hereof an Eligible Account with Lender or Lender’s agent to fund the Required Repairs (the “Required Repair Account”) into which Borrower shall deposit on the date hereof the amount of $288,750.00, which amount equals 125% of the estimated cost for the completion of the Required Repairs.  Amounts so deposited shall hereinafter be referred to as the “Required Repair Funds.”

Section 9.2.REPLACEMENTS

(a)On an ongoing basis throughout the term of the Loan, Borrower shall make (or cause to be made) capital repairs, replacements and improvements necessary to keep each Property in good order and repair and in a good marketable condition or prevent deterioration of each Property, including, but not limited to, repairs, replacements of, or additions to FF&E and those repairs, replacements and improvements more particularly described (i) in any Physical Condition Report received at any time after the Closing Date, (ii) any PIP Report received at any time after the Closing Date, (iii) on Schedule II attached hereto and made a part hereof or (iv) the applicable Annual Budget approved by Lender (collectively, the “Replacements”).  Borrower shall complete all Replacements (or cause all Replacements to be made) in a good and workmanlike manner as soon as commercially reasonable after commencing to make each such Replacement.

(b)Borrower shall establish on the date hereof Eligible Accounts with Lender or Lender’s agent to fund the Replacements (i) with respect to the Marriott Managed Properties (such account, the “Marriott Replacement Reserve Account”), (ii) with respect to the Hilton Managed Properties (other than the Doubletree Property) (such account, the “Hilton Replacement Reserve Account”), (iii) with respect to the Doubletree Property (such account, the “Doubletree Replacement Reserve Account”), (ii) with respect to the Interstate Managed Properties (such account, the “Interstate Replacement Reserve Account” and together with the Marriott Replacement Reserve Account, the Hilton Replacement Reserve Account, the Doubletree Replacement Reserve Account and any other reserve for Replacements provided for in any Management Agreement approved by Lender, in accordance with the terms hereof, collectively, the “Manager Replacement Reserve Accounts”), and (v) with respect to each other Property (such account, the “Other Replacement Reserve Account” and together with the Marriott Replacement Reserve Account, the Hilton Replacement Reserve Account, the Doubletree Replacement Reserve Account and the Interstate Replacement Reserve Account, collectively, the “Replacement Reserve Account”).  Borrower shall (or shall cause the applicable Manager to) timely deposit into each Manager Replacement Reserve Account (A)  on the Closing Date $0.00 into the Marriott Replacement Reserve Account, $125,835.00 into the Hilton Replacement Reserve Account, $0.00 into the Doubletree Replacement Reserve Account and $0.00 into the Interstate Replacement Reserve Account and (B) thereafter, the applicable amounts required to be reserved from time to time with respect to Replacements under the applicable Management Agreement (the aggregate amount of such deposits, the “Manager Replacement Reserve Monthly Deposit”).  In addition, Borrower shall deposit into the Other

92

Replacement Reserve Account (A) $0.00 on the Closing Date and (B) five percent (5%) of total gross revenues from the operations of each Property not subject to a Management Agreement providing for a reserve for Replacements acceptable to Lender, including, but not limited to, any Property operated by a Non-Affiliated Lessee (the aggregate amount of such deposits, the “Other Replacement Reserve Monthly Deposit” and together with the Manager Replacement Reserve Monthly Deposit, collectively, the “Replacement Reserve Monthly Deposit”).  On or before the twenty-first (21st) day of each calendar month during the term of the Loan, Borrower shall provide to Lender an accounting of all amounts deposited into each Replacement Reserve Account during such month.  Amounts so deposited in each Replacement Reserve Account shall hereinafter be referred to collectively as “Replacement Reserve Funds.”  Lender may, in its reasonable discretion, adjust the Other Replacement Reserve Monthly Deposit from time to time to an amount sufficient to maintain the proper maintenance and operation of the applicable Property and Borrower shall deposit or cause to be deposited any additional amounts not deposited by the applicable Manager.  In the event Lender shall at any time increase the Other Replacement Reserve Monthly Deposit, Borrower may, at its election, request that Lender obtain, at the sole cost and expense of Borrower, a Physical Conditions Report prepared by an engineer selected by Lender in its reasonable discretion, in which case the Other Replacement Reserve Monthly Deposit shall be adjusted by Lender based on the results of such report, provided that in no event shall such amounts be reduced below the greater of (a) the aggregate Other Replacement Reserve Monthly Deposit then required by Lender with respect to the Other Replacement Reserve Account or (b) the amount necessary to perform any work required in any PIP Report or by any Legal Requirement with respect to the applicable Property.  Furthermore, in the event of a default by Manager under any Management Agreement relating to the maintenance and repair of one or more Properties, Lender shall have the right to cause Borrower to deposit additional funds in an amount sufficient to remedy such defaults into the Other Replacement Reserve Account, provided that Borrower shall have the right to contest such additional deposit requirement in the same manner set forth in the preceding sentence, with respect to any contest to any additional fundings with respect to the Other Replacement Reserve Monthly Deposit.

(c)Borrower shall establish on the date hereof an Eligible Account with Lender or Lender’s agent to fund certain Replacements described in the PIP reports delivered in connection with the closing of the Loan as summarized on Schedule IV attached hereto (the “Closing PIP Reports”) to the extent not covered by the applicable Replacement Reserve Accounts (such account, the “PIP Reserve Account”).  Borrower shall timely deposit into the PIP Reserve Account (A) on the Closing Date $4,100,000.00 and (B) thereafter, an amount equal to $265,000.00 or such lower amount as Lender may reasonably require taking into account Replacements made and performed by Borrower as required by the Closing PIP Reports and any releases of Properties pursuant to the terms of this Loan Agreement (the aggregate amount of such deposits, the “PIP Reserve Monthly Deposit”).  Additionally, in connection with any release of a Release Property pursuant to Section 2.4(c), Lender may require Borrower to make a deposit into the PIP Reserve Account in an amount as Lender deems is reasonably necessary to cause the amounts in the PIP Reserve Account (taking into account any future PIP Reserve Monthly Deposits and amounts in the applicable Replacement Reserve Account and any future deposits therein as required hereunder) to be sufficient to pay the Required PIP Replacements for the remaining Properties.  Amounts so deposited in the PIP Reserve Account shall hereinafter be referred to collectively as “PIP Reserve Funds”.  Borrower shall complete (or cause to be

93

completed) the Replacements described in the Closing PIP Reports in a good and workmanlike manner on or before the date specified in Schedule IV attached hereto (the “Required PIP Replacements”).  Upon the earlier to occur (i) payment in full of the Debt and (ii) completion of the Required PIP Replacements, any PIP Reserve Funds remaining in the PIP Reserve Account shall be released to Borrower and the obligation to make the PIP Reserve Monthly Deposit shall cease.

Section 9.3.INTENTIONALLY OMITTED

Section 9.4.REQUIRED WORK

Borrower shall diligently pursue (or cause to be pursued) all Required Repairs and Replacements, including any Required PIP Replacements (collectively, the “Required Work”) to completion in accordance with the following requirements:

(a)Lender reserves the right, at its option, to approve all contracts or work orders with materialmen, mechanics, suppliers, subcontractors, contractors or other parties providing labor or materials in connection with the Required Work to the extent such contracts or work orders exceed $150,000.  Upon Lender’s request, Borrower shall assign (or cause to be assigned) any contract or subcontract to Lender.

(b)In the event Lender determines in its reasonable discretion that any Required Work is not being or has not been performed in a workmanlike or timely manner, Lender shall have the option to withhold disbursement for such unsatisfactory Required Work and to proceed under existing contracts or to contract with third parties to complete such Required Work and to apply the Required Repair Funds, the Replacement Reserve Funds or the PIP Reserve Funds (to the extent the Replacement Reserve Funds are insufficient to cover the applicable Replacements), as applicable, toward the labor and materials necessary to complete such Required Work, without providing any prior notice to Borrower and to exercise any and all other remedies available to Lender upon an Event of Default hereunder.

(c)In order to facilitate Lender’s completion of the Required Work, Borrower grants Lender the right to enter onto the applicable Property and perform any and all work and labor necessary to complete the Required Work and/or employ watchmen to protect such Property from damage.  All sums so expended by Lender, to the extent not from the Reserve Funds, shall be deemed to have been advanced under the Loan to Borrower and secured by each Mortgage.  For this purpose Borrower constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete or undertake the Required Work in the name of Borrower upon Borrower’s failure to do so in a workmanlike and timely manner.  Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked.  Borrower empowers said attorney-in-fact as follows: (i) to use any of the Reserve Funds for the purpose of making or completing the Required Work; (ii) to make such additions, changes and corrections to the Required Work as shall be necessary or desirable to complete the Required Work; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against the applicable Property, or as may be necessary or desirable for the completion of the Required Work, or for clearance of title; (v) to execute all

94

applications and certificates in the name of Borrower which may be required by any of the contract documents; (vi) to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of any Property; and (vii) to do any and every act which Borrower might do on its own behalf to fulfill the terms of this Agreement.

(d)Nothing in this Section 9.4 shall: (i) make Lender responsible for making or completing the Required Work; (ii) require Lender to expend funds in addition to the Reserve Funds to make or complete any Required Work; (iii) obligate Lender to proceed with the Required Work; or (iv) obligate Lender to demand from Borrower additional sums to make or complete any Required Work.

(e)Borrower shall permit Lender and Lender’s agents and representatives (including, without limitation, Lender’s engineer, architect, or inspector) or third parties performing Required Work pursuant to this Section 9.4 after reasonable notice to Borrower to enter onto any Property during normal business hours (subject to the rights of tenants under Leases approved, if required) in accordance with the terms hereof and Managers under approved Management Agreements to inspect the progress of any Required Work and all materials being used in connection therewith, to examine all plans and shop drawings relating to such Required Work which are or may be kept at any Property, and to complete any Required Work made pursuant to this Section 9.4.  Borrower shall cause all contractors and subcontractors to cooperate with Lender and Lender’s representatives or such other persons described above in connection with inspections described in this Section 9.4 or the completion of Required Work pursuant to this Section 9.4.

(f)Lender may, to the extent any Required Work would reasonably require an inspection of any Property, inspect such Property at Borrower’s expense prior to making a disbursement of the Reserve Funds in order to verify completion of the Required Work for which reimbursement is sought.  Borrower shall pay Lender a reasonable inspection fee not exceeding $1,000 for each such inspection.  Lender may require that such inspection be conducted by an appropriate independent qualified professional selected by Lender and/or may require a copy of a certificate of completion by an independent qualified professional acceptable to Lender prior to the disbursement of the Reserve Funds.  Borrower shall pay the expense of the inspection as required hereunder, whether such inspection is conducted by Lender or by an independent qualified professional.

(g)The Required Work and all materials, equipment, fixtures, or any other item comprising a part of any Required Work shall be constructed, installed or completed, as applicable, free and clear of all mechanic’s, materialman’s or other Liens (except for Permitted Encumbrances).

(h)Before each disbursement of the Reserve Funds, Lender may require Borrower to provide Lender with a search of title to the applicable Property effective to the date of the disbursement, which search shows that no mechanic’s or materialmen’s or other Liens of any nature have been placed against such Property since the date of recordation of the Mortgages and that title to such Property is free and clear of all Liens (except for Permitted Encumbrances).

95

(i)All Required Work shall comply with all Legal Requirements and applicable insurance requirements including, without limitation, applicable building codes, special use permits, environmental regulations, and requirements of insurance underwriters.

(j)Borrower hereby assigns to Lender all rights and claims Borrower may have against all Persons supplying labor or materials in connection with the Required Work; provided, however, that Lender may not pursue any such rights or claims unless an Event of Default has occurred and remains uncured.

Section 9.5.RELEASE OF RESERVE FUNDS

(a)With respect to a Property upon written request from Borrower and in all instances satisfaction of the requirements set forth in this Agreement, Lender shall promptly disburse to Borrower amounts from (i) the applicable Required Repair Account to the extent necessary to reimburse Borrower for the actual costs of each Required Repair (but not exceeding 125% of the original estimated cost of such Required Repair as set forth on Schedule I, unless Lender has agreed to reimburse Borrower for such excess cost pursuant to Section 9.5(f)), (ii) the applicable Replacement Reserve Account to the extent necessary to reimburse Borrower for the actual costs of any approved Replacements or (iii) the PIP Reserve Account to the extent necessary to reimburse Borrower for the actual costs of any Required PIP Replacements to the extent funds in the applicable Replacement Reserve Account are insufficient for such Required PIP Replacements.  Notwithstanding the preceding sentence, with respect to any Property, in no event shall Lender be required to (x) disburse any amounts which would cause the amount of funds remaining in the applicable Required Repair Account after any disbursement (other than with respect to the final disbursement) to be less than 125% of the then current estimated cost of completing all remaining Required Repairs for such Property, (y) disburse funds from any of the Reserve Accounts if an Event of Default exists, or (z) disburse funds from any Replacement Reserve Account or the PIP Reserve Account to reimburse Borrower for the costs of routine repairs or maintenance to such Property (other than FF&E Replacements required pursuant to any PIP Report) or for costs which are to be reimbursed from funds held in the related Required Repair Account or the PIP Reserve Account.

(b)Each request for disbursement from any of the Reserve Accounts shall be on a form provided or approved by Lender and shall (i) include copies of invoices for all items or materials purchased and all labor or services provided and (ii) specify (A) the Required Work for which the disbursement is requested, including, but not limited to, the Property(ies) to which it relates (B) the quantity and price of each item purchased, if the Required Work includes the purchase or replacement of specific items, (C) the price of all materials (grouped by type or category) used in any Required Work other than the purchase or replacement of specific items, (D) the cost of all contracted labor or other services applicable to each Required Work for which such request for disbursement is made and (E) in the instance of a request for disbursement from the Replacement Reserve Account, the applicable Reserve Account(s) to which such request relates.  With each request Borrower shall certify that all Required Work has been performed in accordance with

all Legal Requirements and, as applicable, any and all requirements set forth in any Management Agreement, Franchise Agreement, and/or Operating Lease.  Except as provided in Section 9.5(d), each request for disbursement shall be made only after completion of the Required Repair or Replacement (or the portion thereof completed in accordance with

96

Section 9.5(d)), as applicable, for which disbursement is requested.  Borrower shall provide Lender evidence satisfactory to Lender in its reasonable judgment of such completion or performance.  With respect to a Property, Lender shall only disburse funds from the Replacement Reserve Account applicable to such Property.

(c)Borrower shall pay all invoices in connection with the Required Work with respect to which a disbursement is requested prior to submitting such request for disbursement from the applicable Reserve Accounts or shall have given undertakings and assurances acceptable to Lender that Borrower shall pay all such amounts from Lender’s disbursements or, if acceptable assurances are not provided, at the request of Borrower, Lender will issue joint checks, payable to Borrower and the contractor, supplier, materialman, mechanic, subcontractor or other party to whom payment is due in connection with the Required Work.  In the case of payments made by joint check, Lender may require a waiver of lien from each Person receiving payment prior to Lender’s disbursement of the Reserve Funds.  In addition, as a condition to any disbursement, Lender may require Borrower to obtain lien waivers from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $100,000 for completion of its work or delivery of its materials.  Any lien waiver delivered hereunder shall conform to all Legal Requirements and shall cover all work performed and materials supplied (including equipment and fixtures) for the applicable Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current disbursement request (or, in the event that payment to such contractor, supplier, subcontractor, mechanic or materialmen is to be made by a joint check, the release of lien shall be effective through the date covered by the previous release of funds request).

(d)If (i) the cost of any item of Required Work exceeds $150,000, (ii) the contractor performing such Required Work requires periodic payments pursuant to terms of a written contract, and (iii) Lender has approved in writing in advance such periodic payments, a request for disbursement from the applicable Reserve Accounts may be made after completion of a portion of the work under such contract, provided (A) such contract requires payment upon completion of such portion of work, (B) the materials for which the request is made are on site at the applicable Property and are properly secured or have been installed in such Property, (C) all other conditions in this Agreement for disbursement have been satisfied, and (D) in the case of a Replacement, funds remaining in the applicable Replacement Reserve Account together with the PIP Reserve Account are, in Lender’s judgment, sufficient to complete such Replacement and other Replacements when required.

(e)Borrower shall not make a request for, nor shall Lender have any obligation to make, any disbursement from any Reserve Account more frequently than once in any calendar month and (except in connection with the final disbursement) in any amount less than the lesser of (i) $10,000 or (ii) the total cost of the Required Work for which the disbursement is requested.

(f)In the event any Borrower requests a disbursement from the Required Repair Account to reimburse Borrower for the actual cost of labor or materials used in connection with repairs or improvements other than the Required Repairs specified on Schedule I, or for a Required Repair to the extent the cost of such Required Repair exceeds 125% of the estimated cost of such Required Repair as set forth on Schedule I (in either case, an “Additional Required Repair”), Borrower shall disclose in writing to Lender the reason why funds in the Required

97

Repair Account should be used to pay for such Additional Required Repair.  If Lender determines that (i) such Additional Required Repair is of the type intended to be covered by the Required Repair Account, (ii) such Additional Required Repair is not covered or is not of the type intended to be covered by the Replacement Reserve Account, (iii) costs for such Additional Required Repair are reasonable, (iv) the funds in the Required Repair Account are sufficient to pay for such Additional Required Repair and all other Required Repairs for the applicable Property specified on Schedule I, and (v) all other conditions for disbursement under this Agreement have been met, Lender may disburse funds from the Required Repair Account.

(g)In the event any Borrower requests a disbursement from any Replacement Reserve Account to reimburse Borrower for the actual cost of labor or materials used in connection with repairs or improvements other than the Replacements specified in the Physical Conditions Report prepared in connection with the closing of the Loan, any PIP Report or the Annual Budget (an “Additional Replacement”), Borrower shall disclose in writing to Lender the reason why funds in such Replacement Reserve Account should be used to pay for such Additional Replacement.  If Lender determines that (i) such Additional Replacement is of the type intended to be covered by such Replacement Reserve Account, (ii) such Additional Replacement is not covered or is not of the type intended to be covered by the Required Repair Account, (iii) costs for such Additional Replacement are reasonable, (iv) the funds in the applicable Replacement Reserve Account are sufficient to pay for such Additional Replacement and all other Replacements with respect to the Property(ies) to which such Replacement Reserve Account relates as specified in the Physical Conditions Report, any PIP Report or the Annual Budget, and (v) all other conditions for disbursement under this Agreement have been met, Lender may disburse funds from the applicable Replacement Reserve Account.

(h)Lender’s disbursement of any Reserve Funds or other acknowledgment of completion of any Required Work in a manner satisfactory to Lender shall not be deemed a certification or warranty by Lender to any Person that the Required Work has been completed in accordance with Legal Requirements.

(i)If the funds in any Reserve Account should exceed the amount of payments actually applied by Lender for the purposes of the account, Lender in its reasonable discretion shall either return any excess to Borrower or credit such excess against future payments to be made to that Reserve Account.  In allocating any such excess, Lender may deal with the Person shown on Lender’s records as being the owner of each applicable Property.  If at any time Lender reasonably determines that the Reserve Funds are not or will not be sufficient to make the required payments, Lender shall notify Borrower of such determination and Borrower shall pay to Lender any amount necessary to make up the deficiency within ten (10) days after notice from Lender to Borrower requesting payment thereof.

(j)The insufficiency of any balance in any of the Reserve Accounts shall not relieve Borrower from its obligation to fulfill all preservation and maintenance covenants in the Loan Documents.

(k)Upon the earlier to occur of (i) the timely completion of all Required Repairs and any Additional Required Repairs, if any, in accordance with the requirements of this Agreement, as verified by Lender in its reasonable discretion, or (ii) the payment in full of the Debt,

98

all amounts remaining on deposit, if any, in the Required Repair Account shall be returned to Borrower or the Person shown on Lender’s records as being the owner of the Properties and no other party shall have any right or claim thereto.

(l)Upon payment in full of the Debt, all amounts remaining on deposit, if any, in each Replacement Reserve Account and the PIP Reserve Account shall be returned to Borrower or the Person shown on Lender’s records as being the owner of each applicable Property to which such Replacement Reserve Account relates and no other party shall have any right or claim thereto.

(m)Notwithstanding anything contained herein to the contrary, from and after the completion of the “Initial Renovations” as defined in the Marriott Pooling Agreement, Lender shall upon prior written notice from Borrower permit Marriott Manager to access the Marriott Replacement Reserve Account for the purpose of making disbursements therefrom under and in accordance with terms of the applicable Marriott Management Agreement, without regard to any contrary or additional disbursement requirements set forth herein.

Section 9.6.TAX AND INSURANCE RESERVE FUNDS

Borrower shall establish on the date hereof an Eligible Account with Lender or Lender’s agent sufficient to discharge Borrower’s obligations for the payment of Taxes and Insurance Premiums pursuant to Section 5.4 and Section 8.1 hereof (the “Tax and Insurance Reserve Account”) into which Borrower shall deposit on the date hereof $577,200.15, which amount, when added to the required monthly deposits set forth in the next sentence, is sufficient to make the payments of Taxes and Insurance Premiums as required herein.  Borrower shall deposit into the Tax and Insurance Reserve Account on each Payment Date (a) one-twelfth of the Taxes that Lender estimates will be payable during the next ensuing twelve (12) months or such higher amount necessary to accumulate with Lender sufficient funds to pay all such Taxes at least thirty (30) days prior to the earlier of (i) the date that the same will become delinquent and (ii) the date that additional charges or interest will accrue due to the non-payment thereof, and (b) except to the extent Lender has waived the insurance escrow because the insurance required hereunder is maintained under a blanket insurance Policy acceptable to Lender in accordance with Section 8.1(c), one-twelfth of the Insurance Premiums that Lender estimates will be payable during the next ensuing twelve (12) months for the renewal of the coverage afforded by the Policies upon the expiration thereof or such higher amount necessary to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration of the Policies (said amounts in (a) and (b) above hereinafter called the “Tax and Insurance Reserve Funds”).  Lender will apply the Tax and Insurance Reserve Funds to payments of Taxes and Insurance Premiums required to be made by Borrower pursuant to Section 5.4 and Section 8.1 hereof.  In making any disbursement from the Tax and Insurance Reserve Account, Lender may do so according to any bill, statement or estimate procured from the appropriate public office or tax lien service (with respect to Taxes) or insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof.  If the amount of the Tax and Insurance Reserve Funds shall exceed the amounts due for Taxes and Insurance Premiums pursuant to Section 5.4 and Section 8.1 hereof, Lender shall, in its reasonable discretion, return any excess to Borrower or credit such excess against future

99

payments to be made to the Tax and Insurance Reserve Account.  In allocating any such excess, Lender may deal with the person shown on Lender’s records as being the owner of the applicable Property.  Any amount remaining in the Tax and Insurance Reserve Account after the Debt has been paid in full shall be returned to Borrower and no other party shall have any right or claim thereto.  If at any time Lender reasonably determines that the Tax and Insurance Reserve Funds are not or will not be sufficient to pay Taxes and Insurance Premiums by the dates set forth in (a) and (b) above, Lender shall notify Borrower of such determination and Borrower shall pay to Lender any amount necessary to make up the deficiency within ten (10) days after notice from Lender to Borrower requesting payment thereof.  Notwithstanding any of the foregoing to the contrary, in lieu of funding the Tax and Insurance Escrow Reserve in accordance with the terms hereof, Borrower may from time to time provide a Letter of Credit to Lender in an amount sufficient to fund the Tax and Insurance Funds with respect to any calendar year(s) as determined from time to time by Lender in its discretion, in such instance Borrower’s escrow obligations under this Section 9.6 shall cease until such time as said Letter of Credit expires, is drawn upon or otherwise fails to meet the definitional requirements for a Letter of Credit as set forth in Article 1 hereof.

Section 9.7.EXCESS CASH RESERVE

Borrower shall establish on the date hereof an Eligible Account into which Borrower shall deposit all Excess Cash on each Payment Date during any Excess Cash Flow Sweep Period (the “Excess Cash Reserve Account”).  Amounts so deposited shall hereinafter be referred to as the “Excess Cash Reserve Funds.”  Provided no Event of Default has occurred and is continuing, sums from the Excess Cash Reserve Account shall be disbursed to Borrower upon the earlier to occur of (a) payment in full of the Debt or (b) the date upon which the Debt Service Coverage Ratio shall be greater than 1.10 to 1.00 for a period of two consecutive fiscal quarters and no Event of Default has occurred and is continuing; provided, however, if the Debt Service Coverage Ratio is great than 1.15 for one fiscal quarter and no Event of Default has occurred and is continuing, such sums shall be disbursed to Borrower under this clause (b) on the date on which the Debt Service Coverage Ratio shall be greater than 1.15 for a period of one fiscal quarter.  In the event a Excess Cash Flow Sweep Period occurs three (3) times during the term of the Loan or, if Borrower exercises its first Extension Option in accordance with Section 2.3 hereof, four (4) times during the term of the Loan, Borrower shall not be entitled to any disbursement of the amounts in the Excess Cash Reserve Account during the remaining term of the Loan, the Excess Cash Flow Sweep Period shall continue, and Borrower shall continue to be obligated to pay Excess Cash to Lender on each Payment Date until the Debt is paid in full.

Section 9.8.OPERATING EXPENSES; EXTRAORDINARY EXPENSES

(a)Borrower shall establish on the date hereof an Eligible Account with Lender or Lender’s agent into which Borrower shall deposit, on each Payment Date during the term of the Loan, funds sufficient to pay all Operating Expenses required to be incurred during the following month in accordance with the Annual Budget approved by Lender (the “Operating Expense Reserve Account.”)  Amounts so deposited shall hereinafter be referred to as the “Operating Expense Reserve Funds.”  Provided no Event of Default has occurred and is continuing, sums from the Operating Expense Reserve Account shall be disbursed by Lender to Borrower following receipt and approval of Borrower’s written request for the payment of such Operating

100

Expenses.  Notwithstanding the foregoing, Borrower shall not be required to make any deposits into the Operating Expense Reserve Account for so long as each Property continues to be operated by (a) a Qualified Manager pursuant to a Management Agreement acceptable to Lender which provides for the payment of Operating Expenses of the applicable Property prior to the disbursement of any amounts due the Operating Lessee or Borrower or (b) a Qualified Lessee (which is not an Affiliate of Borrower) pursuant to an Operating Lease acceptable to Lender which provides for the payment of Operating Expenses of the applicable Property pursuant to an Annual Budget approved by Lender prior to the disbursement of any amounts due Borrower.

(b)Borrower shall establish on the date hereof an Eligible Account with Lender or Lender’s agent into which Borrower shall deposit, on each Payment Date during the term of the Loan, funds sufficient to pay any Extraordinary Expenses for the following month which have been approved by Lender (the “Extraordinary Expense Reserve Account.”)  Amounts so deposited shall hereinafter be referred to as the “Extraordinary Expense Reserve Funds.”  Provided no Event of Default has occurred and is continuing, sums from the Extraordinary Expense Reserve Account shall be disbursed by Lender to Borrower following receipt and approval (which approval shall not be unreasonably withheld) of Borrower’s written request for the payment of such Extraordinary Expenses.

Section 9.9.RESERVE FUNDS GENERALLY

(a)All earnings or interest on the Reserve Accounts shall be payable to Borrower.  Lender or its servicer shall maintain the Reserve Accounts and any funds deposited therein in interest-bearing accounts, which in all instances shall be an Eligible Account(s) and (A) such funds shall not be invested except in Permitted Investments, and (B) all interest earned or accrued thereon shall be for the account of and be retained by Borrower.  In no event shall Lender or any loan servicer that at any time holds or maintains any Reserve Account be required to select any particular interest-bearing account or the account that yields the highest rate of interest, provided that selection of the account shall be consistent with the general standards at the time being utilized by Lender or the loan servicer, as applicable, in establishing similar accounts for loans of comparable type.  All such interest shall be and become part of the applicable Reserve Account and shall be disbursed in accordance with the applicable provisions of this Article 9; provided, however, that Lender may, at its election, retain any such interest for its own account during the occurrence and continuance of a monetary Event of Default.  Borrower agrees that it shall include all interest on Reserve Funds as the income of Borrower (and, if Borrower is a partnership or other pass-through entity, the partners, members or beneficiaries of Borrower, as the case may be), and Borrower shall be shall be the owner of the applicable Reserve Funds for federal and applicable state and local tax purposes, except to the extent that Lender retains any interest for its own account during the occurrence and continuance of a monetary Event of Default as provided herein.

(b)Borrower grants to Lender a first-priority perfected security interest in, and assigns and pledges to Lender, each of the Reserve Accounts and any and all Reserve Funds now or hereafter deposited in the Reserve Accounts as additional security for payment of the Debt.  Until expended or applied in accordance herewith, the Reserve Accounts and the Reserve Funds shall constitute additional security for the Debt.  The provisions of this Section 9.9 are intended

101

to give Lender or any subsequent holder of the Loan “control” of the Reserve Accounts within the meaning of the UCC.

(c)Except as otherwise set forth herein, the Reserve Accounts and any and all Reserve Funds now or hereafter deposited in the Reserve Accounts shall be subject to the exclusive dominion and control of Lender, which shall hold the Reserve Accounts and any or all Reserve Funds now or hereafter deposited in the Reserve Accounts subject to the terms and conditions of this Agreement.  Except as otherwise set forth herein, neither Borrower, nor any other Person shall have any right of withdrawal from the Reserve Accounts or any other right or power with respect to the Reserve Accounts or any or all of the Reserve Funds now or hereafter deposited in the Reserve Accounts, except as expressly provided in this Agreement.

(d)Lender shall furnish or cause to be furnished to Borrower, without charge, an annual accounting of each Reserve Account in the normal format of Lender or its loan servicer, showing credits and debits to such Reserve Account and the purpose for which each debit to each Reserve Account was made.

(e)As long as no Event of Default has occurred, Lender shall make disbursements from the Reserve Accounts in accordance with this Agreement.  All such disbursements shall be deemed to have been expressly pre-authorized by Borrower, and shall not be deemed to constitute the exercise by Lender of any remedies against Borrower unless an Event of Default has occurred and is continuing and Lender has expressly stated in writing its intent to proceed to exercise its remedies as a secured party, pledgee or lienholder with respect to the Reserve Accounts.

(f)If any Event of Default occurs, Borrower shall immediately lose all of its rights to receive disbursements from the Reserve Accounts until the earlier to occur of (i) the date on which such Event of Default is cured to Lender’s satisfaction, or (ii) the payment in full of the Debt.  In addition, at Lender’s election, Borrower shall lose all of its rights to receive interest on the Reserve Accounts during the occurrence and continuance of an Event of Default.  Upon the occurrence of any Event of Default, Lender may exercise any or all of its rights and remedies as a secured party, pledgee and lienholder with respect to the Reserve Accounts.  Without limitation of the foregoing, upon any Event of Default, Lender may use and disburse the Reserve Funds (or any portion thereof) for any of the following purposes: (A) repayment of the Debt, including, but not limited to, principal prepayments and the prepayment premium applicable to such full or partial prepayment (as applicable); (B) reimbursement of Lender for all losses, fees, costs and expenses (including, without limitation, reasonable legal fees) suffered or incurred by Lender as a result of such Event of Default; (C) payment of any amount expended in exercising any or all rights and remedies available to Lender at law or in equity or under this Agreement or under any of the other Loan Documents; (D) payment of any item from any of the Reserve Accounts as required or permitted under this Agreement; or (E) any other purpose permitted by applicable law; provided, however, that any such application of funds shall not cure or be deemed to cure any Event of Default.  Without limiting any other provisions hereof, each of the remedial actions described in the immediately preceding sentence shall be deemed to be a commercially reasonable exercise of Lender’s rights and remedies as a secured party with respect to the Reserve Funds and shall not in any event be deemed to constitute a setoff or a foreclosure of a statutory banker’s lien.  Nothing in this Agreement shall obligate Lender to apply all or any

102

portion of the Reserve Funds to effect a cure of any Event of Default, or to pay the Debt, or in any specific order of priority.  The exercise of any or all of Lender’s rights and remedies under this Agreement or under any of the other Loan Documents shall not in any way prejudice or affect Lender’s right to initiate and complete a foreclosure under any or all of the Mortgages.

(g)Notwithstanding anything contained herein or in any other Loan Document to the contrary, Lender shall not be permitted to apply funds in the Marriott, Hilton or Interstate Replacement Reserve Accounts toward the payment of any amounts other than Replacements with respect to the applicable Property(ies), unless and until the applicable Management Agreement pursuant to which such Replacement Reserve Account relates shall expire or otherwise terminate.

(h)The Reserve Funds shall not constitute escrow or trust funds (except for the Replacement Reserve Accounts relating to the Marriott Managed Properties, the Hilton Managed Properties and the Interstate Managed Properties) and may be commingled with other monies held by Lender.  Notwithstanding anything else herein to the contrary, Lender may commingle in one or more Eligible Accounts any and all funds controlled by Lender, including, without limitation, funds pledged in favor of Lender by other borrowers, whether for the same purposes as the Reserve Accounts or otherwise.  Without limiting any other provisions of this Agreement or any other Loan Document, the Reserve Accounts may be established and held in such name or names as Lender or its loan servicer, as agent for Lender, shall deem appropriate, including, without limitation, in the name of Lender or such loan servicer, as agent for Lender.  In the case of any Reserve Account which is held in a commingled account, Lender or its loan servicer, as applicable, shall maintain records sufficient to enable it to determine at all times which portion of such account is related to the Loan.  The Reserve Accounts are solely for the protection of Lender.  With respect to the Reserve Accounts, Lender shall have no responsibility beyond the allowance of due credit for the sums actually received by Lender or beyond the reimbursement or payment of the costs and expenses for which such accounts were established in accordance with their terms.  Upon assignment of the Loan by Lender, any Reserve Funds shall be turned over to the assignee and any responsibility of Lender as assignor shall terminate.  The requirements of this Agreement concerning Reserve Accounts in no way supersede, limit or waive any other rights or obligations of the parties under any of the Loan Documents or under applicable law.

(i)Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in the Reserve Accounts or the Reserve Funds deposited therein or permit any Lien to attach thereto, except for the security interest granted in this Section 9.9, or any levy to be made thereon, or any UCC Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto.

(j)Borrower will maintain the security interest created by this Section 9.9 as a first priority perfected security interest and will defend the right, title and interest of Lender in and to the Reserve Accounts and the Reserve Funds against the claims and demands of all Persons whomsoever.  At any time and from time to time, upon the written request of Lender, and at the sole expense of Borrower, Borrower will promptly and duly execute and deliver such further instruments and documents and will take such further actions as Lender reasonably may request

103

for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted.

Section 9.10.GROUND RENT RESERVE FUNDS.

Borrower shall establish on the date hereof an Eligible Account with Lender or Lender’s agent sufficient to discharge Borrower’s obligations for the payment of Rent under each Ground Lease (the “Ground Rent Reserve Account”) into which Borrower shall deposit on the date hereof $0.00, which amount, when added to the required monthly deposits set forth in the next sentence, is sufficient to make the payments of Ground Rent as required under each Ground Lease (collectively, the “Ground Rent Reserve Funds”).  Borrower shall deposit into the Ground Rent Reserve Account on each Payment Date (the “Ground Rent Monthly Deposit”) one-twelfth of the annual Ground Rent that Lender estimates will be payable during the next ensuing twelve (12) months.  Lender will apply the Ground Rent Reserve Funds to payments of Ground Rent required to be made by Borrower pursuant to each Ground Lease.  In making any disbursement from the Ground Rent Reserve Account, Lender may do so according to any bill, statement or estimate procured from the ground lessor under each Ground Lease, without inquiry into the accuracy of such bill, statement or estimate or into the validity of any rent, additional rent or other charge thereof.  If the amount of the Ground Rent Reserve Funds shall exceed the amounts due for Rent under the Ground Leases, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Ground Rent Reserve Account.  In allocating any such excess, Lender may deal with the person shown on Lender’s records as being the owner of the leasehold title to the applicable Property.  Any amount remaining in the Ground Rent Reserve Account after the Debt has been paid in full shall be returned to Borrower or the person shown on Lender’s records as being the owner of the leasehold title to the applicable Property and no other party shall have any right or claim thereto.  If at any time Lender reasonably determines that the Ground Rent Reserve Funds are not or will not be sufficient to pay Ground Rent by the due date, Lender shall notify Borrower of such determination and Borrower shall pay to Lender any amount necessary to make up the deficiency within ten (10) days after notice from Lender to Borrower requesting payment thereof.  Notwithstanding any of the foregoing to the contrary, in lieu of funding the Ground Rent Reserve Account in accordance with the terms set forth above, Borrower may from time to time provide a Letter of Credit to Lender in an amount sufficient to fund the Ground Rent Reserve Funds with sufficient funds to pay Ground Rents with respect to an entire calendar year(s) as determined from time to time by Lender in its discretion; in such instance Borrowers escrow obligations under this Section 9.10 shall cease until such time as said Letter of Credit expires, is drawn upon or otherwise fails to meet the definitional requirements for a Letter of Credit as set forth in Article 1 hereof.

Section 9.11.LEASE ENHANCEMENT FUNDS

Borrower shall establish on the date hereof an Eligible Account with Lender or Lender’s agent (the “Lease Enhancement Account”) into which Borrower shall deposit on the date hereof $420,000.00 (the “Lease Enhancement Funds”) to serve as additional security for the Loan.  Notwithstanding any of the foregoing to the contrary, in lieu of funding the Lease Enhancement Account in accordance with the terms set forth above, Borrower may from time to time provide a Letter of Credit to Lender in an amount equal to the initial deposit therein as

104

described above; in such instance Borrower’s escrow obligations under this Section 9.11 shall cease (and any Lease Enhancement Funds released to Borrower) until such time as said Letter of Credit expires or otherwise fails to meet the definitional requirements for a Letter of Credit as set forth in Article 1 hereof in which event Borrower immediately upon demand of Lender shall deposit the Lease Enhancement Funds in the amount of $420,000.00 with Lender or provide a Letter of Credit satisfying the definitions of such term.

ARTICLE 10
CASH MANAGEMENT

Section 10.1.CASH MANAGEMENT AGREEMENT

On or prior to the Closing Date, Borrower, Lender and Agent shall enter into the Cash Management Agreement for the operation of the Cash Management Account and the subaccounts for the Reserve Funds, which Cash Management Agreement shall, among other things, provide that (a) the Managers shall deposit all Rents from each Property to the Affiliated Lessee is entitled to under the applicable Management Agreement, directly into the Cash Management Account, (b) the Non-Affiliated Lessee shall deposit Rents payable to the Borrower under the applicable Operating Lease directly into the Cash Management Account and (c) in the event that an Excess Cash Flow Sweep Period occurs and is continuing and only as to Properties where the Operating Lessee or Manager is not paying Operating Expenses pursuant to the applicable Operating Lease or Management Agreement, Operating Expenses shall be disbursed by Lender pursuant to the Annual Budget approved by Lender, and (d) all amounts in the Cash Management Account shall be applied by Lender in accordance with the Cash Management Agreement.

ARTICLE 11
EVENTS OF DEFAULT; REMEDIES

Section 11.1.EVENT OF DEFAULT

The occurrence of any one or more of the following events shall constitute an “Event of Default”:

(a)if any portion of the Debt is not paid on or prior to the date the same is due or if the entire Debt is not paid on or before the Maturity Date; provided, however, Borrower shall not be in default so long as there is sufficient money in the Cash Management Account for payment of all amounts then due and payable (including any deposits into Reserve Accounts) and Lender’s access to such money has not been constrained or constricted in any manner;

(b)except as otherwise expressly provided in the Loan Documents, if any of the Taxes or Other Charges (including Ground Rents) are not paid when the same are due and payable, unless there is sufficient money in the Tax and Insurance Reserve Account or Ground Rent Reserve Account, as applicable for payment of amounts then due and payable and Lender’s access to such money has not been constrained or restricted in any manner;

(c)if the Policies are not kept in full force and effect, or if certified copies of the Policies are not delivered to Lender as provided in Section 8.1;

105

(d)if Borrower breaches any covenant with respect to itself or any SPE Component Entity (if any) contained in (i) Article 6 and Borrower shall within fifteen (15) days of the earlier of Borrower’s knowledge or notice of such breach, fail to cure the same and deliver an updated non-consolidation opinion acknowledging such breach in form and substance acceptable to Lender or (ii) any covenant contained in Article 7 hereof;

(e)if any representation or warranty of, or with respect to, Borrower, Affiliated Lessee, Borrower Principal, any SPE Component Entity, or any member, general partner, principal or beneficial owner of any of the foregoing, made herein, in any other Loan Document, or in any certificate, report, financial statement or other instrument or document furnished to Lender at the time of the closing of the Loan or during the term of the Loan shall have been false or misleading in any material respect when made;

(f)if (i) Borrower, or any managing member (which shall not include Mezzanine Borrower as long as the Mezzanine Loan is outstanding) or general partner of Borrower, Operating Lessee, Borrower Principal or any SPE Component Entity (if any) shall commence any case, proceeding or other action (A) under any Creditors Rights Laws, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Borrower, Operating Lessee, any managing member (which shall not include Mezzanine Borrower as long as the Mezzanine Loan is outstanding) or general partner of Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Borrower, Operating Lessee, any managing member (which shall not include Mezzanine Borrower as long as the Mezzanine Loan is outstanding) or general partner of Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (iii) there shall be commenced against Borrower, Operating Lessee, any managing member (which shall not include Mezzanine Borrower as long as the Mezzanine Loan is outstanding) or general partner of Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (iv) Borrower, Operating Lessee, any managing member (which shall not include the Mezzanine Borrower as long as the Mezzanine Loan is outstanding) or general partner of Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Borrower, Operating Lessee, any managing member (which shall not include Mezzanine Borrower as long as the Mezzanine Loan is outstanding) or general partner of Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due;

106

(g)if Borrower shall be in default beyond applicable notice and grace periods under any other mortgage, deed of trust, deed to secure debt or other security agreement covering any part of any Property, whether it be superior or junior in lien to any or all of the Mortgages;

(h)if any Property becomes subject to any mechanic’s, materialman’s or other Lien other than a Lien for any Taxes or Other Charges not then due and payable and the Lien shall remain undischarged of record (by payment, bonding or otherwise) for a period of sixty (60) days;

(i)if any federal tax lien is filed against Borrower, any managing member (which shall not include Mezzanine Borrower as long as the Mezzanine Loan is outstanding) or general partner of Borrower, Affiliated Lessee, Borrower Principal, or any SPE Component Entity (if any) or any Property and same is not discharged of record within thirty (30) days after same is filed;

(j)if a judgment is filed against the Borrower in excess of $100,000 which is not vacated or discharged within 30 days;

(k)if any default occurs under any guaranty or indemnity executed in connection herewith and such default continues after the expiration of applicable grace periods, if any;

(l)if Borrower shall permit any event within its control to occur that would cause any REA to terminate without notice or action by any party thereto or would entitle any party to terminate any REA and the term thereof by giving notice to Borrower; or any REA shall be surrendered, terminated or canceled for any reason or under any circumstance whatsoever except as provided for in such REA; or any term of any REA shall be modified or supplemented without Lender’s prior written consent; or Borrower shall fail, within ten (10) Business Days after demand by Lender, to exercise its option to renew or extend the term of any REA or shall fail or neglect to pursue diligently all actions necessary to exercise such renewal rights pursuant to such REA except as provided for in such REA  and the same shall have (or shall be reasonably expected to have) a material and adverse affect on the value, use, operation or enjoyment of the applicable Property as a hotel of a similar type as the hotel situated on such Property as of the Closing Date or on the ability of Borrower to perform its obligations (including its payment obligations under this Agreement, the Note and the other Loan Documents);

(m)if Borrower breaches any of its covenants contained in Section 5.24;

(n)if a default has occurred and is continuing beyond any applicable cure period under any Franchise Agreement or Management Agreement, which entitles such Franchisor or Manager, as the case may be, to terminate or cancel such Franchise Agreement or Management Agreement;

(o)if Borrower, without Lender’s consent, modifies, amends, terminates or cancels (or permits or directs Operating Lessee to modify, amend, terminate or cancel) any Franchise Agreement or operates any Property under the name of any hotel chain or system other than the name such Property is operated under as of the date hereof;

107

(p)if Borrower, without Lender’s consent, modifies, amends, terminates or cancels (or permits or directs any Affiliated Lessee to modify, amend, terminate or cancel) any Management Agreement;

(q)if any Affiliated Lessee is in default beyond any applicable notice or cure period under the applicable Operating Lease;

(r)if an “Event of Default” shall occur under any Subordination, Attornment and Security Agreement;

(s)if there shall occur any default by Borrower, as tenant under either Ground Lease, in the observance or performance of any term, covenant or condition of the applicable Ground Lease on the part of Borrower to be observed or performed and said default is not cured following the expiration of any applicable grace and notice periods therein provided, or if the leasehold estate created by the applicable Ground Lease shall be surrendered or if the applicable Ground Lease shall cease to be in full force and effect or the applicable Ground Lease shall be terminated or canceled for any reason or under any circumstances whatsoever, or if any of the terms, covenants or conditions of the applicable Ground Lease shall in any manner be modified, changed, supplemented, altered, or amended without the consent of Lender;

(t)if Borrower Principal breaches its covenant set forth in Section 5.26 unless within five (5) days of written notice from Lender, CNL Hospitality Properties, Inc. executes this Agreement assuming all obligations of Borrower Principal hereunder; or

(u)if Borrower shall continue to be in default under any other term, covenant or condition of this Agreement or any of the Loan Documents for more than ten (10) days after notice from Lender in the case of any default which can be cured by the payment of a sum of money or for thirty (30) days after notice from Lender in the case of any other default, provided that if such default cannot reasonably be cured within such thirty (30) day period and Borrower shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall require Borrower in the exercise of due diligence to cure such default, it being agreed that no such extension shall be for a period in excess of sixty (60) days.

Section 11.2.REMEDIES

(a)Upon the occurrence of an Event of Default (other than an Event of Default described in Section 11.1(f) above) and at any time thereafter during the continuance of such Event of Default Lender may, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in the Properties or any of them, including, without limitation, declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and any Property, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in Section 11.1(f) above, the Debt and all other obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due

108

and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding.

(b)Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to any Property.  Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singularly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents.

ARTICLE 12
ENVIRONMENTAL PROVISIONS

Section 12.1.ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants, based upon an Environmental Report of each Property and information that Borrower knows or should reasonably have known, and subject to all matters disclosed in the Environmental Reports delivered pursuant to the provisions of (or referenced in) Section 3.2(e) hereof that:  (a) there are no Hazardous Materials or underground storage tanks in, on, or under any Property, except those that are both (i) in compliance with Environmental Laws and with permits issued pursuant thereto (if such permits are required), if any, and (ii) either (A) in the case of Hazardous Materials, in amounts not in excess of that necessary to operate such Property for the purposes set forth herein or (B) fully disclosed to and approved by Lender in writing pursuant to an Environmental Report; (b) there are no past, present or threatened Releases of Hazardous Materials in violation of any Environmental Law or which would require remediation by a Governmental Authority in, on, under or from any Property except as described in the Environmental Report; (c) there is no threat of any Release of Hazardous Materials migrating to any Property except as described in the Environmental Report; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with any Property except as described in the Environmental Report; (e) Borrower does not know of, and has not received, any written or oral notice or other communication from any Person relating to Hazardous Materials in, on, under or from any Property; and (f) Borrower has truthfully and fully provided to Lender, in writing, any and all information relating to environmental conditions in, on, under or from such Property known to Borrower or contained in Borrower’s files and records, including but not limited to any reports relating to Hazardous Materials in, on, under or migrating to or from such Property and/or to the environmental condition of such Property.

109

Section 12.2.ENVIRONMENTAL COVENANTS

Borrower covenants and agrees that so long as Borrower owns, manages, is in possession of, or otherwise controls the operation of the Properties:  (a) all uses and operations on or of each Property, whether by Borrower or any other Person, shall be in compliance in all material respects with all Environmental Laws and permits issued pursuant thereto; (b) there shall be no Releases of Hazardous Materials in, on, under or from any Property; (c) there shall be no Hazardous Materials in, on, or under any Property, except those that are both (i) in compliance with all Environmental Laws and with permits issued pursuant thereto, if and to the extent required, and (ii) (A) in amounts not in excess of that necessary to operate any Property for the purposes set forth herein or (B) fully disclosed to and approved by Lender in writing; (d) Borrower shall keep each Property free and clear of all Environmental Liens; (e) Borrower shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Section 12.4 below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (f) Borrower shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with each Property, pursuant to any reasonable written request of Lender, upon Lender’s reasonable belief that such Property is not in full compliance with all Environmental Laws, and share with Lender the reports and other results thereof, and Lender and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; (g) Borrower shall, at its sole cost and expense, comply with all reasonable written requests of Lender to (i) reasonably effectuate remediation of any Hazardous Materials in, on, under or from such Property; and (ii) comply with any Environmental Law; (h) Borrower shall not allow any tenant or other user of any Property to violate any Environmental Law; and (i) Borrower shall immediately notify Lender in writing after it has become aware of (A) any presence or Release or threatened Release of Hazardous Materials in, on, under, from or migrating towards any Property; (B) any non-compliance with any Environmental Laws related in any way to any Property; (C) any actual or potential Environmental Lien against any Property; (D) any required or proposed remediation of environmental conditions relating to any Property; and (E) any written or oral notice or other communication of which Borrower becomes aware from any source whatsoever (including but not limited to a Governmental Authority) relating in any way to Hazardous Materials.  Any failure of Borrower to perform its obligations pursuant to this Section 12.2 shall constitute bad faith waste with respect to the Properties.

Section 12.3.LENDER’S RIGHTS

Lender and any other Person designated by Lender, including but not limited to any representative of a Governmental Authority, and any environmental consultant, and any receiver appointed by any court of competent jurisdiction, shall have the right, but not the obligation, to enter upon any Property at all reasonable times to assess any and all aspects of the environmental condition of each Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Lender’s reasonable discretion) and taking samples of soil, groundwater or other water, air, or building materials, and conducting other invasive testing.  Borrower shall cooperate with and provide access to Lender and any such person or entity designated by Lender.

110

Section 12.4.OPERATIONS AND MAINTENANCE PROGRAMS

If recommended by the Environmental Report or any other environmental assessment or audit of any Property,  Borrower shall establish and comply with an operations and maintenance program with respect to any such Property, in form and substance reasonably acceptable to Lender, prepared by an environmental consultant reasonably acceptable to Lender, which program shall address any asbestos-containing material or lead based paint that may now or in the future be detected at or on any such Property.  Without limiting the generality of the preceding sentence, Lender may require (a) periodic notices or reports to Lender in form, substance and at such intervals as Lender may specify, (b) an amendment to such operations and maintenance program to address changing circumstances, laws or other matters, (c) at Borrower’s sole expense, supplemental examination of any such Property by consultants specified by Lender, (d) access to each Property by Lender, its agents or servicer, to review and assess the environmental condition of each Property and Borrower’s compliance with any operations and maintenance program, and (e) variation of the operations and maintenance program in response to the reports provided by any such consultants.

Section 12.5.ENVIRONMENTAL DEFINITIONS

“Environmental Law” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, standards, policies and other government directives or requirements, as well as common law, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act, that apply to Borrower or any Property and relate to Hazardous Materials or protection of human health or the environment.  “Environmental Liens” means all Liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Borrower or any other Person.  “Environmental Report” means the written reports resulting from the environmental site assessments of any Property delivered to Lender in connection with the Loan.  “Hazardous Materials” shall mean petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on any Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a “hazardous substance,” “hazardous material”, “hazardous waste”, “toxic substance”, “toxic pollutant”, “contaminant”, or “pollutant” within the meaning of any Environmental Law.  “Release” of any Hazardous Materials includes but is not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials.

Section 12.6.INDEMNIFICATION

(a)Borrower and Borrower Principal covenant and agree at their sole cost and expense, to protect, defend, indemnify, release and hold Indemnified Parties harmless from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified

111

Parties and directly or indirectly arising out of or in any way relating to any one or more of the following:  (i) any presence of any Hazardous Materials in, on, above, or under any Property; (ii) any past, present or threatened Release of Hazardous Materials in, on, above, under or from any Property; (iii) any activity by Borrower, any Person Affiliated with Borrower, and any Tenant or other user of any Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from any Property of any Hazardous Materials at any time located in, under, on or above any Property or any actual or proposed remediation of any Hazardous Materials at any time located in, under, on or above any Property, whether or not such remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (iv) any past, present or threatened non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with any Property or operations thereon, including but not limited to any failure by Borrower, any person or entity Affiliated with Borrower, and any tenant or other user of any Property to comply with any order of any Governmental Authority in connection with any Environmental Laws; (v) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumbering any Property; (vi) any acts of Borrower, any person or entity Affiliated with Borrower, and any tenant or other user of any Property in (A) arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Materials at any facility or incineration vessel containing such or similar Hazardous Materials or (B) accepting any Hazardous Materials for transport to disposal or treatment facilities, incineration vessels or sites from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for remediation; and (vii) any misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to this Agreement relating to environmental matters.

(b)Upon written request by any Indemnified Party, Borrower and Borrower Principal shall defend same (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals reasonably approved by the Indemnified Parties.  Notwithstanding the foregoing, any Indemnified Parties may, in their sole discretion, engage their own attorneys and other professionals to defend or assist them, and, at the option of Indemnified Parties, their attorneys shall control the resolution of any claim or proceeding.  Upon demand, Borrower and Borrower Principal shall pay or, in the sole discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith.

(c)Notwithstanding the foregoing, Borrower shall have no liability for any Losses imposed upon or incurred by or asserted against any Indemnified Parties and described in subsection (a) above to the extent that Borrower can conclusively prove both that such Losses were caused solely by actions, conditions or events that occurred after the date that Lender (or any purchaser at a foreclosure sale) actually acquired title to any Property and that such Losses were not caused by the direct or indirect actions of Borrower, Borrower Principal, or any partner, member, principal, officer, director, trustee or manager of Borrower or Borrower Principal or any employee, agent, contractor or Affiliate of Borrower or Borrower Principal.  The obligations

112

and liabilities of Borrower and Borrower Principal under this Section 12.6 shall fully survive indefinitely notwithstanding any termination, satisfaction, assignment, entry of a judgment of foreclosure, exercise of any power of sale, or delivery of a deed in lieu of foreclosure of any or all of the Mortgages.

ARTICLE 13
SECONDARY MARKET

Section 13.1.TRANSFER OF LOAN

Lender may, at any time, sell, transfer or assign the Loan Documents, or grant participations therein (“Participations”) or syndicate the Loan (“Syndication”) or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (“Securities”) (a Syndication or the issuance of Participations and/or Securities, a “Securitization”).

Section 13.2.DELEGATION OF SERVICING

At the option of Lender, the Loan may be serviced by a servicer/trustee selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to such servicer/trustee pursuant to a servicing agreement between Lender and such servicer/trustee.

Section 13.3.DISSEMINATION OF INFORMATION

Lender may forward to each purchaser, transferee, assignee, or servicer of, and each participant, or investor in, the Loan, or any Participations and/or Securities or any of their respective successors (collectively, the “Investor”) or any Rating Agency rating the Loan, or any Participations and/or Securities, each prospective Investor, and any organization maintaining databases on the underwriting and performance of commercial mortgage loans, all documents and information which Lender now has or may hereafter acquire relating to the Debt and to Borrower, any managing member or general partner thereof, Borrower Principal, any SPE Component Entity (if any) and any Property, including financial statements, whether furnished by Borrower or otherwise, as Lender determines necessary or desirable.  Borrower irrevocably waives any and all rights it may have under applicable Legal Requirements to prohibit such disclosure, including but not limited to any right of privacy.

Section 13.4.COOPERATION

At the request of the holder of the Note and, to the extent not already required to be provided by Borrower under this Agreement, Borrower and Borrower Principal shall use reasonable efforts to provide information not in the possession of the holder of the Note in order to satisfy the market standards to which the holder of the Note customarily adheres or which may be reasonably required in the marketplace or by the Rating Agencies in connection with such sales or transfers, including, without limitation, to:

(a)provide updated financial, budget and other information (including, but not limited to, rent rolls meeting the requirements set forth in Section 5.11(a)(i) hereof and operating

113

statements for each Property meeting the requirements set forth in Section 5.11(a)(ii) hereof) with respect to each Property, Borrower, Borrower Principal and Manager and provide modifications and/or updates to the appraisals, market studies, environmental reviews and reports and engineering reports of any Property obtained in connection with the making of the Loan (all of the foregoing being referred to as the “Provided Information”), together, if customary, with appropriate verification and/or consents of the Provided Information through letters of auditors or opinions of counsel of independent attorneys acceptable to Lender and the Rating Agencies;;

(b)make reasonable changes to the organizational documents of Borrower, any SPE Component Entity and their respective principals, including, but not limited to, changes to the ownership structure of Borrower as may be necessary to create a second Mezzanine Borrower acceptable to Lender in its reasonable discretion;

(c)at Borrower’s expense, cause counsel to render or update existing opinion letters as to enforceability and non-consolidation, and a 10b-5 comfort letter, which may be relied upon by the holder of the Note, the Rating Agencies and their respective counsel, which shall be dated as of the closing date of the Securitization;

(d)permit site inspections, appraisals, market studies and other due diligence investigations of any Property, as may be reasonably requested by the holder of the Note or the Rating Agencies or as may be necessary or appropriate in connection with the Securitization;

(e)make the representations and warranties with respect to any or all Properties, Borrower,  Borrower Principal and the Loan Documents as are made in the Loan Documents and such other representations and warranties as may be reasonably requested by the holder of the Note or the Rating Agencies;

(f)execute such amendments to the Loan Documents as may be requested by the holder of the Note or the Rating Agencies or otherwise to effect the Securitization including, without limitation, bifurcation of the Loan into two or more components and/or separate notes and/or creating a senior/subordinate note structure; provided, however, that Borrower shall not be required to modify or amend any Loan Document if such modification or amendment would (i) change the interest rate or the stated maturity, except in connection with a bifurcation of the Loan which may result in varying LIBOR Rates for each component thereof, but which shall have the same weighted average coupon of the LIBOR Rate that existed immediately prior to such modification, or (ii) in the reasonable judgment of Borrower, modify or amend any other material economic term of the Loan, or (iii) in the reasonable judgment of Borrower, materially increase Borrower’s obligations and liabilities under the Loan Documents;

(g)deliver to Lender and/or any Rating Agency, (i) one or more certificates executed by an officer of the Borrower certifying as to the accuracy, as of the closing date of the Securitization, of all representations made by Borrower in the Loan Documents as of the Closing Date in all relevant jurisdictions or, if such representations are no longer accurate, certifying as to what modifications to the representations would be required to make such representations accurate as of the closing date of the Securitization, and (ii) certificates of the relevant

114

Governmental Authorities in all relevant jurisdictions indicating the good standing and qualification of Borrower as of the date of the closing date of the Securitization;

(h)have reasonably appropriate personnel participate in a bank meeting and/or presentation for the Rating Agencies or Investors; and

(i)cooperate with and assist Lender in obtaining ratings of the Securities from two (2) or more of the Rating Agencies.

Upon Lender’s modification the Selected Day pursuant to the terms of Section 2.2(d) above, Borrower and Borrower Principal shall promptly deliver to Lender such modifications to the Rate Cap and the Collateral Assignment of Interest Rate Cap reasonably required by Lender as result of such designation.

All reasonable third party costs and expenses incurred by Borrower in connection with Borrower’s complying with the requests and requirements made under this Section 13.4 shall be paid by Borrower.

In the event that Borrower requests any consent or approval hereunder and the provisions of this Agreement or any Loan Documents require the receipt of written confirmation from each Rating Agency with respect to the rating on the Securities, or, in accordance with the terms of the transaction documents relating to a Securitization, such a rating confirmation is required in order for the consent of Lender to be given, Borrower shall pay all of the costs and expenses of Lender, Lender’s servicer and each Rating Agency in connection therewith, and, if applicable, shall pay any fees imposed by any Rating Agency as a condition to the delivery of such confirmation.

Section 13.5.SECURITIZATION INDEMNIFICATION

(a)Borrower and Borrower Principal understand that certain of the Provided Information may be included in disclosure documents in connection with the Securitization, including, without limitation, a prospectus, prospectus supplement, offering memorandum or private placement memorandum (each, a “Disclosure Document”) and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act or the Exchange Act, or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers relating to the Securitization.  In the event that the Disclosure Document is required to be revised prior to the sale of all Securities, Borrower and Borrower Principal will cooperate with the holder of the Note in updating the Disclosure Document by providing all current information necessary to keep the Disclosure Document accurate and complete in all material respects.

(b)Borrower and Borrower Principal agree in connection with each of (i) a preliminary and a final offering memorandum or private placement memorandum or similar document (including any Investor or Rating Agency “term sheets” or

115

presentations relating to any Property and/or the Loan) or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, (A) that Borrower and Borrower Principal will provide a certificate certifying that Borrower and Borrower Principal have carefully examined such memorandum or prospectus or other document (including any Investor or Rating Agency “term sheets” or presentations relating to any Property and/or the Loan), as applicable, including without limitation, the sections entitled “Special Considerations,” and/or “Risk Factors,” and “Certain Legal Aspects of the Mortgage Loan,” or similar sections, and all sections relating to Borrower, Borrower Principal, Manager, their Affiliates, the Loan, the Loan Documents and any Property, and any risks or special considerations relating thereto, and that, to the best of Borrower’s knowledge, such sections (and any other sections reasonably requested) do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (B) that Borrower will provide an indemnification certificate (1) indemnifying Lender (and for purposes of this Section 13.5, Lender hereunder shall include its officers and directors) and the Affiliate of Lender that (i) has filed the registration statement, if any, relating to the Securitization and/or (ii) which is acting as issuer, depositor, sponsor and/or a similar capacity with respect to the Securitization (any Person described in (i) or (ii), an “Issuer Person”), and each director and officer of any Issuer Person, and each Person or entity who controls any Issuer Person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Issuer Group”), and each Person which is acting as an underwriter, manager, placement agent, initial purchaser or similar capacity with respect to the Securitization, each of its directors and officers and each Person who controls any such Person within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act (collectively, the “Underwriter Group”) for any Losses to which Lender, the Issuer Group or the Underwriter Group may become subject insofar as the Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact which is in fact untrue contained in such sections (including any Investor or Rating Agency “term sheets” or presentations relating to any Property and/or the Loan) or arise out of or are based upon the omission or alleged omission which is in fact an omission to state therein a material fact required to be stated in such sections (including any Investor or Rating Agency “term sheets” or presentations relating to any Property and/or the Loan) or necessary in order to make the statements in such sections (including any Investor or Rating Agency “term sheets” or presentations relating to any Property and/or the Loan) or in light of the circumstances under which they were made, not misleading (collectively the “Securities Liabilities”) and (2) agreeing to reimburse Lender, the Issuer Group and the Underwriter Group for any legal or other expenses reasonably incurred by Lender and Issuer Group in connection with investigating or defending the Securities Liabilities; provided, however, that Borrower will be liable in any such case under clauses (1) or (2) above only to the extent that any such Securities Liabilities arise out of or is based upon any such untrue statement or omission made therein in reliance upon and in conformity with information furnished to Lender or any member of the Issuer Group or Underwriter Group by or on behalf of Borrower or Borrower Principal in connection with the preparation of the memorandum or prospectus or other document (including any Investor or Rating Agency “term sheets” or presentations relating to any Property and/or the Loan) or in connection with the underwriting of the Loan, including, without limitation, financial statements of Borrower or Borrower Principal, operating statements, rent rolls, environmental site assessment reports and Property condition reports with respect to any Property.  This indemnity agreement will be in addition to any liability which Borrower may otherwise have.  Moreover, the indemnification provided for in Clauses (1) and (2) above shall be effective whether or not a certificate described in (A) above is provided and shall be applicable based on information previously provided by Borrower and Borrower Principal or their Affiliates if Borrower or Borrower Principal do not provide the indemnification certificate.

116

(c)           In connection with filings under the Exchange Act or any information provided to holders of Securities on an ongoing basis, Borrower agrees to indemnify (i) Lender, the Issuer Group and the Underwriter Group for Losses to which Lender, the Issuer Group or the Underwriter Group may become subject insofar as the Securities Liabilities arise out of or are based upon the omission or alleged omission which is in fact an omission to state in the Provided Information a material fact required to be stated in the Provided Information in order to make the statements in the Provided Information, in light of the circumstances under which they were made not misleading and (ii) reimburse Lender, the Issuer Group or the Underwriter Group for any legal or other expenses reasonably incurred by Lender, the Issuer Group or the Underwriter Group in connection with defending or investigating the Securities Liabilities.

(d)           Promptly after receipt by an indemnified party under this Section 13.5 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 13.5, notify the indemnifying party in writing of the commencement thereof, but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability which the indemnifying party may have to any indemnified party hereunder except to the extent that failure to notify causes prejudice to the indemnifying party.  In the event that any action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled, jointly with any other indemnifying party, to participate therein and, to the extent that it (or they) may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party.  After notice from the indemnifying party to such indemnified party under this Section 13.5 the indemnifying party shall be responsible for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there are any legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties.  The indemnifying party shall not be liable for the expenses of more than one such separate counsel unless an indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to another indemnified party.

(e)           In order to provide for just and equitable contribution in circumstances in which the indemnity agreements provided for in  Section 13.5(c) or Section 13.5(d) is or are for any reason held to be unenforceable by an indemnified party in respect of any losses, claims, damages or liabilities (or action in respect thereof) referred to therein which would otherwise be indemnifiable under Section 13.5(c) or Section 13.5(d), the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages or liabilities (or action in respect thereof); provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  In determining the amount of contribution to which the respective parties are entitled, the following factors shall be considered:  (i) the indemnified party’s, Borrower’s and

117

Borrower Principal’s relative knowledge and access to information concerning the matter with respect to which claim was asserted; (ii) the opportunity to correct and prevent any statement or omission; and (iii) any other equitable considerations appropriate in the circumstances.  Lender and Borrower hereby agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation.

(f)            The liabilities and obligations of Borrower, Borrower Principal and Lender under this Section 13.5 shall survive the satisfaction of this Agreement and the satisfaction and discharge of the Debt.

Section 13.6.      INTENTIONALLY DELETED.

ARTICLE 14
INDEMNIFICATIONS

Section 14.1.      GENERAL INDEMNIFICATION

Borrower shall indemnify, defend and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about any Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (b) any use, nonuse or condition in, on or about any Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) performance of any labor or services or the furnishing of any materials or other property in respect of any Property or any part thereof; (d) any failure of any Property to be in compliance with any Applicable Legal Requirements; (e) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease; (f) the holding or investing of the Reserve Accounts or the performance of the Required Work, Additional Required Repairs or Additional Replacements, or (g) the payment of any commission, charge or brokerage fee to anyone which may be payable in connection with the funding of the Loan (collectively, the “Indemnified Liabilities”); provided, however, that Borrower shall not have any obligation to Lender hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of Lender.  To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Lender.

Section 14.2.      MORTGAGE AND INTANGIBLE TAX INDEMNIFICATION

Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any

118

way relating to any tax on the making and/or recording of any or all of the Mortgages, the Note or any of the other Loan Documents, but excluding any income, franchise or other similar taxes.

Section 14.3.      ERISA INDEMNIFICATION

Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys’ fees and costs incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in Lender’s sole discretion) that Lender may incur, directly or indirectly, as a result of a default under Section 4.8 or Section 5.18 of this Agreement.

Section 14.4.      SURVIVAL

The obligations and liabilities of Borrower under this Article 14 shall fully survive indefinitely notwithstanding any termination, satisfaction, assignment, entry of a judgment of foreclosure, exercise of any power of sale, or delivery of a deed in lieu of foreclosure of any or all of the Mortgages.

ARTICLE 15
EXCULPATION

Section 15.1.      EXCULPATION

(a)           Except as otherwise provided herein or in the other Loan Documents, Lender shall not enforce the liability and obligation of Borrower or Borrower Principal, as applicable, to perform and observe the obligations contained herein or in the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower or Borrower Principal, except that Lender may bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Lender to enforce and realize upon this Agreement, the Note, any or all of the Mortgages and the other Loan Documents, and the interest in any Property, the Rents and any other collateral given to Lender created by this Agreement, the Note, the Mortgages and the other Loan Documents; provided, however, that any judgment in any such action or proceeding shall be enforceable against Borrower or Borrower Principal, as applicable, only to the extent of Borrower’s or Borrower Principal’s interest in any Property, in the Rents and in any other collateral given to Lender.  Lender, by accepting this Agreement, the Note, the Mortgages and the other Loan Documents, agrees that it shall not, except as otherwise provided in this Section 15.1, sue for, seek or demand any deficiency judgment against Borrower or Borrower Principal in any such action or proceeding, under or by reason of or under or in connection with this Agreement, the Note, the Mortgages or the other Loan Documents.  The provisions of this Section 15.1 shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by this Agreement, the Note, the Mortgages or the other Loan Documents; (ii) impair the right of Lender to name Borrower or Borrower Principal as a party defendant in any action or suit for judicial foreclosure and sale under this Agreement and any or all of the Mortgages; (iii) affect the validity or enforceability of any indemnity (including, without limitation, those contained in Section 12.6, Section 13.5 and Article 14 of this

119

Agreement), guaranty, master lease or similar instrument made in connection with this Agreement, the Note, the Mortgages and the other Loan Documents; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the assignment of leases provisions contained in each Mortgage; or (vi) impair the right of Lender to obtain a deficiency judgment or other judgment on the Note against Borrower or Borrower Principal if necessary to obtain any Insurance Proceeds or Awards to which Lender would otherwise be entitled under this Agreement; provided however, Lender shall only enforce such judgment to the extent of the Insurance Proceeds and/or Awards.

(b)           Notwithstanding the provisions of this  Section 15.1 to the contrary, Borrower and Borrower Principal shall be personally liable to Lender on a joint and several basis for Losses due to:

(i)            fraud or intentional misrepresentation by Borrower, Borrower Principal or any other Affiliate of Borrower or Borrower Principal in connection with the execution and the delivery of this Agreement, the Note, the Mortgages, any of the other Loan Documents, or any certificate, report, financial statement or other instrument or document furnished to Lender at the time of the closing of the Loan or during the term of the Loan;

(ii)           Borrower’s misapplication or misappropriation of Rents received by Borrower after the occurrence of an Event of Default;

(iii)          Borrower’s misapplication or misappropriation of tenant security deposits or Rents collected in advance;

(iv)          the misapplication or the misappropriation of Insurance Proceeds or Awards;

(v)           Borrower’s failure to pay Taxes, Other Charges (except to the extent that sums sufficient to pay such amounts have been deposited in escrow with Lender pursuant to the terms hereof and there exists no impediment to Lender’s utilization thereof), charges for labor or materials or other charges that can create liens on any Property beyond any applicable notice and cure periods specified herein;

(vi)          Borrower’s failure to return or to reimburse Lender for all Personal Property taken from any Property by or on behalf of Borrower and not replaced with Personal Property of the same utility and of the same or greater value;

(vii)         any act of actual waste or arson by Borrower, any principal, Affiliate, member or general partner thereof or by Borrower Principal, any principal, Affiliate, member or general partner thereof;

(viii)        Borrower’s failure following any Event of Default to deliver to Lender upon demand all Rents and books and records relating to any Property;

(ix)           Borrower’s gross negligence or willful misconduct; or

120

(x)            Borrower or any Affiliated Lessee shall take any action of any kind or nature whatsoever, either directly or indirectly to oppose, impede, obstruct, challenge, hinder, frustrate, enjoin or otherwise interfere with (A) Lender’s termination of any Operating Lease with any Affiliated Lessee, (B) Lender or the party acquiring any Property following the occurrence of a foreclosure or deed in lieu thereof (in full substitution of the applicable Affiliated Lessee) being deemed the “Owner” under the Management Agreement, (C)  the execution, delivery or effectiveness of a new Management Agreement directly between Lender or the party acquiring any Property following a foreclosure or deed in lieu thereof and applicable Manager or (D)  any payment or other transfer by Manager of funds which would otherwise be paid to any Affiliated Lessee under any Operating Lease directly to Lender or the party acquiring any Property following the occurrence of a foreclosure or deed in lieu thereof, in each case after or as a result of any automatic termination of the applicable Operating Lease or of Lender exercising its right to terminate the Operating Lease, in each case pursuant to the applicable Subordination, Attornment and Security Agreement and this Agreement, or shall, either directly or indirectly, cause or permit any other person to take any action which, if taken by such Affiliated Lessee would constitute an event described in this Section 15.1(b)(x).

(c)           Notwithstanding the foregoing, the agreement of Lender not to pursue recourse liability as set forth in subsection (a) above SHALL BECOME NULL AND VOID and shall be of no further force and effect and the Debt shall become fully recourse to Borrower and Borrower Principal, jointly and severally, in the event (i) of a breach by Borrower or SPE Component Entity of any of the covenants set forth in Article 6 (excluding Sections 6.1(xv) and 6.1(xviii)(A) thereof) or a breach by Affiliated Lessee of any of the covenants set forth in Section 15 of the Subordination, Attornment and Security Agreement, except the extent that such breach was inadvertent, immaterial and is promptly cured, (ii) of a breach of any of the covenants set forth in Article 7 hereof, (iii) any Property or any part thereof shall become an asset in (A) a voluntary bankruptcy or insolvency proceeding or Borrower Principal, or (B) an involuntary bankruptcy or insolvency proceeding of Borrower or Borrower Principal in connection with which Borrower, Borrower Principal, SPE Component Entity or any Affiliate of any of the foregoing has or have colluded in any way with the creditors commencing or filing such proceeding and such proceeding is not dismissed in ninety (90) days.

(d)           Nothing herein shall be deemed to be a waiver of any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provision of the U.S. Bankruptcy Code to file a claim for the full amount of the indebtedness secured by the Mortgages or to require that all collateral shall continue to secure all of the indebtedness owing to Lender in accordance with this Agreement, the Note, the Mortgages or the other Loan Documents.

ARTICLE 16
NOTICES

Section 16.1.      NOTICES

All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand

121

delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested, (b) expedited prepaid overnight delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or by (c) telecopier (with answer back acknowledged provided an additional notice is given pursuant to subsection (b) above), addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section):

If to Lender:	Bank of America, N.A.
	Capital Markets Servicing Group
	555 South Flower Street, 6th Floor
	CA9-706-06-42
	Los Angeles, California 90071
	Attn:  Servicing Manager
	Telephone No: (800) 462-0505
	Facsimile No.: (213) 345-6587
With a copy to:	Bank of America Legal Department
	GCIB/CMBS
	NC1-007-20-01
	100 North Tyron Street
	Charlotte, North Carolina 28255-0001
	Attention:  Glenn J. Reid, Esq.
	Facsimile No.: (704) 387-0922
If to Borrower:	c/o CNL Hospitality Properties
	450 South Orange Avenue, 12th Floor
	Orlando, Florida 32801-3336
	Attention:  Chief Financial Officer
	Facsimile No.: (407) 650-1085
With a copy to:	Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
	215 North Eola Drive
	Orlando, Florida 32801-3336
	Attention:  Richard J. Fildes, Esq.
	Facsimile No.: (407) 843-4444
If to Borrower
Principal:	CNL Hospitality Properties
	450 South Orange Avenue, 12th Floor
	Orlando, Florida 32810-3336
	Attention:  Chief Financial Officer
	Facsimile No.: (407) 650-1085
With a copy to:	Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
	215 North Eola Drive
	Orlando, Florida 32801-3336

122

Attention:  Richard J. Fildes, Esq.

Facsimile No.: (407) 843-4444

A notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day.

ARTICLE 17
FURTHER ASSURANCES

Section 17.1.      REPLACEMENT DOCUMENTS

Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor.

Section 17.2.      RECORDING OF MORTGAGE, ETC.

Borrower forthwith upon the execution and delivery of the Mortgages and thereafter, from time to time, will cause the Mortgages and any of the other Loan Documents creating a lien or security interest or evidencing the lien hereof upon any Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect and perfect the lien or security interest hereof upon, and the interest of Lender in, any Property.  Borrower will pay all taxes, filing, registration or recording fees, and all expenses incident to the preparation, execution, acknowledgment and/or recording of the Note, the Mortgages, the other Loan Documents, any note, deed of trust or mortgage supplemental hereto, any security instrument with respect to any Property and any instrument of further assurance, and any modification or amendment of the foregoing documents, and all federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of the Mortgages, any deed of trust or mortgage supplemental hereto, any security instrument with respect to any Property or any instrument of further assurance, and any modification or amendment of the foregoing documents, except where prohibited by law so to do.

Section 17.3.      FURTHER ACTS, ETC.

Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every further acts, deeds, conveyances, deeds of trust, mortgages, assignments, security agreements, control agreements, notices of assignments, transfers and assurances as Lender shall, from time to time, reasonably require, for the better assuring, conveying, assigning, transferring, and confirming unto Lender any Property and rights hereby mortgaged, deeded, granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and transferred or intended now or hereafter so to be, or which Borrower may be or

123

may hereafter become bound to convey or assign to Lender, or for carrying out the intention or facilitating the performance of the terms of this Agreement or for filing, registering or recording the Mortgages, or for complying with all Legal Requirements.  Borrower, on demand, will execute and deliver, and in the event it shall fail to so execute and deliver, hereby authorizes Lender to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements and financing statement amendments to evidence more effectively, perfect and maintain the priority of the security interest of Lender in any Property.  Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Lender at law and in equity, including without limitation, such rights and remedies available to Lender pursuant to this Section 17.3.

Section 17.4.      CHANGES IN TAX, DEBT, CREDIT AND DOCUMENTARY STAMP LAWS

(a)           If any law is enacted or adopted or amended after the date of this Agreement which deducts the Debt from the value of any Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Debt or Lender’s interest in any Property, Borrower will pay the tax, with interest and penalties thereon, if any.  If Lender is advised by counsel chosen by it that the payment of tax by Borrower would be unlawful or taxable to Lender or unenforceable or provide the basis for a defense of usury then Lender shall have the option by written notice of not less than one hundred twenty (120) days to declare the Debt immediately due and payable.

(b)           Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against any Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of any Property, or any part thereof, for real estate tax purposes by reason of the Mortgages or the Debt.  If such claim, credit or deduction shall be required by law, Lender shall have the option, by written notice of not less than one hundred twenty (120) days, to declare the Debt immediately due and payable.

If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, the Mortgage, or any of the other Loan Documents or impose any other tax or charge on the same, Borrower will pay for the same, with interest and penalties thereon, if any.

Section 17.5.      EXPENSES

Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender within ten (10) days of receipt of written notice from Lender for all reasonable costs and expenses (including reasonable, actual attorneys’ fees and disbursements and the allocated costs of internal legal services and all actual disbursements of internal counsel) reasonably incurred by Lender in accordance with this Agreement in connection with (a) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower (including without limitation any opinions requested by Lender as to

124

any legal matters arising under this Agreement or the other Loan Documents with respect to any Property); (b) any default by Borrower in Borrower’s ongoing performance of and compliance with Borrower’s respective agreements and covenants contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date, including, without limitation, confirming compliance with environmental and insurance requirements; (c) following a request by Borrower, Lender’s ongoing performance and compliance with all agreements and conditions contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date; (d) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters requested by Lender; (e) securing Borrower’s compliance with any requests made pursuant to the provisions of this Agreement; (f) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in favor of Lender pursuant to this Agreement and the other Loan Documents; (g) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents, any Property, or any other security given for the Loan; and (h) enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to any Property or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or of any insolvency or bankruptcy proceedings; provided, however, that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender.  Additionally, on the Closing Date Borrower shall pay Lender a securitization fee in the amount of $520,000.00 (the “Securitization Fee”).

ARTICLE 18
WAIVERS

Section 18.1.      REMEDIES CUMULATIVE; WAIVERS

The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower or Borrower Principal pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise.  Lender’s rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion.  No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient.  A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon.

125

Section 18.2.      MODIFICATION, WAIVER IN WRITING

No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given.  Except as otherwise expressly provided herein, no notice to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.

Section 18.3.      DELAY NOT A WAIVER

Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

Section 18.4.      TRIAL BY JURY

BORROWER, BORROWER PRINCIPAL AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, BORROWER PRINCIPAL AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  EACH OF LENDER, BORROWER PRINCIPAL AND BORROWER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER, BORROWER PRINCIPAL AND LENDER.

Section 18.5.      WAIVER OF NOTICE

Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except

126

with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice.  Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrower.

Section 18.6.      REMEDIES OF BORROWER

In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary damages, and Borrower’s sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment.  The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment.  Lender agrees that, in such event, it shall cooperate in expediting any action seeking injunctive relief or declaratory judgment.

Section 18.7.      WAIVER OF MARSHALLING OF ASSETS

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

Section 18.8.      WAIVER OF STATUTE OF LIMITATIONS

Borrower hereby expressly waives and releases, to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to payment of the Debt or performance of its Other Obligations.

Section 18.9.      WAIVER OF COUNTERCLAIM

Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.

Section 18.10.    GRADSKY WAIVERS.

Borrower Principal hereby waives each of the following:

(a)           Any rights of Borrower Principal of subrogation, reimbursement, indemnification, and/or contribution against Borrower or any other person or entity, and any other rights and

127

defenses that are or may become available to Borrower Principal or any other person or entity by reasons of Sections 2787-2855, inclusive of the California Civil Code;

(b)           Any rights or defenses that may be available by reason of any election of remedies by Lender (including, without limitation, any such election which in any manner impairs, effects, reduces, releases, destroys or extinguishes Borrower Principal’s subrogation rights, rights to proceed against Borrower for reimbursement, or any other rights of Borrower Principal to proceed against any other person, entity or security, including but not limited to any defense based upon an election of remedies by Lender under the provisions of Section 580(d) of the California Code of Civil Procedure or any similar law of California or of any other State or of the United Sates); and

(c)           Any rights or defenses Borrower Principal may have because its obligations under this Agreement (the “Borrower Principal Obligations”) are secured by real property or any estate for years.  These rights or defenses include, but are not limited to, any rights or defenses that are based upon, directly or indirectly, the application of Section 580(a), Section 580(b), Section 580(d) or Section 726 of the California Code of Civil Procedure to the Borrower Principal Obligations.

The provisions of this subsection (c) mean, among other things:

(y)           Lender may collect from Borrower Principal without first foreclosing on any real or personal property collateral pledged by Borrower for the Debt; and

(z)            Subject to the provisions of Article 15, if Lender forecloses on a real property pledged by Borrower:

(1)           The Borrower Principal Obligations shall not be reduced by the price for which the collateral sold at the foreclosure sale or the value of the collateral at the time of the sale.

(2)           Lender may collect from Borrower Principal even if Lender, by foreclosing on the real property collateral, has destroyed any right of Borrower Principal to collect from Borrower.  Further, the provisions of this Agreement constitute an unconditional and irrevocable waiver of any rights and defenses Borrower Principal may have because Borrower’s obligations are secured by real property.  These rights and defenses, include, but are not limited to, any rights or defenses based upon Section 580(a), Section 580(b), Section 580(d) or Section 726 of the California Code of Civil Procedure.

ARTICLE 19
GOVERNING LAW

Section 19.1.      CHOICE OF LAW

This Agreement shall be deemed to be a contract entered into pursuant to the laws of the State of New York and shall in all respects be governed, construed, applied and enforced in

128

accordance with the laws of the State of New York, provided however, (a) that with respect to the creation, perfection, priority and enforcement of any Lien created by the Loan Documents, and the determination of deficiency judgments, the laws of the state where any Property is located shall apply, and (b) with respect to the security interest in each of the Reserve Accounts and the Cash Management Account, the laws of the State of New York shall apply.

Section 19.2.      SEVERABILITY

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

Section 19.3.      PREFERENCES

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

ARTICLE 20
MISCELLANEOUS

Section 20.1.      SURVIVAL

This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents.  Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party.  All covenants, promises and agreements in this Agreement,  by or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and assigns of Lender.

Section 20.2.      LENDER’S DISCRETION

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

129

Section 20.3.      HEADINGS

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

Section 20.4.      COST OF ENFORCEMENT

In the event (a) that any or all of the Mortgages is foreclosed in whole or in part, (b) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or any of its constituent Persons or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors, or (c) Lender exercises any of its other remedies under this Agreement or any of the other Loan Documents, Borrower shall be chargeable with and agrees to pay all costs of collection and defense, including attorneys’ fees and costs, incurred by Lender or Borrower in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, together with all required service or use taxes.

Section 20.5.      SCHEDULES INCORPORATED

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

Section 20.6.      OFFSETS, COUNTERCLAIMS AND DEFENSES

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

Section 20.7.      NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY BENEFICIARIES

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

(b)           This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein.  All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that

130

Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable to do so.

(c)           The general partners, members, principals and (if Borrower is a trust) beneficial owners of Borrower are experienced in the ownership and operation of properties similar to any Property, and Borrower and Lender are relying solely upon such expertise and business plan in connection with the ownership and operation of any Property.  Borrower is not relying on Lender’s expertise, business acumen or advice in connection with any Property.

(d)           Notwithstanding anything to the contrary contained herein, Lender is not undertaking the performance of (i) any obligations under the Leases; or (ii) any obligations with respect to such agreements, contracts, certificates, instruments, franchises, permits, trademarks, licenses and other documents.

(e)           By accepting or approving anything required to be observed, performed or fulfilled or to be given to Lender pursuant to this Agreement, the Mortgages, the Note or the other Loan Documents, including, without limitation, any officer’s certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Lender shall not be deemed to have warranted, consented to, or affirmed the sufficiency, the legality or effectiveness of same, and such acceptance or approval thereof shall not constitute any warranty or affirmation with respect thereto by Lender.

(f)            Borrower recognizes and acknowledges that in accepting this Agreement, the Note, the Mortgages and the other Loan Documents, Lender is expressly and primarily relying on the truth and accuracy of the representations and warranties set forth in Article 4 of this Agreement without any obligation to investigate any Property and notwithstanding any investigation of any Property by Lender; that such reliance existed on the part of Lender prior to the date hereof, that the warranties and representations are a material inducement to Lender in making the Loan; and that Lender would not be willing to make the Loan and accept this Agreement, the Note, the Mortgages and the other Loan Documents in the absence of the warranties and representations as set forth in Article 4 of this Agreement.

Section 20.8.      PUBLICITY

All news releases, publicity or advertising by Borrower or its Affiliates through any media intended to reach the general public which refers to the Loan, Lender, Banc of America Securities LLC, or any of their Affiliates shall be subject to the prior written approval of Lender, not to be unreasonably withheld.  Lender shall be permitted to make any news, releases, publicity or advertising by Lender or its Affiliates through any media intended to reach the general public which refers to the Loan, any Property, Borrower, Borrower Principal and their respective Affiliates without the approval of Borrower or any such Persons.  Borrower also agrees that Lender may share any information pertaining to the Loan with Bank of America Corporation, including its bank subsidiaries, Banc of America Securities LLC and any other Affiliates of the foregoing, in connection with the sale or transfer of the Loan or any Participations and/or Securities created.

131

Section 20.9.      CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE

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

Section 20.10.    ENTIRE AGREEMENT

This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written between Borrower and Lender are superseded by the terms of this Agreement and the other Loan Documents.

Section 20.11.    CROSS COLLATERALIZATION

Without limitation to any other right or remedy provided to Lender in this Agreement or any of the other Loan Documents, Borrower acknowledges and agrees that to the full extent permitted under applicable law, upon the occurrence of an Event of Default (i) Lender shall have the right to pursue all of its rights and remedies in one proceeding, or separately and independently in separate proceedings which it, as Lender, in its sole and absolute discretion, shall determine from time to time, (ii) Lender is not required to either marshal assets, sell any of the collateral for the Loan in any inverse order of alienation, or be subjected to any “one action” or “election of remedies” law or rule, (iii) the exercise by Lender of any remedies against any of the collateral for the Loan will not impede Lender from subsequently or simultaneously exercising remedies against other collateral for the Loan, (iv) all Liens and other rights, remedies and privileges provided to Lender in this Agreement and in the other Loan Documents or otherwise shall remain in full force and effect until Lender has exhausted all of its remedies against the collateral for the Loan and all of the collateral for the Loan has been foreclosed, sold and/or otherwise realized upon and (v) all of the Properties shall be security for the performance of all of Borrower’s obligations hereunder.

132

Section 20.12.    TAX DISCLOSURE

Notwithstanding anything herein to the contrary, except as reasonably necessary to comply with applicable securities laws, each party (and each employee, representative or other agent of each party) hereto may disclose to any and all persons, without limitation of any kind, any information with respect to the United States federal income “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to such parties (or their representatives) relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the United States federal income tax treatment or tax structure of the transactions contemplated hereby.

Section 20.13.    MEZZANINE LOAN AGREEMENTS.

As of the Closing Date, the Mezzanine Lender has not made the Mezzanine Loan to Mezzanine Borrower.  For so long as the Mezzanine Loan has to not been entered into, this Agreement shall be interpreted without reference to the Mezzanine Loan or any of the terms that relate to the Mezzanine Loan including but not limited to “Mezzanine Debt Service”, “Mezzanine Borrower”, “Mezzanine Lender” and “Mezzanine Loan”.

[Signatures Commence on Following Page]

133

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

BORROWER:
ROSE SPE 1, L.P., a Delaware limited partnership
By:		Rose SPE 1 GP, LLC, its general partner
		By:
				Name:
				Title:
BORROWER PRINCIPAL:
Acknowledged and agreed to with respect to its obligations set forth in Article 4, Section 5.11, Section 5.26, Section 12.6, Article 13, Article 15 and Article 18 hereof:
RFS PARTNERSHIP, L.P., a Tennessee limited partnership
By:		CNL Rose GP CORP., a Delaware corporation, its general partner
		By:
			Name:
			Title:
AFFILIATED LESSEE:
Acknowledged and agreed to with respect to its obligations set forth in Article 4 hereof:
CNL ROSE SPE TENANT CORP., a Delaware corporation
By:
	Name:
	Title:

LENDER:
BANK OF AMERICA, N.A.
By:
	Name:
	Title:

2

EXHIBIT A

Annual Budget

EXHIBIT B

Borrower Equity Ownership Structure

Exhibit B to Loan Agreement

ROSE SPE Structure for CMBS (26 Pool)

~~ ~~

HI Phoenix Chandler, AZ; HOM Phoenix Chandler, AZ; HI Sedona, AZ; RI Sacramento/Cal Expo, CA; DT San Diego Del Mar, CA; HI Denver SW Lakewood, CO; RI Wilmington/Newark, DE;  HI Ft. Lauderdale/Cypress, FL;  TPS Miami Airport West, FL;  TPS Miami Lakes, FL;  RI Orlando International Drive, FL; HOL Crystal Lake, IL;  HOL Louisville Southwest, KY; RI Ann Arbor, MI;  CY Flint, MI;  HI Minneapolis Minnetonka, MN;  HI Hattiesburg, MS;  HI Lincoln Airport I-80, NE;  RI Fishkill, NY;  HI Oklahoma City Airport, OK;  HI Tulsa, OK;  RI Warwick, RI; RI Ft. Worth River Plaza, TX; TPS Fort Worth Southwest, TX;  HI Laredo, TX;  and  RI Tyler, TX

v.3.03  11-5-2003

CONFIDENTIALITY NOTICE:  The information contained herein is confidential and intended only for the use of CNL Hospitality Properties, Inc. or it’s affiliates and legal counsel.  If the reader is not the intended recipient, you are hereby notified that any dissemination, distribution or copying of this information is strictly prohibited.

SCHEDULE A

Properties and Initial Allocated Loan Amounts and Percentages

Property	Initial Allocated Loan Amount		Initial Allocated Loan Percentage
Hampton Inn Phoenix Chandler Chandler, Arizona	$	2,302,857	1.8	%
Homewood Suites Phoenix Chandler Chandler, Arizona	$	2,600,000	2.0	%
Hampton Inn Sedona Sedona, Arizona	$	2,340,000	1.8	%
Residence Inn Sacramento/Cal Expo Sacramento, California	$	9,842,857	7.6	%
Doubletree Hotel San Diego Del Mar San Diego, California	$	7,280,000	5.6	%
Hampton Inn Denver SW Lakewood Lakewood, Colorado	$	1,485,714	1.1	%
Residence Inn Wilmington/Newark (the “Wilmington Newark Property”) Wilmington, Delaware	$	7,428,571	5.7	%
Hampton Inn Ft. Lauderdale-Cypress Creek Ft. Lauderdale, Florida	$	2,785,714	2.1	%
Towne Place Suites Miami Airport West (the “Miami Airport West Property”) Miami, Florida	$	2,971,429	2.3	%
Towne Place Suites Miami Lakes (The “Miami Lakes Property”) Miami, Florida	$	2,971,429	2.3	%
Residence Inn by Marriott International Drive Orlando, Florida	$	7,502,857	5.8	%
Holiday Inn Crystal Lake Crystal Lake, Illinois	$	8,431,429	6.5	%
Holiday Inn Southwest Louisville (the “Louisville Southwest Property”) Louisville, Kentucky	$	4,828,571	3.7	%
Residence Inn Ann Arbor Ann Arbor, Michigan	$	4,364,286	3.4	%
Courtyard Flint Flint, Michigan	$	3,996,571	3.1	%

Property	Initial Allocated Loan Amount		Initial Allocated Loan Percentage
Hampton Inn Minneapolis Minnetonka Minnetonka, Minnesota	$	1,374,286	1.1	%
Hampton Inn Hattiesburg Hattiesburg,Mississippi	$	4,605,714	3.5	%
Hampton Inn Lincoln Airport I-80 Lincoln, Nebraska	$	3,279,714	2.5	%
Residence Inn Fishkill Fishkill, New York	$	14,508,000	11.2	%
Hampton Inn Oklahoma City-Airport I-40 Oklahoma City, Oklahoma	$	4,230,571	3.3	%
Hampton Inn Tulsa Tulsa, Oklahoma	$	2,971,429	2.3	%
Residence Inn Warwick Warwick, Rhode Island	$	6,314,286	4.9	%
Ft. Worth Towne Place Suites-Southwest Ft. Worth, Texas	$	3,484,000	2.7	%
Residence Inn - Ft. Worth River Plaza Ft. Worth, Texas	$	7,242,857	5.6	%
Hampton Inn - Laredo Laredo, Texas	$	6,760,000	5.2	%
Residence Inns Tyler Tyler, Texas	$	4,096,857	3.2	%

2

SCHEDULE B

Initial Property Manager and Franchisor

Property	Initial Property Manager	Initial Franchisor
Hampton Inn Phoenix Chandler Chandler, Arizona	Promus Hotel, Inc. (“Promus”)	Promus
Homewood Suites Phoenix Chandler Chandler, Arizona	Promus	Promus
Hampton Inn Sedona Sedona, Arizona	Promus	Promus
Residence Inn Sacramento/Cal Expo Sacramento, California	Residence Inn by Marriott, Inc. (“Residence Inn”)	N/A
Doubletree Hotel San Diego Del Mar San Diego, California (“Doubletree Property”)	DT Management, Inc.	Double Tree Hotel Systems, Inc.
Hampton Inn Denver SW Lakewood Lakewood, Colorado	Promus	Promus
Residence Inn Wilmington/Newark Wilmington, Delaware	Residence Inn	N/A
Hampton Inn Ft. Lauderdale-Cypress Creek Ft. Lauderdale, Florida	Promus	Promus
Towne Place Suites Miami Airport West (the “Miami Airport West Property”) Miami, Florida(1)	N/A	N/A
Towne Place Suites Miami Lakes (The “Miami Lakes Property”) Miami, Florida(1)	N/A	N/A
Residence Inn by Marriott International Drive Orlando, Florida	Residence Inn	N/A
Holiday Inn Crystal Lake Crystal Lake, Illinois	Interstate Management Company, LLC (“Interstate”)	Holiday Hospitality Franchising, Inc. (“Holiday”)

(1) With respect to the Miami Airport West Property and the Miami Lakes Property, such Properties are leased to the Non-Affiliated Lessee which may or may not have entered into management agreements and/or franchise agreements for such Properties.

Property	Initial Property Manager	Initial Franchisor
Holiday Inn Southwest Louisville Louisville, Kentucky (“Louisville Property”)	Interstate	Holiday
Residence Inn Ann Arbor Ann Arbor, Michigan	Residence Inn	N/A
Courtyard Flint Flint, Michigan (“Flint Property”)	Flagstone/Interstate(2)	Marriott International, Inc.
Hampton Inn Minneapolis Minnetonka Minnetonka, Minnesota	Promus	Promus
Hampton Inn Hattiesburg Hattiesburg, Mississippi	Promus	Promus
Hampton Inn Lincoln Airport I-80 Lincoln, Nebraska	Promus	Promus
Residence Inn Fishkill Fishkill, New York	Residence Inn	N/A
Hampton Inn Oklahoma City-Airport I-40 Oklahoma City, Oklahoma	Promus	Promus
Hampton Inn Tulsa Tulsa, Oklahoma	Promus	Promus
Residence Inn Warwick Warwick, Rhode Island	Residence Inn	N/A
Ft. Worth Towne Place Suites-Southwest Ft. Worth, Texas	Towne Place Management Corporation (“Towne Place”)	N/A
Residence Inn - Ft. Worth River Plaza Ft. Worth, Texas	Residence Inn	N/A
Hampton Inn - Laredo Laredo, Texas	Promus	Promus
Residence Inns Tyler Tyler, Texas	Residence Inn	N/A

(2) On the Closing Date the Initial Manager is Flagstone Hospitality Management LLC, a Tennessee limited liability company (“Flagstone”).  Borrower anticipates entering into a new Management Agreement in the exact same form as the ones with Interstate for the other Interstate Properties in effect on the Closing Date with Interstate on or before December 31, 2003.

2

SCHEDULE I

REQUIRED REPAIRS

Property Name	Address	Location	Prop. Improvements	ESA Information	Environmental Concerns	Recommendations	Estimated Cost	Reserve Amount (125%)
Courtyard by Marriott	5205 Gateway Centre	Flint, MI	3-story hotel, 102 guest rooms, 2.58-acres, built in 1996, undeveloped and agricultural prior to 1996	Phase I ESA by PSI 6/16/03, inspected 6/6/03	Mold - PSI observed areas of moisture and mold growth in a pool room.  PSI issued a mold R&P Plan on November 25, 2003.	Mold remediation required.  ESD recommends escrowing funds for remediation. ESD estimate is $10,000.	10,000	12,500
Residence Inn	3303 Troup Highway	Tyler, TX	16 buildings with guest suites, one gatehouse/office building, 4.125 acres, built in 1985, undeveloped prior to 1985	Phase I ESA by PSI 6/16/03, inspected 6/5/03	Mold - Moisture intrusion and visible mold growth were observed in various areas - the gatehouse, closets in guest suites, and near commercial washing machines. PSI issued mold R&P Plan on October 20, 2003.	Mold remediation required. ESD recommends escrowing funds for remediation. ESD estimate for mold remediation is $40,000.	40,000	50,000
Residence Inn	7975 Canada Ave.	Orlando, FL	eleven 2-story hotel buildings, 176 guest rooms, built in 1984, undeveloped prior to 1984	Phase I ESA by PSI 6/9/03, inspected 5/29/03	Mold - Water damage and mold growth were observed in multiple buildings. PSI issued a mold R&P Plan on October 6, 2003.	Mold remediation required. ESD recommends funds be escrowed for remediation.  ESD estimate for mold remediation is $176,000.	176,000	220,000
Residence Inn	500 Kilvert St.	Warwick, RI	twelve 2-story hotel buildings with 96 guest rooms, office and storage buildings, 3.80 acres, built in 1989, sand and gravel pit from 1936 to the mid-1980s	Phase I ESA by PSI 6/19/03, inspected 5/30/03	Mold - Water intrusions from roof leaks and small areas of mold growth were observed in six mechanical rooms. PSI issued a mold R&P Plan on September 22, 2003.	Mold remediation required.  ESD recommends funds be escrowed for remediation. ESD estimate for mold remediation is $5,000.	5,000	6,250
						TOTAL RESERVES		288,750

SCHEDULE II

REPLACEMENTS

SCHEDULE III

COST BASIS OF PROPERTIES

	Property Name	Brand	Total Assigned Value (from Purch. Accounting)	Land	FF&E	Automobiles	Renovations (Building)		Building	Total Purchase Acctg NBV at 7/10/03
CMBS	Flint	Courtyard	9,769,249	963,479	155,919	4,397	—		8,645,454	9,769,249
CMBS	San Diego Del Mar	Doubletree	23,284,953	1,896,074	1,628,247	—	8,268		19,752,364	23,284,953
CMBS	Phoenix Chandler	Hampton Inn	7,773,222	737,860	213,707	—	3,107		6,818,548	7,773,222
CMBS	Sedona	Hampton Inn	6,028,695	1,469,150	152,093	—	—		4,407,451	6,028,695
CMBS	Denver SW Lakewood	Hampton Inn	11,273,212	745,794	471,465	—	600,356		9,455,597	11,273,212
CMBS	Ft. Lauderdale/Cypress	Hampton Inn	10,045,221	931,111	712,839	12,627	8,642		8,380,002	10,045,221
CMBS	Minneapolis Minnetonka	Hampton Inn	9,872,521	959,038	274,303	—	698,277		7,940,904	9,872,521
CMBS	Hattiesburg	Hampton Inn	11,259,326	467,529	559,715	—	8,152		10,223,930	11,259,326
CMBS	Lincoln Airport I-80	Hampton Inn	8,407,611	609,820	190,586	13,636	698,320		6,895,250	8,407,611
CMBS	Oklahoma City Airport	Hampton Inn	10,230,938	847,150	736,519	13,845	13,337		8,620,088	10,230,938
CMBS	Tulsa	Hampton Inn	11,001,578	589,738	370,253	—	1,047,440		8,994,147	11,001,578
CMBS	Laredo	Hampton Inn	9,300,920	532,909	354,727	—	7,439		8,405,845	9,300,920
CMBS	Crystal Lake	Holiday Inn	19,784,530	2,852,273	1,727,477	—	(3,027	)	15,207,807	19,784,530
CMBS	Louisville Southwest	Holiday Inn	12,741,593	881,392	1,172,623	11,866	25,338		10,650,374	12,741,593
CMBS	Phoenix Chandler	Homewood Suites	8,205,405	905,563	536,048	—	—		6,763,794	8,205,405
CMBS	Sacramento/Cal Expo	Residence Inn	18,481,558	1,919,923	1,617,702	—	1,201,158		13,742,775	18,481,558
-CMBS	Wilmington/Newark	Residence Inn	12,293,398	—	392,365	13,481	9,477		11,878,075	12,293,398
CMBS	Orlando International Drive	Residence Inn	15,968,213	1,434,506	1,617,897	—	5,255		12,910,555	15,968,213
CMBS	Ann Arbor	Residence Inn	10,974,675	921,516	868,776	—	—		9,184,383	10,974,675
CMBS	Fishkill	Residence Inn	15,215,711	2,093,959	477,646	—	1,670,850		10,973,257	15,215,711
CMBS	Warwick	Residence Inn	10,147,626	1,745,317	543,968	11,021	3,032		7,844,288	10,147,626
CMBS	Ft. Worth River Plaza	Residence Inn	13,075,233	1,928,207	720,221	—	6,398		10,420,407	13,075,233
CMBS	Tyler	Residence Inn	12,071,622	788,783	657,806	—	103,007		10,522,027	12,071,622
CMBS	Miami Airport West	TownePlace Suites	8,518,695	831,129	380,010	—	—		7,307,556	8,518,695
CMBS	Miami Lakes	TownePlace Suites	8,470,964	780,479	374,080	—	—		7,316,405	8,470,964
CMBS	Ft. Worth Southwest	TownePlace Suites	8,532,580	835,181	447,378	—	37,091		7,212,930	8,532,580
	Total CMBS Properties		302,729,251	28,667,879	17,354,370	80,873	6,151,917		250,474,213	302,729,251

		Depreciation 7/10/03 through 9/30/03					Net Book Value as of 9/30/03
	Property Name	Land	FF&E (Including Autos)		Buildings (Including Renovations)		Land	FF&E (Including Autos)	Buildings (Including Renovations)	Total
CMBS	Flint	—	(5,208	)	(49,149	)	963,479	155,108	8,596,305	9,714,892
CMBS	San Diego Del Mar	—	(52,894	)	(112,338	)	1,896,074	1,575,353	19,648,294	23,119,721
CMBS	Phoenix Chandler	—	(6,942	)	(38,781	)	737,860	206,765	6,782,875	7,727,499
CMBS	Sedona	—	(4,941	)	(25,056	)	1,469,150	147,152	4,382,395	5,998,698
CMBS	Denver SW Lakewood	—	(15,316	)	(57,167	)	745,794	456,149	9,998,786	11,200,728
CMBS	Ft. Lauderdale/Cypress	—	(23,567	)	(47,689	)	931,111	701,899	8,340,955	9,973,965
CMBS	Minneapolis Minnetonka	—	(8,911	)	(49,113	)	959,038	265,392	8,590,068	9,814,498
CMBS	Hattiesburg	—	(18,183	)	(58,169	)	467,529	541,532	10,173,913	11,182,975
CMBS	Lincoln Airport I-80	—	(6,634	)	(43,169	)	609,820	197,588	7,550,401	8,357,808
CMBS	Oklahoma City Airport	—	(24,376	)	(49,080	)	847,150	725,988	8,584,344	10,157,482
CMBS	Tulsa	—	(12,028	)	(57,086	)	589,738	358,225	9,984,502	10,932,465
CMBS	Laredo	—	(11,523	)	(47,829	)	532,909	343,204	8,365,455	9,241,568
CMBS	Crystal Lake	—	(56,118	)	(86,438	)	2,852,273	1,671,359	15,118,342	19,641,974
CMBS	Louisville Southwest	—	(38,479	)	(60,691	)	881,392	1,146,010	10,615,021	12,642,424
CMBS	Phoenix Chandler	—	(17,414	)	(38,452	)	905,563	518,634	6,725,343	8,149,540
CMBS	Sacramento/Cal Expo	—	(52,552	)	(84,955	)	1,919,923	1,565,150	14,858,978	18,344,051
CMBS	Wilmington/Newark	—	(13,184	)	(67,580	)	—	392,662	11,819,972	12,212,634
CMBS	Orlando International Drive	—	(52,558	)	(73,425	)	1,434,506	1,565,339	12,842,385	15,842,230
CMBS	Ann Arbor	—	(28,222	)	(52,213	)	921,516	840,554	9,132,171	10,894,240
CMBS	Fishkill	—	(15,516	)	(71,881	)	2,093,959	462,130	12,572,226	15,128,314
CMBS	Warwick	—	(18,029	)	(44,611	)	1,745,317	536,960	7,802,708	10,084,986
CMBS	Ft. Worth River Plaza	—	(23,397	)	(59,276	)	1,928,207	696,824	10,367,530	12,992,561
CMBS	Tyler	—	(21,369	)	(60,403	)	788,783	636,437	10,564,631	11,989,851
CMBS	Miami Airport West	—	(12,345	)	(41,543	)	831,129	367,665	7,266,013	8,464,807
CMBS	Miami Lakes	—	(12,152	)	(41,593	)	780,479	361,928	7,274,811	8,417,218
CMBS	Ft. Worth Southwest	—	(14,533	)	(41,216	)	835,181	432,845	7,208,805	8,476,831
	Total CMBS Properties	—	(566,389	)	(1,458,902	)	28,667,879	16,868,854	255,167,228	300,703,960

SCHEDULE IV

CLOSING PIP REPORTS

CNL PIP SCHEDULE

Flag	Location	State	2004		2005		2006		Total
Marriott
Residence Inn	Ann Arbor	MI	$	828,428	$	—	$	—	$	828,428
Courtyard	Flint	MI	$	771,743	$	—	$	—	$	771,743
Residence Inn	Orlando International Drive	FL	$	1,901,268	$	—	$	—	$	1,901,268
Residence Inn	Sacramento Cal Expo	CA	$	8,435	$	—	$	—	$	8,435
Residence Inn	Fishkill	NY	$	311,510	$	—	$	—	$	311,510
Residence Inn	Tyler	TX	$	—	$	2,102,308	$	—	$	2,102,308
Residence Inn	Forth Worth River Plaza	TX	$	—	$	1,912,123	$	—	$	1,912,123
Residence Inn	Warwick	RI	$	—	$	851,595	$	—	$	851,595
TownePlace Suites	Forth Worth	TX	$	—	$	—	$	409,327	$	409,327
Residence Inn	Wilmington Newark	DE	$	—	$	—	$	1,777,826	$	1,777,826
TownePlace Suites	Miami Airport West	FL	$	—	$	—	$	404,238	$	404,238
TownePlace Suites	Miami Lakes	FL	$	—	$	—	$	404,238	$	404,238
Internet Access			$	513,000	$	—	$	—	$	513,000
			$	4,334,384	$	4,866,026	$	2,995,628	$	12,196,038
Interstate
Holiday Inn	Crystal Lakes	IL	$	500,000	$	—	$	—	$	500,000
Holiday Inn	Louisville Southwest	KY	$	—	$	778,484	$	—	$	778,484
			$	500,000	$	778,484	$	—	$	1,278,484
Hilton
Homewood Suites	Phoenix Chandler	AZ	$	441,246	$	—	$	—	$	441,246
Hampton Inn	Sedona	AZ	$	281,718	$	—	$	—	$	281,718
Hampton Inn	Laredo	TX	$	351,996	$	—	$	—	$	351,996
Hampton Inn	Lakewood	CO	$	200,613	$	—	$	—	$	200,613
Hampton Inn	Minneapolis Minnetonka	MN	$	805,028	$	—	$	—	$	805,028
Hampton Inn	Phoenix Chandler	AZ	$	—	$	464,900	$	—	$	464,900
Hampton Inn	Ft. Lauderdale Cypress Creek	FL	$	—	$	999,598	$	—	$	999,598
Hampton Inn	Lincoln Airport I-80	NE	$	—	$	—	$	690,251	$	690,251
Hampton Inn	Oklahoma City Airport I-40	OK	$	—	$	—	$	871,054	$	871,054
Hampton Inn	Hattiesburg	MS	$	—	$	—	$	766,834	$	766,834
Hampton Inn	Tulsa	OK	$	—	$	—	$	690,897	$	690,897
Internet Access			$	336,000	$	—	$	—	$	336,000
			$	2,416,602	$	1,464,498	$	3,019,036	$	6,900,135
Hilton
Doubletree	San Diego Del Mar	CA	$	—	$	—	$	528,012	$	528,012
Total			$	7,250,985	$	7,109,008	$	6,542,676	$	20,902,670

EX-10.21

Exhibit 10.21

MEZZANINE LOAN AGREEMENT

Dated as of December 23, 2003

Between

ROSE MEZZANINE SPE, LP,
as Borrower

and

FLEET NATIONAL BANK,
as Lender

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1.	DEFINITIONS
SECTION 1.2.	PRINCIPLES OF CONSTRUCTION
ARTICLE 2 GENERAL TERMS
SECTION 2.1.	LOAN COMMITMENT; DISBURSEMENT TO BORROWER
SECTION 2.2.	INTEREST RATE
SECTION 2.3.	LOAN PAYMENTS
SECTION 2.4.	PREPAYMENTS.
ARTICLE 3 CONDITIONS PRECEDENT
SECTION 3.1.	REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH CONDITIONS
SECTION 3.2.	DELIVERY OF LOAN DOCUMENTS; REPORTS; LEASES
SECTION 3.3.	RELATED DOCUMENTS
SECTION 3.4.	ORGANIZATIONAL DOCUMENTS
SECTION 3.5.	OPINIONS OF BORROWER’S COUNSEL
SECTION 3.6.	ANNUAL BUDGET
SECTION 3.7.	TAXES AND OTHER CHARGES
SECTION 3.8.	COMPLETION OF PROCEEDINGS
SECTION 3.9.	PAYMENTS
SECTION 3.10.	TRANSACTION COSTS
SECTION 3.11.	NO MATERIAL ADVERSE CHANGE
SECTION 3.12.	OPERATING LEASES
SECTION 3.13.	LEASES; RENT ROLLS
SECTION 3.14.	TENANT ESTOPPELS
SECTION 3.15.	REA ESTOPPELS
SECTION 3.16.	SUBORDINATION AND ATTORNMENT
SECTION 3.17.	TAX LOT
SECTION 3.18.	PHYSICAL CONDITIONS REPORT; PIP REPORT
SECTION 3.19.	MANAGEMENT AGREEMENT
SECTION 3.20.	APPRAISAL
SECTION 3.21.	FINANCIAL STATEMENTS
SECTION 3.22.	NET OPERATING INCOME
SECTION 3.23.	FRANCHISE AGREEMENTS
SECTION 3.24.	GROUND LEASE
SECTION 3.25.	FURTHER DOCUMENTS
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
SECTION 4.1.	ORGANIZATION
SECTION 4.2.	STATUS OF BORROWER; AFFILIATED LESSEE
SECTION 4.3.	VALIDITY OF DOCUMENTS
SECTION 4.4.	NO CONFLICTS
SECTION 4.5.	LITIGATION
SECTION 4.6.	AGREEMENTS
SECTION 4.7.	SOLVENCY
SECTION 4.8.	FULL AND ACCURATE DISCLOSURE
SECTION 4.9.	NO PLAN ASSETS
SECTION 4.10.	NOT A FOREIGN PERSON
SECTION 4.11.	ENFORCEABILITY
SECTION 4.12.	BUSINESS PURPOSES

i

SECTION 4.13.	COMPLIANCE
SECTION 4.14.	FINANCIAL INFORMATION
SECTION 4.15.	ILLEGAL ACTIVITY
SECTION 4.16.	PERMITTED ENCUMBRANCES
SECTION 4.17.	FEDERAL RESERVE REGULATIONS
SECTION 4.18.	INVESTMENT COMPANY ACT
SECTION 4.19.	NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE
SECTION 4.20.	SPECIAL PURPOSE ENTITY
SECTION 4.21.	INTELLECTUAL PROPERTY
SECTION 4.22.	EMBARGOED PERSON
SECTION 4.23.	PATRIOT ACT
SECTION 4.24.	MORTGAGE LOAN REPRESENTATIONS
SECTION 4.25.	NO CONTRACTUAL OBLIGATIONS
SECTION 4.26.	PLEDGED SECURITIES
SECTION 4.27.	TAXES
SECTION 4.28.	SURVIVAL; MISCELLANEOUS
ARTICLE 5 BORROWER COVENANTS
SECTION 5.1.	EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS
SECTION 5.2.	MAINTENANCE AND USE OF PROPERTY
SECTION 5.3.	WASTE
SECTION 5.4.	TAXES AND OTHER CHARGES
SECTION 5.5.	LITIGATION
SECTION 5.6.	ACCESS TO PROPERTY
SECTION 5.7.	NOTICE OF DEFAULT
SECTION 5.8.	COOPERATE IN LEGAL PROCEEDINGS
SECTION 5.9.	PERFORMANCE BY BORROWER
SECTION 5.10.	AWARDS; INSURANCE PROCEEDS
SECTION 5.11.	FINANCIAL REPORTING
SECTION 5.12.	ESTOPPEL STATEMENT
SECTION 5.13.	OPERATING LEASE; LEASING MATTERS
SECTION 5.14.	PROPERTY MANAGEMENT
SECTION 5.15.	LIENS
SECTION 5.16.	DEBT CANCELLATION
SECTION 5.17.	ZONING
SECTION 5.18.	ERISA
SECTION 5.19.	NO JOINT ASSESSMENT
SECTION 5.20.	RECIPROCAL EASEMENT AGREEMENTS
SECTION 5.21.	ALTERATIONS
SECTION 5.22.	FRANCHISE AGREEMENTS.
SECTION 5.23.	GROUND LEASE
SECTION 5.24.	INTEREST RATE CAP AGREEMENT
SECTION 5.25.	NOTICES
SECTION 5.26.	CURING
SECTION 5.27.	SPECIAL DISTRIBUTIONS
SECTION 5.28.	LIMITATION ON SECURITIES ISSUANCES
SECTION 5.29.	LIMITATIONS ON DISTRIBUTIONS
SECTION 5.30.	OTHER LIMITATIONS
SECTION 5.31.	CONTRACTUAL OBLIGATIONS
SECTION 5.32.	MANAGER OF FLINT PROPERTY
SECTION 5.33.	CONSOLIDATED TANGIBLE NET WORTH
SECTION 5.34.	REFINANCING
ARTICLE 6 ENTITY COVENANTS

ii

SECTION 6.1.	SINGLE PURPOSE ENTITY/SEPARATENESS
SECTION 6.2.	CHANGE OF NAME, IDENTITY OR STRUCTURE
SECTION 6.3.	BUSINESS AND OPERATIONS
SECTION 6.4.	INDEPENDENT DIRECTOR
ARTICLE 7 NO SALE OR ENCUMBRANCE
SECTION 7.1.	TRANSFER DEFINITIONS
SECTION 7.2.	NO SALE/ENCUMBRANCE
SECTION 7.3.	PERMITTED TRANSFERS
SECTION 7.4.	LENDER’S RIGHTS
SECTION 7.5.	ASSUMPTION
ARTICLE 8 INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
SECTION 8.1.	INSURANCE
SECTION 8.2.	CASUALTY
SECTION 8.3.	CONDEMNATION
SECTION 8.4.	RESTORATION
ARTICLE 9 RESERVE FUNDS
ARTICLE 10 CASH MANAGEMENT
ARTICLE 11 EVENTS OF DEFAULT; REMEDIES
SECTION 11.1.	EVENT OF DEFAULT
SECTION 11.2.	REMEDIES
ARTICLE 12 ENVIRONMENTAL PROVISIONS
SECTION 12.1.	ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES
SECTION 12.2.	ENVIRONMENTAL COVENANTS
SECTION 12.3.	LENDER’S RIGHTS
SECTION 12.4.	OPERATIONS AND MAINTENANCE PROGRAMS
SECTION 12.5.	ENVIRONMENTAL DEFINITIONS
SECTION 12.6.	INDEMNIFICATION
ARTICLE 13 SECONDARY MARKET
SECTION 13.1.	TRANSFER OF LOAN
SECTION 13.2.	DELEGATION OF SERVICING
SECTION 13.3.	DISSEMINATION OF INFORMATION
SECTION 13.4.	COOPERATION
SECTION 13.5.	SECURITIZATION INDEMNIFICATION
SECTION 13.6.	INTENTIONALLY OMITTED.
ARTICLE 14 INDEMNIFICATIONS
SECTION 14.1.	GENERAL INDEMNIFICATION
SECTION 14.2.	INTANGIBLE TAX INDEMNIFICATION
SECTION 14.3.	ERISA INDEMNIFICATION
SECTION 14.4.	SURVIVAL
ARTICLE 15 EXCULPATION
SECTION 15.1.	EXCULPATION
ARTICLE 16 NOTICES
SECTION 16.1.	NOTICES

iii

ARTICLE 17 FURTHER ASSURANCES
SECTION 17.1.	REPLACEMENT DOCUMENTS
SECTION 17.2.	INTENTIONALLY OMITTED
SECTION 17.3.	FURTHER ACTS, ETC.
SECTION 17.4.	CHANGES IN TAX, DEBT, CREDIT AND DOCUMENTARY STAMP LAWS
SECTION 17.5.	EXPENSES
ARTICLE 18 WAIVERS
SECTION 18.1.	REMEDIES CUMULATIVE; WAIVERS
SECTION 18.2.	MODIFICATION, WAIVER IN WRITING
SECTION 18.3.	DELAY NOT A WAIVER
SECTION 18.4.	TRIAL BY JURY
SECTION 18.5.	WAIVER OF NOTICE
SECTION 18.6.	REMEDIES OF BORROWER
SECTION 18.7.	WAIVER OF MARSHALLING OF ASSETS
SECTION 18.8.	WAIVER OF STATUTE OF LIMITATIONS
SECTION 18.9.	WAIVER OF COUNTERCLAIM
ARTICLE 19 GOVERNING LAW
SECTION 19.1.	CHOICE OF LAW
SECTION 19.2.	SEVERABILITY
SECTION 19.3.	PREFERENCES
ARTICLE 20 MISCELLANEOUS
SECTION 20.1.	SURVIVAL
SECTION 20.2.	LENDER’S DISCRETION
SECTION 20.3.	HEADINGS
SECTION 20.4.	COST OF ENFORCEMENT
SECTION 20.5.	SCHEDULES INCORPORATED
SECTION 20.6.	OFFSETS, COUNTERCLAIMS AND DEFENSES
SECTION 20.7.	NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY BENEFICIARIES
SECTION 20.8.	PUBLICITY
SECTION 20.9.	CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE
SECTION 20.10.	ENTIRE AGREEMENT
SECTION 20.11.	TAX DISCLOSURE

iv

MEZZANINE LOAN AGREEMENT

THIS MEZZANINE LOAN AGREEMENT, dated as of December 23, 2003 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”), between FLEET NATIONAL BANK, a national banking association, having an address at 100 Federal Street, MA DE 10009A, Boston, Massachusetts 02110 (together with its successors and/or assigns, “Lender”) and ROSE MEZZANINE SPE, LP, a Delaware limited partnership having an address at 450 South Orange Avenue, Orlando, Florida 32801-3336 (together with its successors and/or assigns, “Borrower”).

RECITALS:

WHEREAS, Bank of America, N.A., a national banking association, as mortgage lender (together with its successors and assigns, “Mortgage Lender”) is making a loan in the principal amount of $130,000,000.00 (the “Mortgage Loan”) (a) evidenced by (i) an Amended and Restated Promissory Note of even date herewith (together with any and all extensions, renewals, substitutions, replacements, amendments, modifications and/or restatements thereof, the “Mortgage Note”) made by Rose SPE 1, LP, a Delaware limited partnership (“Mortgage Borrower”) and (ii) an Amended and Restated Loan Agreement of even date herewith (as the same may be amended, modified and in effect from time to time, the “Mortgage Loan Agreement”), and (b) secured by, among other things, certain fee and/or leasehold deeds of trust, mortgages, and deeds to secure debt  (individually and collectively, as the case may be, together with any and all extensions, renewals, substitutions, replacements, amendment, modifications and/or restatements thereof, the “Mortgage”), which Mortgages grant Mortgage Lender a first priority lien on, among other things, the properties more fully described in each Mortgage (each a “Property” and collectively, the “Properties”).

WHEREAS, Borrower is the legal and beneficial owner of:  (i) 99.0% of the limited partnership interests in Mortgage Borrower and (ii) 100% of the membership interests of Rose SPE 1 GP, LLC, a Delaware limited liability company (“Mortgage Borrower GP”), the general partner of Mortgage Borrower and the legal and beneficial holder of the 1.0% general partnership interest in Mortgage Borrower (said 99.0% limited partnership interest in Mortgage Borrower and 100% membership interest in Mortgage Borrower GP, collectively, the “Pledged Securities”).

WHEREAS Borrower is the legal and beneficial owner of all of the Pledged Securities.

WHEREAS, Borrower has requested Lender to make a loan to it in the aggregate principal amount of $35,000,000.00 (as the same may be reduced in accordance with this Agreement, the “Loan”).

WHEREAS, as a condition precedent to the obligation of Lender to make the Loan to Borrower, Borrower has entered into that certain Pledge and Security Agreement, dated of even date herewith, in favor of Lender (as amended, restated, replaced, supplemented or

otherwise modified from time to time, “Pledge Agreement”), pursuant to which Borrower has granted to Lender a first priority security interest in its respective Collateral (as defined in the Pledge Agreement) as collateral security for the Debt (as defined below).

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

ARTICLE 1
DEFINITIONS; PRINCIPLES OF CONSTRUCTION

Section 1.1.DEFINITIONS

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

“Acceptable Accountant” shall mean a “Big Four” accounting firm or other independent certified public accountant acceptable to Lender.

“Acceptable Counterparty” shall mean any counterparty to the Rate Cap that has and shall maintain, until the expiration of the applicable Rate Cap, a credit rating of not less than AA- from S&P and not less than Aa3 from Moody’s.

“Acquired Property” shall have the meaning set forth in Section 5.11(c)(i)(A) hereof.

“Acquired Property Statements” shall have the meaning set forth in Section 5.11(c)(i)(A) hereof.

“Act” shall have the meaning set forth in Section 6.1.

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person or of an Affiliate of such Person.

“Affiliated Lessee” shall mean, individually or collectively, as the context may require, any operating lessee under an Operating Lease, which is an Affiliate of Borrower and which qualifies as a special purpose entity as defined from time to time by the Rating Agencies, provided that such operating lessee shall be selected in accordance with the terms hereof.  As of the date hereof, the term Affiliated Lessee shall refer to CNL Rose SPE Tenant Corp., a Delaware corporation, the current operating lessee of each Property other than the “Miami Lakes Property” and the “Miami Airport West Property” (each as defined on Schedule A attached hereto), and an Affiliate of Borrower.

“Affiliated Loans” shall mean a loan made by Lender to a parent, subsidiary or other entity which is an Affiliate of Borrower or Borrower Principal.

“Affiliated Manager” shall have the meaning set forth in Section 7.1 hereof.

2

“Allocated Loan Amount” shall mean as of the Closing Date a certain portion of the original principal amount of the Note allocated, solely for the purposes of performing certain calculations hereunder, to each Property based on the initial Allocated Loan Percentages, as the same shall hereafter be reduced by (a) ratable application of payments of principal made under and in accordance with the terms of this Agreement and the Note, determined based on the Allocated Loan Percentage and/or (b) deemed reductions attributable to any partial prepayment made pursuant to the provisions of Section 2.4(c)(ii) hereof.  The Allocated Loan Amounts shall at all times equal the then outstanding principal balance of the Note.  The initial Allocated Loan Amounts are set forth on Schedule A hereto.

“Allocated Loan Percentage” shall mean that proportion, expressed as a percentage, which each Allocated Loan Amount, if any, bears to the outstanding principal balance of the Note.  The sum of the Allocated Loan Percentages shall at all times equal 100%.  The initial Allocated Loan Percentages are as set forth on Schedule A hereto.

“ALTA” shall mean American Land Title Association, or any successor thereto.

“Alteration Threshold” means with respect to any particular Property five percent (5%) of the then Allocated Loan Amount attributable to such Property.

“Annex” shall have the meaning set forth in Section 4.23 hereof.

“Annual Budget” shall mean, individually or collectively, as the context may require, the operating budgets, including all planned capital expenditures, for each Property approved by Lender in accordance with Section 5.11(a)(iv) hereof for the applicable calendar year or other period.

“Award” shall mean any compensation paid by any Governmental Authority in connection with a Condemnation in respect of all or any part of any Property.

“Borrower Partnership Agreement”  shall mean that certain Amended and Restated Partnership Agreement of Rose Mezzanine SPE, LP, dated as of December 4, 2003, by and between Rose Mezzanine SPE GP, LLC, a Delaware limited liability company, as general partner, and RFS Partnership, L.P. and RFS Financing Partnership, L.P., each a Tennessee limited partnership, as limited partners.

“Borrower Principal” shall mean RFS Partnership, L.P., a Tennessee limited partnership.

“Breakage Costs” shall have the meaning set forth in Section 2.3(f)(v) hereof.

“Bridge Loan” shall have the meaning set forth in the Mortgage Loan Agreement.

“Business Day” shall mean any day other than (i) a Saturday or a Sunday or (ii) a day on which federally insured depository institutions in the States of New York or North Carolina or the state in which the offices of the Lender’s servicer and the trustee in the Securitization are located are authorized or obligated by law, governmental decree or executive order to be closed, except that when used with respect to the determination of LIBOR, “Business Day” shall be a

3

day on which commercial banks are open for international business (including dealings in U.S. Dollar deposits) in London, England.

“Cash Management Account” shall mean an Eligible Account established pursuant to the Cash Management Agreement.

“Cash Management Agreement” shall mean that certain Cash Management Agreement by and among Mortgage Borrower, Agent and Mortgage Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Cash Management Account.

“Casualty” shall have the meaning set forth in Section 8.2.

“Closing Date” shall mean the date of the funding of the Loan.

“Collateral” shall have the meaning set forth in the Pledge Agreement.

“Collateral Assignment of Interest Rate Cap” shall mean that certain Collateral Assignment of Interest Rate Cap Agreement, dated as of the date hereof, executed by Borrower in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the result, in lieu or in anticipation, of the exercise of the right of condemnation or eminent domain, of all or any part of any Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting any Property or any part thereof.

“Condemnation Proceeds” shall have the meaning set forth in Section 8.4(b).

“Consequential Loss” shall have the meaning set forth in Section 2.3(f)(i) hereof.

“Consolidated Tangible Net Worth” means, for Borrower Principal and its Subsidiaries on a consolidated basis as of any date of determination, Partners’ Capital on that date minus Intangible Assets on that date.

“Contractual Obligation” shall mean as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound, or any provision of the foregoing.

“Control” shall have the meaning set forth in Section 7.1 hereof.

“Creditors Rights Laws” shall mean with respect to any Person any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to its debts or debtors.

4

“Debt” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note, without duplication, together with all interest accrued and unpaid thereon and all other sums due to Lender in respect of the Loan under the Note, this Agreement, the Pledge Agreement or any other Loan Document.

“Debt Service” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments under the Note.

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

“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the maximum rate permitted by applicable law, or (b) four percent (4%) above the Note Rate.

“Determination Date” shall mean (a) with respect to any Interest Period prior to the Interest Period within which the Securitization Closing Date occurs, two (2) Business Days prior to the start of the applicable Interest Period; (b) with respect to the Interest Period within which the Securitization Closing Date occurs, (i) for that portion of such Interest Period which ends on the day prior to the Securitization Closing Date, the date that is two (2) Business Days prior to the start of such Interest Period, and (ii) for the remaining portion of such Interest Period which commences on the Securitization Closing Date, the date that is two (2) Business Days prior to the Securitization Closing Date; and (iii) with respect to each Interest Period thereafter, the date that is two (2) Business Days prior to the beginning of such Interest Period.

“Disclosure Document” shall have the meaning set forth in Section 13.5 hereof.

“Eligible Account” shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority.  An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

“Eligible Institution” shall mean Bank of America, N.A. or a depository institution or trust company insured by the Federal Deposit Insurance Corporation, the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s).

“Embargoed Person” shall have the meaning set forth in Section 4.22 hereof.

5

“Environmental Law” shall have the meaning set forth in Section 12.5 hereof.

“Environmental Liens” shall have the meaning set forth in Section 12.5 hereof.

“Environmental Report” shall have the meaning set forth in Section 12.5 hereof.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statutes thereto and applicable regulations issued pursuant thereto in temporary or final form.

“Event of Default” shall have the meaning set forth in Section 11.1 hereof.

“Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended.

“Exchange Act Filing” shall have the meaning set forth in Section 5.11(c) hereof.

“Extended Maturity Date” shall have the meaning set forth in Section 2.3(b).

“Extension Fee” shall mean 0.250% of the original principal amount of the Note.

“Extension Option” shall have the meaning set forth in Section 2.3(b).

“FF&E” shall mean all furniture, fixtures, outfittings, apparatus, equipment and all other items of personal property of the type customarily installed in, held in storage for use in, used in or required for use in connection with any Property as a hotel.

“First Payment Date” shall mean the Payment Date occurring in January, 2004.

“Fitch” shall mean Fitch, Inc.

“Flagstone” shall have the meaning set forth in Schedule B hereof.

“Flint Property” shall have the meaning set forth in Schedule B hereof.

“Foreign Taxes” shall have the meaning set forth in Section 2.3(f)(ii).

“Franchise Agreement” shall mean, individually or collectively, as the context may require, each franchise or similar agreement entered into by and between the applicable Operating Lessee and Franchisor pursuant to which the Operating Lessee is permitted to operate the applicable Property under the “flag” or other trade name that is the subject thereof, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof and of the Mortgage Loan Agreement; provided that, as long as the Non-Affiliated Lessee leases the Miami Lakes Property or the Miami Airport West Property, as to such Property, the term “Franchise Agreement” shall exclude any franchise or similar agreement entered into by such Operating Lessee.

“Franchisor” shall mean, individually or collectively, as the context may require, each franchisor under a Franchise Agreement.  As of the date hereof, each Franchisor of each such

6

Property is set forth on Schedule B attached hereto, selected in accordance with the terms of this Agreement and the Mortgage Loan Agreement.

“GAAP” shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report.

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

“Ground Lease” means, individually or collectively, as the context may require, that certain (a) Ground Lease dated November 30, 1987 between Commonwealth Trust Company, trustee for the Chopin Trust, as Lessor, and RFP Group, Inc., as Lessee, the terms of which were amended and evidenced of record by that certain Memorandum and Amendment to Ground Lease Agreement dated as of June 20, 1988 and recorded in Book 730, Page 289 of the Office of the Recorder of Deeds for new Castle County, Delaware, between Commonwealth Trust Company, trustee for the Chopin Trust and RFP Group, Inc., as assigned under Assignment of Lease from RFP Group, Inc. to RFS Partnership, L.P. dated October 14, 1994 and recorded in Deed Book 1824, Page 196 and further assigned by that certain assignment by RFS Partnership, L.P. to Mortgage Borrower, and as amended by that certain Ground Lease Estoppel and Agreement by Northtowne, Inc., as successor trustee for Chopin Trust, and Borrower and agreed and consented to by the National Life Insurance Company of Vermont all with respect to the “Wilmington Newark Property” (as defined on Schedule A) (such Ground Lease, the “Wilmington Ground Lease”) and (b) Lease between Shively Masonic Lodge No. 951, F. & A.M. by and through its Board of Trustees and its Building Committee, as Lessor, and West, Inc. d/b/a Holiday Inn Southwest, as Lessee which was recorded at Book 5039, Page 873 in the Office of the Clerk of the County Court of Jefferson County, Kentucky being the same leasehold estate which was acquired by LVSW Partners, LP, a Tennessee limited partnership, from West, Inc. by Assignment of Lease dated November 27, 1984 and recorded in Deed Book 5463, page 861 in the aforesaid clerk’s office, which was further assigned to RFS Partnership, L.P. by Assignment of Lease dated August 5, 1993 and recorded in Book 6345, Page 085 in the same clerk’s office and which was further assigned by RFS Partnership, L.P. to Mortgage Borrower, under Assignment and Assumption of Ground Lease dated as of and recorded promptly following the date hereof, all with respect to the “Louisville Southwest Property” (as defined on Schedule A) (such Ground Lease, the “Louisville Southwest Ground Lease”).

“Hazardous Materials” shall have the meaning set forth in Section 12.5 hereof.

“Improvements” shall have the meaning set forth in the granting clause of the Mortgage.

“Indemnified Parties” shall mean (a) Lender, (b) any prior owner or holder of the Loan or Participations in the Loan, (c) any servicer or prior servicer of the Loan, (d) any Investor or any prior Investor in any Securities, (e) any trustees, custodians or other fiduciaries who hold or who have held a full or partial interest in the Loan for the benefit of any Investor or other third party, (f) any receiver  or other fiduciary appointed in a foreclosure or other Creditors Rights Laws proceeding, (g) any officers, directors, shareholders, partners, members, employees,

7

agents, servants, representatives, contractors, subcontractors, Affiliates or subsidiaries of any and all of the foregoing, and (h) the heirs, legal representatives, successors and assigns of any and all of the foregoing (including, without limitation, any successors by merger, consolidation or acquisition of all or a substantial portion of the Indemnified Parties’ assets and business), in all cases whether during the term of the Loan or as part of or following a foreclosure of any or all of the Mortgages.

“Indemnity” means that certain Indemnity Agreement of even date herewith from Borrower Principal to Lender as amended, modified and in effect from time to time.

“Independent Director” shall have the meaning set forth in Section 6.4 hereof.

“Insurance Premiums” shall have the meaning set forth in Section 8.1(b) hereof.

“Insurance Proceeds” shall have the meaning set forth in Section 8.4(b) hereof.

“Intangible Assets” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount, and capitalized research and development costs.

“Intercreditor Agreement” shall mean the Intercreditor Agreement, dated of even date herewith, by and between Lender and Mortgage Lender.

“Interest Period” shall mean (a) with respect to the initial period for the accrual of interest due under this Agreement, the Interim Interest Period, and (b) with respect to the First Payment Date and each Payment Date thereafter, the period from and including the Selected Day immediately preceding the applicable Payment Date through but excluding the Selected Day next occurring after the applicable Payment Date.  Notwithstanding the foregoing clause (b), if the Lender so elects at any time, the “Interest Period” shall be the calendar month preceding each Payment Date.

“Interim Interest Period” shall mean the period from and including the Closing Date through but excluding the Selected Day first occurring after the Closing Date, provided, however, there shall be no “Interim Interest Period” in the event the Closing Date shall occur on a Selected Day.

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

“Investor” shall have the meaning set forth in Section 13.3 hereof.

“Issuer Group” shall have the meaning set forth in Section 13.5(b) hereof.

“Issuer Person” shall have the meaning set forth in Section 13.5(b) hereof.

8

“Lease” shall have the meaning set forth in the Mortgages (and shall include, but not be limited to, each Operating Lease).

“Legal Requirements” shall mean all statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting Borrower, Mortgage Borrower, Mortgage Borrower GP, Borrower Principal, any other SPE Component Entity, Affiliated Lessee, the Collateral, any Property or any part thereof, or the construction, use, alteration or operation thereof, whether now or hereafter enacted and in force, and all permits, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower or Mortgage Borrower, at any time in force affecting Borrower, Mortgage Borrower, Mortgage Borrower GP, any other SPE Component Entity, Borrower Principal, Affiliated Lessee, the Collateral, any Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to any Property or any part thereof, or (b) in any way materially limit the use and enjoyment thereof for hotel and related uses.

“Letter of Credit”  shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit acceptable to Lender and the Rating Agencies (either an evergreen letter of credit or one which does not expire until the applicable date in the event of a Letter of Credit delivered pursuant to the provisions of Section 5.21) in favor of Lender and entitling Lender to draw thereon in New York, New York issued by a domestic Eligible Institution or the U.S. agency or branch of a foreign Eligible Institution.  If at any time the bank issuing the Letter of Credit shall cease to be an Eligible Institution, Lender shall have the right to immediately draw down the Letter of Credit in full and apply the proceeds thereof in accordance with the terms hereof.

“LIBOR” shall mean, with respect to each Interest Period, a rate of interest per annum obtained by dividing

(a)the rate for deposits in U.S. Dollars, for a period equal to one month, which appears on the Telerate Page 3750 as of 11:00 a.m., London time, on the related Determination Date; provided, however, if Telerate is unavailable, the rate shall be as specified on Reuters Screen LIBOR Page or, more than one rate is specified on Reuters Screen LIBOR Page, the LIBOR Rate shall be the arithmetic mean of all rates.  Lender shall determine the LIBOR Rate for each Interest Period and Selected Day and the determination of the LIBOR Rate by Lender shall be binding upon Borrower absent manifest error, by

(b)a percentage equal to 100% minus the applicable Reserve Percentage then in effect.

LIBOR may or may not be the lowest rate based upon the market for U.S. Dollar deposits in the London Interbank Eurodollar Market at which the Lender prices loans on the date which LIBOR is determined by Lender as set forth above.

“LIBOR Loan” shall mean the Loan at such time as interest thereon accrues at the LIBOR Rate.

“LIBOR Margin” shall mean 4.65%.

9

“LIBOR Rate” shall mean the sum of (i) LIBOR plus (ii) the LIBOR Margin, provided that the LIBOR Rate shall at no time be less than 6.65%.

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

“Liquidation Event” shall have the meaning set forth in Section 2.4(g) hereof.

“LLC Agreement” shall have the meaning set forth in Section 6.1.

“Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement.

“Loan Documents” shall mean, collectively, this Agreement, the Note, the Pledge Agreement, the Indemnity, each Subordination of Management Agreement/Estoppel, the Collateral Assignment of Interest Rate Cap, each Subordination, Non-Disturbance and Attornment Agreement, each Subordination and Attornment Agreement, and any and all other documents, agreements and certificates executed and/or delivered in connection with the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Lockout Period” shall mean the period commencing on the date hereof through and including the Payment Date occurring in June, 2005.

“Lockout Yield Maintenance Premium” shall mean an amount equal to fourpercent (4%) of the then principal amount of the Loan.

“Losses” shall mean any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, judgments, awards, amounts paid in settlement of whatever kind or nature (including but not limited to legal fees and other costs of defense).

“Louisville Property” shall have the meaning set forth on Schedule B attached hereto.

“Major Lease” shall mean as to any Property (i) any Lease which, individually or when aggregated with all other leases at such Property with the same Tenant or its Affiliate, either (A) accounts for five percent (5%) or more of such Property’s aggregate Net Operating Income, or (B) demises 5,000 square feet or more of such Property’s gross leasable area, (ii) any Lease which contains any option, offer, right of first refusal or other similar entitlement to acquire all or any portion of any Property, or (iii) any instrument guaranteeing or providing credit support for any Lease meeting the requirements of (i) or (ii) above.  Without limiting any of the foregoing, each Operating Lease shall be considered a Major Lease for all purposes hereunder.

10

“Management Agreement” shall mean, individually or collectively, as the context may require, each management agreement entered into by and between the Operating Lessee and Manager, in form and substance reasonably acceptable to Lender and Mortgage Lender in accordance with the terms of this Agreement and the Mortgage Loan Agreement, pursuant to which each Manager is to provide management and other services with respect to the applicable Property, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof; provided that, as long as the Non-Affiliated Lessee leases the Miami Lakes Property or the Miami Airport West Property, as to each such Property, the term “Management Agreement” shall exclude any management agreement entered into by such Operating Lessee.

“Manager” shall mean, individually or collectively, as the context may require, each manager of a Property under the terms of a Management Agreement.  As of the date hereof, each Manager of each Property is set forth on Schedule B attached hereto, selected in accordance with the terms of this Agreement and the Mortgage Loan Agreement.

“Maturity Date” shall mean the Payment Date occurring in December, 2006, as such date may be extended pursuant to Section 2.3(b) hereof.

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

“Member” shall have the meaning set forth in Section 6.1(c) hereof.

“Miami Airport West Property” shall have the meaning set forth on Schedule B hereto.

“Miami Lakes Property” shall have the meaning set forth on Schedule B hereto.

“Monthly Payment Amount” shall mean the monthly payment of interest due on each Payment Date equal to the interest that has or will accrue at the Note Rate during the Interest Period in which the applicable Payment Date shall occur based on the outstanding principal balance of the Note (a) as the same shall exist on the Closing Date in the instance of the First Payment Date and (b) thereafter as the same shall exist on the Selected Day immediately preceding the applicable Payment Date.

“Moody’s” shall mean Moody’s Investor Services, Inc.

“Mortgage” shall have the meaning set forth in the Recitals hereof.

“Mortgage Borrower” shall have the meaning set forth in the Recitals hereof

“Mortgage Borrower GP” shall have the meaning set forth in the Recitals hereof.

11

“Mortgage Borrower Partnership Agreement” shall mean that certain Amended and Restated Limited Partnership Agreement of Rose SPE 1, LP dated as of December 4, 2003, by and between Borrower and Mortgage Borrower GP.

“Mortgage Lender” shall have the meaning set forth in the Recitals hereof.

“Mortgage Loan” shall have the meaning set forth in the Recitals hereof.

“Mortgage Loan Agreement” shall have the meaning set forth in the Recitals hereof.

“Mortgage Loan Documents” shall mean the “Loan Documents” as defined in the Mortgage Loan Agreement.

“Mortgage Loan Event of Default” shall mean an “Event of Default” under and as defined in the Mortgage Loan Agreement.

“Mortgage Note” shall have the meaning set forth in the Recitals hereto.

“Mortgage Reserve Accounts” shall mean the “Reserve Accounts” as defined in the Mortgage Loan Agreement.

“Net Liquidation Proceeds After Debt Service” with respect to any Liquidation Event, all amounts paid or payable to or received by or on behalf of Mortgage Borrower in connection with such Liquidation Event, less amounts required or permitted to be deducted therefrom pursuant to the Mortgage Loan Documents and amounts paid pursuant to the Mortgage Loan Documents to Mortgage Lender, including, without limitation, proceeds of any sale, refinancing or other disposition or liquidation, the amount of any award or payment incurred in connection with any condemnation or taking by eminent domain, and the amount of any insurance proceeds paid in connection with any casualty loss, as applicable, other than, in the case of a casualty loss or condemnation award, amounts required or permitted by the terms of the Mortgage Loan Documents to be applied to the restoration or repair of the Mortgaged Property, less (i) in the case of a foreclosure sale or transfer of the Property in connection with realization thereon following an Event of Default under the Mortgage Loan or other disposition, such reasonable and customary costs and expenses of sale or other disposition (including reasonable attorneys’ fees and brokerage commissions), (ii) in the case of a foreclosure sale, such costs and expenses incurred by Mortgage Lender under the Mortgage Loan Documents as Mortgage Lender shall be entitled to receive reimbursement for under the terms of the Mortgage Loan Documents, (iii) in the case of a casualty loss or condemnation, such costs and expenses of collection (including reasonable attorneys’ fees) of the related insurance proceeds or condemnation award as shall be approved by Mortgage Lender pursuant to the terms of the Mortgage Loan Documents, or if the Mortgage Loan has been paid in full, by Lender, and (iv) in the case of a refinancing of the Mortgage Loan or the Property, such costs and expenses (including reasonable attorneys’ fees) of such refinancing as shall be reasonably approved by Lender.

“Net Operating Income” shall mean, with respect to any period of time, the amount obtained by subtracting Operating Expenses from Operating Income, as such amount may be adjusted by Lender in its good faith discretion based on Lender’s current underwriting standards

12

and any underwriting standards then in use by any of the Rating Agencies, including without limitation, adjustments for vacancy allowance.

“Net Proceeds” shall have the meaning set forth in Section 8.4(b) hereof.

“Net Proceeds Deficiency” shall have the meaning set forth in Section 8.4(b)(vi) hereof.

“Non-Affiliated Lessee” shall mean, individually or collectively, as the context may require, each operating lessee under an Operating Lease, which is not an Affiliate of Borrower, provided that such operating lessee shall be selected in accordance with the terms hereof.  As of the date hereof, the term Non-Affiliated Lessee shall refer to Landcom Hospitality Management, Inc., in its capacity as the lessee of (a) the Miami Lakes Property and (b) the Miami Airport West Property.

“Note” shall mean that certain Mezzanine Promissory Note of even date herewith in the principal amount of $35,000,000, made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Note Rate” shall mean (a) with respect to the Interim Interest Period, an interest rate per annum equal to 6.65%; and (b) with respect to each Interest Period thereafter, through and including the Interest Period in which the Maturity Date or Extended Maturity Date, as applicable, shall occur, an interest rate per annum equal to (i) the LIBOR Rate (in all cases where clause (ii) below does not apply), or (ii) the Static LIBOR Rate, to the extent provided in accordance with the provisions of Section 2.2(b).

“OFAC” shall have the meaning set forth in Section 4.23 hereof.

“Offering Document Date” shall have the meaning set forth in Section 5.11(c)(i)(D) hereof.

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed by an authorized officer of the general partner of Borrower.

“Operating Expenses” shall mean, with respect to any period of time, the total of all expenses actually paid or payable, computed in accordance with GAAP, of whatever kind relating to the operation, maintenance and management of each Property, including without limitation, utilities, ordinary repairs and maintenance, Insurance Premiums, Ground Rent (as defined in the Mortgage Loan Agreement), license and franchise fees, Taxes and Other Charges, advertising expenses, payroll and related taxes, computer processing charges, management fees equal to the greater of four percent (4%) of the Operating Income of each Property and the management fees actually paid under each Management Agreement, operational equipment or other lease payments as approved by Lender, FF&E expenditures equal to the greater of five percent (5%) per annum and the actual FF&E expenditures per annum with respect to each Property, without duplication of any other item identified above, all payments required to be made pursuant to any Franchise Agreement and/or Management Agreement, but specifically excluding depreciation and amortization, income taxes, Debt Service, any incentive fees due under the Management Agreement, any item of expense that in accordance with GAAP should be capitalized but only to the extent the same would qualify for funding from the Mortgage

13

Reserve Accounts, any item of expense that would otherwise be covered by the provisions hereof but which is paid by any Tenant (other than any Affiliated Lessee) under such Tenant’s Lease or other agreement, and deposits into the Mortgage Reserve Accounts.

“Operating Income” shall mean, with respect to any period of time, all income, computed in accordance with GAAP, derived from the ownership and operation of  each Property from whatever source, including, but not limited to, Rents, utility charges, escalations, forfeited security deposits, interest on credit accounts, service fees or charges, license fees, parking fees, rent concessions or credits, and other required pass-throughs but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, refunds and uncollectible accounts, sales of furniture, fixtures and equipment, interest income from any source other than the escrow accounts, Mortgage Reserve Accounts or other accounts required pursuant to the Loan Documents, Insurance Proceeds (other than business interruption or other loss of income insurance), Awards, percentage rents, unforfeited security deposits, utility and other similar deposits, income from tenants not paying rent, income from tenants in bankruptcy, non-recurring or extraordinary income, including, without limitation lease termination payments, and any disbursements to Mortgage Borrower from the Mortgage Reserve Accounts.

“Operating Lease” shall mean, individually or collectively, as the context may require, the operating lease or similar agreement entered into by and between Mortgage Borrower and the applicable Operating Lessee, which governs the operation of one of more of the Properties as the same may be amended, restated, replaced, supplemented or modified from time to time, in accordance with the terms hereof and of the Mortgage Loan Agreement.

“Operating Lessee” shall mean, individually or collectively, as the context may require, Affiliated Lessee and Non-Affiliated Lessee, together with any substitutes or replacements determined by Lender and Mortgage Lender in accordance with the terms hereof and of the Mortgage Loan Agreement, respectively.

“Organizational Documents” shall mean, as to any Person, the certificate of incorporation and by-laws with respect to a corporation; the certificate of organization and operating agreement with respect to a limited liability company; the certificate of limited partnership and partnership agreement with respect to a limited partnership, or any other organizational or governing documents of such Person.

“Other Charges” shall mean all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining any Property, now or hereafter levied or assessed or imposed against any Property or any part thereof.

“Participations” shall have the meaning set forth in Section 13.1 hereof.

“Partners’ Capital” means, as of any date of determination, with respect to any Person, consolidated partner’s capital of such Person as of that date determined in accordance with GAAP.

“Patriot Act” shall have the meaning set forth in Section 4.23 hereof.

14

“Payment Date” shall mean the day that is seven (7) Business Days prior to the Selected Day.

“Permitted Encumbrances” shall mean collectively, (a) the Lien and security interests created by the Mortgage Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent, (d) such other title and survey exceptions as Mortgage Lender has approved or may approve in writing in Mortgage Lender’s reasonable discretion, and (e) such other easements reasonably created by Mortgage Borrower in the ordinary course of business which do not have (and are not anticipated to have) a material adverse affect on the value, use, operation or enjoyment of the applicable Property as a hotel of a similar type as the hotel situated on such Property as of the Closing Date or on the ability of Borrower to perform its obligations (including its payment obligations under this Agreement, the Note and the other Loan Documents).

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

“Personal Property” shall have the meaning set forth in the granting clause of the Mortgages.

“Physical Conditions Report” shall mean a report regarding the physical condition of each Property, satisfactory in form and substance to Mortgage Lender in accordance with the terms of the Mortgage Loan Agreement.

“PIP Report” shall mean any property improvement plan or other similar report issued by any Franchisor or Manager (with respect to any Property which is not subject to a Franchise Agreement), with respect to any repairs, replacements, improvements or additions as may be required under the applicable Franchise Agreement or Management Agreement.

“Pledge Agreement” shall have the meaning set forth in the Recitals hereto.

“Policies” shall have the meaning specified in Section 8.1(b) hereof.

“Policy” shall have the meaning specified in Section 8.1(b) hereof.

“Prohibited Transfer” shall have the meaning set forth in Section 7.2 hereof.

“Property” and “Properties” shall have the meanings set forth in the Recitals hereto, provided that any real property released from the lien of any Mortgage upon compliance with the partial prepayment provisions of Section 2.4(c)(ii) of this Agreement and the Mortgage Loan Agreement shall no longer be included in the definition of Property or Properties.

“Provided Information” shall have the meaning set forth in Section 13.4(a) hereof.

15

“Qualified Lessee” shall mean (a) CNL Rose SPE Tenant Corp.; (b) an entity which is an Affiliate of Mortgage Borrower, including, any then existing Affiliated Lessee, provided that (i) no Default or Event of Default shall exist hereunder, (ii) in the instance of an entity which is then an Affiliated Lessee, such entity is not then in default beyond any applicable notice or cure period under any Operating Lease, Franchise Agreement or Management Agreement to which it is a party, (iii) such entity shall be a “special purpose entity” containing (A) the same special purpose entity covenants as set forth in CNL Rose SPE Tenant Corp.’s organizational documents as the same shall exist as of the Closing Date, and (B) such other special purpose entity covenants or provisions as may then be required by the Rating Agencies, (iv) Mortgage Lender shall have first received a substantive non-consolidation opinion with respect to the appointment of such entity as successor lessee under any Operating Lease and (v) a Qualified Manager shall be managing each related Property pursuant to a Management Agreement in form acceptable to Lender and Mortgage Lender or (c) a hotel operating company which at the time of its engagement as Operating Lessee (i) shall be (or when considered together with any Affiliate thereof, shall be) operating and controlling full-service hotels having an aggregate of at least 2,500 rooms and 20 hotel properties similar to the Properties, exclusive of rooms located on any Property and the Properties, (ii) shall be approved by (A) Lender (such approval not to be unreasonably withheld) and (B) Mortgage Lender in accordance with the terms of the Mortgage Loan Agreement and (iii) for which Mortgage Lender shall have received written confirmation from the Rating Agencies that the appointment of such operating lessee shall not result in a downgrade, withdrawal or qualification of the initial, or if higher, then current ratings issued in connection with a Securitization, or if a Securitization has not occurred, any ratings to be assigned in connection with a Securitization.

“Qualified Manager” shall mean a reputable and experienced professional management organization (a) which manages, together with its Affiliates, full-service hotels, having in aggregate at least 2,500 rooms and 20 hotel properties similar to the Properties, exclusive of rooms located on any Property and the Properties, (b) approved by (i) Lender (which approval by Lender shall not be unreasonably withheld)  and (ii) Mortgage Lender in accordance with the terms of the Mortgage Loan Agreement and (c) for which Mortgage Lender shall have received (i) written confirmation from the Rating Agencies that the employment of such manager will not result in a downgrade, withdrawal or qualification of the initial, or if higher, then current ratings issued in connection with a Securitization, or if a Securitization has not occurred, any ratings to be assigned in connection with a Securitization, and (ii) with respect to any Affiliated Manager, a substantive non-consolidation opinion.

“Rate Cap” shall mean an interest rate cap with a termination date no earlier than the end of the Interest Period in which the initial Maturity Date occurs, entered into with Bank of America, N.A. or an Acceptable Counterparty with a notional amount equal to the Loan for the term of the Loan and a LIBOR strike price not greater than seven percent (7.0%); provided, however, if the provider of any Rate Cap (including, but not limited to, Bank of America, N.A.) ceases to be an Acceptable Counterparty, Borrower shall obtain a replacement Rate Cap from an Acceptable Counterparty within ten (10) Business Days of receipt of notice from Lender or Borrower’s obtaining knowledge that the then current counterparty under such Rate Cap is no longer an Acceptable Counterparty; until such time as a replacement provider is obtained in accordance with the above provisions, the current provider will continue to perform its obligations under the Rate Cap; and provided, further, any replacement Rate Cap shall be

16

accompanied by legal opinions regarding the Rate Cap, in form and substance acceptable to Lender, including, without limitation opinions with respect to (i) enforceability, (ii) payment priority, (iii) choice of law and (iv) enforcement of judgments.  Furthermore, each Rate Cap shall provide for (i) the calculation of interest, (ii) the determination of the interest rate, (iii) the modification of the Interest Period and (iv) the distribution of payments thereunder to be identical to the definition of Interest Period set forth herein.

“Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other nationally-recognized statistical rating agency which has been approved by Lender, provided that from and after the Securitization Date, such term shall only refer to the nationally-recognized statistical rating agency(ies) rating the securities offered in connection with the Securitization.

“REA” shall mean, collectively or individually, as the context may require, any “construction, operation and reciprocal easement agreement” or similar agreement (including any “separate agreement” or other agreement between Mortgage Borrower and one or more other parties to an REA with respect to such REA) affecting any Property or portion thereof.

“Release” shall have the meaning set forth in Section 12.5 hereof.

“Release Price” shall mean 120% times the then Allocated Loan Amount of the Property(ies) being released.

“Rent Roll” shall have the meaning set forth in the Mortgage Loan Agreement.

“Rents” shall have the meaning set forth in the Mortgage.

“Replacement Rate Cap” shall mean an interest rate cap from an Acceptable Counterparty with terms identical to the Rate Cap.

“Reserve Percentage” shall mean, with respect to any day of any Interest Period, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the maximum reserve requirement (including basic, supplemental, emergency, special and marginal reserves) generally applicable to financial institutions regulated by the Federal Reserve Board comparable in size and type to Lender in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on the Loan is determined), whether or not Lender has any Eurocurrency liabilities or such requirement otherwise in fact applies to Lender.  The LIBOR Rate shall be adjusted automatically as of the effective date of each change in the Reserve Percentage.  As of the date hereof, the Reserve Percentage is zero, however, there can be no assurance as to what such amount may be in the future.

“Restoration” shall mean, following the occurrence of a Casualty or a Condemnation which is of a type necessitating the repair of any Property, the completion of the repair and restoration of such Property as nearly as possible to the condition such Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender.

17

“Restoration Consultant” shall have the meaning set forth in Section 8.4(b)(iii) hereof.

“Restoration Retainage” shall have the meaning set forth in Section 8.4(b)(iv) hereof.

“Restricted Party” shall have the meaning set forth in Section 7.1 hereof.

“Sale or Pledge” shall have the meaning set forth in Section 7.1 hereof.

“Securities” shall have the meaning set forth in Section 13.1 hereof.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Securities Liabilities” shall have the meaning set forth in Section 13.5 hereof.

“Securitization” shall have the meaning set forth in Section 13.1 hereof.

“Securitization Closing Date” shall have the meaning set forth in the Mortgage Loan Agreement.

“Selected Day” means the fifteenth (15th) day of each calendar month or such other date as determined by the Lender pursuant to Section 2.2(d) hereof.

“SPE Component Entity” shall have the meaning set forth in Section 6.1(b) hereof.

“Special Member” shall have the meaning set forth in Section 6.1(c).

“Standard Statements” shall have the meaning set forth in Section 5.11(c)(i)(A) hereof.

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

“State” shall mean the state or states in which any Property or any part thereof is located.

“Static LIBOR Rate” shall have the meaning set forth in Section 2.2(b) hereof.

“Static LIBOR Rate Loan” shall have the meaning set forth in Section 2.3(f)(iii) hereof.

“Subordination and Attornment Agreement” shall mean for each Operating Lease with an Affiliated Lessee, a Subordination and Attornment Agreement between Lender and the Affiliated Lessee, acceptable to Lender in accordance with the terms of this Agreement as the same may be amended, modified and in effect from time to time.

“Subordination, Non-Disturbance and Attornment Agreement” shall mean with respect to the Operating Leases between Borrower and any Non-Affiliated Lessee, a Subordination, Non-Disturbance and Attornment Agreement, between Lender and the applicable Non-Affiliated Lessee, acceptable to Lender in accordance with the terms of this Agreement as the same may be amended, modified and in effect from time to time.

18

“Subordination of Management Agreement/Estoppel” shall mean, individually or collectively, as the context may require, (i) for the Interstate Properties and Hilton Properties (each as defined in the Mortgage Loan Agreement), each Subordination and Attornment Agreement executed in connection with each Management Agreement, by and among Lender, Borrower, Mortgage Borrower, the Affiliated Lessee and the applicable Manager and (ii) for the Marriott Properties (as defined in the Mortgage Loan Agreement), each Manager Estoppel by the applicable Manager for the benefit of Lender, in each case as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms hereof.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company, or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.

“Syndication” shall have the meaning set forth in Section 13.1 hereof.

“Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against any Property (or any part thereof) or the Collateral (or any part thereof).

“Tenant” shall mean any Person (including, but not limited to, any Operating Lessee) leasing, subleasing or otherwise occupying any portion of a Property under a Lease or other occupancy agreement with Mortgage Borrower or Operating Lessee.

“Title Insurance Policy” shall have the meaning set forth in the Mortgage Loan Agreement.

“Tribunal” shall mean any state, commonwealth, federal, foreign, territorial or other court or governmental department, commission, board, bureau, district, authority, agency, central bank, or instrumentality, or any arbitration authority.

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the State of New York.

“Underwriter Group” shall have the meaning set forth in Section 13.5(b) hereof.

Section 1.2.PRINCIPLES OF CONSTRUCTION

All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified.  All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise.  Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

19

ARTICLE 2
GENERAL TERMS

Section 2.1.LOAN COMMITMENT; DISBURSEMENT TO BORROWER

(a)Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date.

(b)Borrower may request and receive only one borrowing in respect of the Loan and any amount borrowed and repaid in respect of the Loan may not be reborrowed.

(c)The Loan shall be evidenced by the Note and secured by the Pledge Agreement and the other Loan Documents.

(d)Borrower shall use the proceeds of the Loan to (i) make an equity contribution to the Mortgage Borrower in order to cause the Mortgage Borrower to use such amounts for any use permitted pursuant to Section 2.1(d) of the Mortgage Loan Agreement, (ii) pay costs and expenses incurred in connection with the closing of the Loan, as approved by Lender, and (iii) distribute the balance, if any, to its partners.

Section 2.2.INTEREST RATE

(a)Note Rate.  The outstanding principal balance of the Loan shall bear interest at the Note Rate.  Except as otherwise set forth in this Agreement, interest shall be paid in arrears.

(b)Unavailability of LIBOR Rate.  In the event that Lender shall have determined (which determination shall be conclusive and binding upon Borrower absent manifest error) that by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate, then Lender shall forthwith give notice by telephone of such determination, confirmed in writing, to Borrower at least one (1) Business Day prior to the last day of the related Interest Period. If such notice is given, the Note Rate, commencing with the first (1st) day of the next succeeding Interest Period, shall be the LIBOR Rate in effect for the most recent Interest Period (the “Static LIBOR Rate”).

If, pursuant to the terms of this Agreement, the Loan has been converted to the Static LIBOR Rate and Lender shall determine (which determination shall be conclusive and binding upon Borrower absent manifest error) that the event(s) or circumstance(s) which resulted in such conversion shall no longer be applicable, Lender shall give notice thereof to Borrower, and the Static LIBOR Rate shall convert to the LIBOR Rate effective on the first day of the next succeeding Interest Period. Notwithstanding any provision of this Agreement to the contrary, in no event shall Borrower have the right to elect to convert from the LIBOR Rate to the Static LIBOR Rate.

(c)Computations and Determinations.  All interest shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed during an Interest Period.  Lender shall determine each interest rate applicable to the Debt in accordance with this Agreement and its determination thereof shall be conclusive in the absence of manifest error.  The books and records of Lender shall be prima facie evidence of all sums owing to Lender from

20

time to time under this Agreement, but the failure to record any such information shall not limit or affect the obligations of Borrower under the Loan Documents.

(d)Selected Day.  Prior to a Securitization, Lender may in its sole discretion change the day of the month that will constitute the Selected Day.

(e)Default Rate.  Any principal of, and to the extent permitted by applicable law, any interest on the Note, and any other sum payable hereunder, which is not paid when due shall bear interest from the date due and payable until paid, payable on demand, at a rate per annum (the “Default Rate”) equal to the Note Rate plus four percent (4%).

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

Section 2.3.LOAN PAYMENTS

(a)Payments.  Borrower agrees to pay sums under the Note in installments as follows:

(i)a payment on the Closing Date of all interest that will accrue on the principal amount of the Note during the Interim Interest Period;

(ii)a payment on each Payment Date of interest equal to the Monthly Payment Amount and any other interest that has or will accrue hereunder during the Interest Period in which such Payment Date occurs; and

(iii)the outstanding principal amount and all interest thereon (including interest through the end of the Interest Period in which the Maturity Date occurs) shall be due and payable on the Payment Date occurring in December, 2006 (the “Maturity Date”), unless the Maturity Date is extended pursuant to Section 2.3(b) below.

(b)Extension of the Maturity Date.  Borrower shall have the option to extend the term of the Loan beyond the initial Maturity Date for two (2) successive terms (each, an “Extension Option”) of one (1) year each to (x) the Payment Date occurring in December, 2007 and (y) the Payment Date occurring in December, 2008 (each such date, the “Extended

21

Maturity Date”), respectively, and, as to each Extension Option, upon satisfaction of the following terms and conditions:

(i)no Event of Default shall have occurred and be continuing at the time the applicable Extension Option is exercised and on the date that the applicable extension term is commenced;

(ii)Borrower shall notify Lender of its irrevocable election to extend the Maturity Date as aforesaid not earlier than three (3) months, and no later than one (1) month, prior to the then applicable Maturity Date;

(iii)Borrower shall obtain and deliver to Lender prior to exercise of such Extension Option, one or more Replacement Rate Caps, which Replacement Rate Caps shall be effective commencing on the first day of such Extension Option and shall have a maturity date not earlier than the end of the Interest Period in which the applicable Extended Maturity Date shall occur;

(iv)in connection with each Extension Option, Borrower shall have delivered to Lender together with its notice pursuant to subsection (b) of this Section 2.3 and as of the commencement of the applicable Extension Option, an Officer’s Certificate in form acceptable to the Lender (A) certifying that each of the representations and warranties of Borrower contained in the Loan Documents is true, complete and correct in all material respects as of the date of such Officer’s Certificate to the extent such representations and warranties are not matters which by their nature can no longer be true and correct as a result of the passage of time or (B) specifying any exceptions to such representations and warranties as may be acceptable to Lender in its discretion.

(v)in connection with the exercise of each Extension Option, Borrower shall have paid to Lender the Extension Fee; and

(vi)Mortgage Borrower shall have exercised its right to extend the term of the Mortgage Loan pursuant to Section 2.3(b) of the Mortgage Loan Agreement and the Mortgage Loan shall have been extended by the Mortgage Lender.

All references in this Agreement and in the other Loan Documents to the Maturity Date shall mean the applicable Extended Maturity Date in the event the applicable Extension Option is exercised.

(c)Payments after Default.  (i) Upon the occurrence and during the continuance of an Event of Default, interest on the outstanding principal balance of the Loan and, to the extent permitted by law, overdue interest and other amounts due in respect of the Loan shall accrue at the Default Rate, and (ii) subject to the rights of Mortgage Lender and the terms of the Cash Management Agreement, upon (A) the occurrence and during the continuance of a monetary Event of Default or an Event of Default under Section 11.1(f) hereof or (B) the occurrence of nay other Event of Default with respect to which Lender has accelerated the Loan, Lender shall be entitled to receive and Borrower shall pay to Lender all cash flow from the Properties, such amount to be applied by Lender to the payment of the Debt in such order as Lender shall determine in its sole discretion, including, without limitation, alternating applications thereof

22

between interest and principal.  Interest at the Default Rate shall be computed from the occurrence of the Event of Default until the earlier of (x) the actual receipt and collection of the Debt (or that portion thereof that is then due) and (y) the cure of such Event of Default.  To the extent permitted by applicable law, interest at the Default Rate shall be added to the Debt, shall itself accrue interest at the same rate as the Loan and shall be secured by the Pledge Agreement.  This paragraph shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default; the acceptance of any payment from Borrower shall not be deemed to cure or constitute a waiver of any Event of Default; and Lender retains its rights under this Agreement to accelerate and to continue to demand payment of the Debt upon the happening of and during the continuance any Event of Default, despite any payment by Borrower to Lender.

(d)Late Payment Charge.  If any principal or interest payment is not paid by Borrower on or before three (3) Business Days after the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment.  Any such amount shall be secured by the Pledge Agreement and the other Loan Documents to the extent permitted by applicable law.

(e)Method and Place of Payment.  Each payment by Borrower hereunder or under the Note shall be payable at P.O. Box 515228, Los Angeles, California 90051-6528, Attn:  Commercial Mortgage Loan Servicing #1777, or at such other place as the Lender may designate from time to time in writing, on the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower.  Each payment by Borrower hereunder or under the Note shall be made in funds settled through the New York Clearing House Interbank Payments System or other funds immediately available to Lender by 2:00 p.m., New York City time, on the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower.  Whenever any payment hereunder or under the Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the first Business Day preceding such scheduled due date. Notwithstanding the foregoing, amounts due under the Loan Documents shall be deemed paid so long as there is sufficient money in the Cash Management Account for payment of such amounts pursuant to the Cash Management Agreement and Lender’s access to such money has not been constrained or constricted in any manner.

(f)Additional Payment Provisions.

(i)If at any time after the date hereof, Lender (which shall include, for purposes of this Section, any corporation controlling Lender) reasonably determines that due to the adoption or modification of any Legal Requirement regarding taxation, Lender’s required levels of reserves, deposits, Federal Deposit Insurance Corporation insurance or capital (including any allocation of capital requirements or conditions), or similar requirements, or any interpretation or administration thereof by any Tribunal or compliance of Lender with any of such requirements, has or would have the effect of (a) increasing Lender’s costs relating to the Loan, or (b) reducing the yield or rate of return

23

of Lender on the Loan, to a level below that which Lender could have achieved but for the adoption or modification of any such Legal Requirements, Borrower shall, within fifteen (15) days of any request by Lender, pay to Lender such additional amounts as (in Lender’s sole judgment, after good faith and reasonable computation) will compensate Lender for such increase in costs or reduction in yield or rate of return of Lender (a “Consequential Loss”).  No failure by Lender to immediately demand payment of any additional amounts payable hereunder shall constitute a waiver of Lender’s right to demand payment of such amounts at any subsequent time.  Nothing herein contained shall be construed or so operate as to require Borrower to pay any interest, fees, costs or charges greater than is permitted by applicable Law.

(ii)All payments made by Borrower hereunder shall be made free and clear of, and without reduction for or on account of, income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions, reserves or withholdings imposed, levied, collected, withheld or assessed by any Governmental Authorities, which are imposed, enacted or become effective on or after the date hereof (such non-excluded taxes being referred to collectively as “Foreign Taxes”), excluding income and franchise taxes of the United States of America or any political subdivision or taxing authority thereof or therein.  If any Foreign Taxes are required to be withheld from any amounts payable to Lender hereunder and such Foreign Taxes are not a result of activities of Lender unrelated to the Loan or Borrower, the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after payment of all Foreign Taxes) interest or any such other amounts payable hereunder at the rate or in the amounts specified hereunder. Whenever any Foreign Tax is payable pursuant to applicable law by Borrower, as promptly as possible thereafter, Borrower shall send to Lender an original official receipt, if available, or certified copy thereof showing payment of such Foreign Tax. Borrower hereby indemnifies Lender for any incremental taxes, interest or penalties that may become payable by Lender which may result from any failure by Borrower to pay any such Foreign Tax when due to the appropriate taxing authority of which Lender shall have provided Borrower with prior written notice, if possible, or any failure by Borrower to remit to Lender the required receipts or other required documentary evidence. Lender’s inability to notify Borrower of any such Foreign Tax in accordance with the immediately preceding sentence shall in no way relieve Borrower of its obligations under this Section 2.3(f)(ii).

(iii)If any requirement of law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for Lender to make or maintain a Loan with the Note Rate being based on LIBOR as contemplated hereunder, (i) the obligation of Lender hereunder to make such Loan based on LIBOR or to convert the Loan from the Static LIBOR Rate to the LIBOR Rate shall be canceled forthwith and (ii) any outstanding LIBOR Loan shall be converted automatically to a loan bearing interest at the Static LIBOR Rate (the “Static LIBOR Rate Loan”) on the next succeeding Payment Date or within such earlier period as required by law.  Borrower hereby agrees promptly to pay Lender, upon demand, any additional amounts necessary to compensate Lender for any costs incurred by Lender in making any conversion in accordance with this Agreement, including, without limitation, any interest or fees payable by Lender to lenders of funds obtained by it in order to make or maintain the LIBOR Loan hereunder.

24

If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.3(f)(iii), Lender shall provide Borrower with not less than ninety (90) days written notice specifying in reasonable detail the event by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional costs.  Lender’s notice of such costs, as certified to Borrower, shall be conclusive absent manifest error.

(iv)In the event that any change in any requirement of law or in the interpretation or application thereof, or compliance by Lender with any request or directive (whether or not having the force of law) hereafter issued from any central bank or other Governmental Authority:

(A)shall hereafter impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of Lender which is not otherwise included in the determination of the LIBOR Rate hereunder;

(B)shall hereafter have the effect of reducing the rate of return on Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration Lender’s policies with respect to capital adequacy) by any amount deemed by Lender to be material; or

(C)shall hereafter impose on Lender any other condition and the result of any of the foregoing is to increase the cost to Lender of making, renewing or maintaining loans or extensions of credit or to reduce any amount receivable hereunder;

then, in any such case, Borrower shall promptly pay Lender, upon demand, any additional amounts necessary to compensate Lender for such additional cost or reduced amount receivable which Lender deems to be material as determined by Lender. If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.3(f)(iv), Lender shall provide Borrower with not less than ninety (90) days written notice specifying in reasonable detail the event by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional cost or reduced amount. A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive in the absence of manifest error. This provision shall survive payment of the Note and the satisfaction of all other obligations of Borrower under this Agreement and the Loan Documents.

(v)Borrower agrees to indemnify Lender and to hold Lender harmless from any loss or expense which Lender sustains or incurs as a consequence of (i) any default by Borrower in payment of the principal of or interest on a LIBOR Loan, including, without limitation, any such loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain a LIBOR Loan hereunder,

25

(ii) any prepayment (whether voluntary or mandatory) of the LIBOR Loan that did not include all interest which had accrued (or would have accrued) at the Note Rate through the end of the related Interest Period, including, without limitation, such loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain the LIBOR Loan hereunder, and (iii) the conversion (for any reason whatsoever, whether voluntary or involuntary) of the Note Rate from the LIBOR Rate to the Static LIBOR Rate with respect to any portion of the outstanding principal amount of the Loan then bearing interest at the LIBOR Rate on a date other than the Payment Date immediately following the last day of an Interest Period, including, without limitation, such loss or expenses arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain a LIBOR Loan hereunder (the amounts referred to in clauses (i), (ii) and (iii) are herein referred to collectively as the “Breakage Costs”).  This provision shall survive payment of the Note in full and the satisfaction of all other obligations of Borrower under this Agreement and the other Loan Documents.

(vi)Lender shall not be entitled to claim compensation pursuant to this Section 2.3(f) for any Foreign Taxes, increased cost or reduction in amounts received or receivable hereunder, or any reduced rate of return, which was incurred or which accrued more than one hundred eighty (180) days before the date Lender notified Borrower of the change in law or other circumstance on which such claim of compensation is based and delivered to Borrower a written statement setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.3(f), which statement shall be conclusive and binding upon all parties hereto absent manifest error.

(vii)Within fifteen (15) days after request by Lender (or at the time of any prepayment), Borrower shall pay to Lender such amount or amounts as will compensate Lender for any loss, cost, expense, penalty, claim or liability, including any loss incurred in obtaining, prepaying, liquidating or employing deposits or other funds from third parties and any loss of yield, as determined by Lender in its judgment reasonably exercised, incurred by it with respect to the Loan as a result of the payment or prepayment of any amount on a date other than the date such amount is required or permitted to be paid or prepaid; provided that Lender delivers to Borrower a certificate as to the amounts of such costs described herein, which certificate shall be conclusive in the absence of manifest error.  Lender shall have no obligation to purchase, sell and/or match funds in connection with the funding or maintaining of the Loan or any portion thereof.  The obligations of Borrower under this Section shall survive any termination of the Loan Documents and payment of the Note and shall not be waived by any delay by Lender in seeking such compensation.

(viii)All payments made by Borrower  hereunder or under the other Loan Documents shall be made irrespective of, and without any deduction for, any setoff, defense or counterclaims.

(ix)Remittances in payment of any part of the Loan in less than the required amount in immediately available U.S. funds shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by the holder hereof in immediately available U.S. funds and shall be made and accepted subject

26

to the condition that any check or draft may be handled for collection in accordance with the practices of the collecting bank or banks.

Section 2.4.PREPAYMENTS.

(a)Voluntary Prepayments.  Except as otherwise expressly provided herein and in Section 2.4(c) hereof, Borrower shall not have the right to prepay the Loan in whole or in part prior to the initial Maturity Date. Any partial prepayment shall be applied to the last payments of principal due under the Loan and shall reduce the outstanding principal balance of the Loan for purposes of computing the Monthly Payment Amount.

(b)Lockout.  The Loan shall only be prepayable after the expiration of the Lockout Period.

(c)Payments After the Lockout Period.

(i)Full Prepayment.

(A)At any time after the expiration of the Lockout Period other than during the time period in any month from and including the day after the Payment Date through and including the day prior to the Determination Date, Borrower may prepay the Loan in whole but not in part at any time upon not less than thirty (30) days prior written notice to Lender.  Any such prepayment shall include (A) in the event the prepayment occurs at any time during the period after the Payment Date occurring in June, 2005 through and including the Payment Date occurring in December, 2005, a prepayment premium in the amount of 1.75% of the then principal amount of the Loan, (B) all amounts required to be paid by Borrower under Section 2.4(c)(iii) hereof and (C) all other amounts owing by Borrower to Lender under this Agreement and the other Loan Documents, including, without limitation, any Breakage Costs incurred by Lender.

(B)In addition to the foregoing requirements for a full prepayment of the Loan, prior to Lender’s obligation to accept a prepayment pursuant to the foregoing Section 2.4(c)(i)(A) Borrower shall have paid (or cause to be paid) any amounts required to be paid under Section 2.4(c)(i) of the Mortgage Loan Agreement to Mortgage Lender in connection with the full prepayment of the Mortgage Loan, provided that, the requirements set forth in this Section 2.4(c)(i)(B) shall not apply in the event (1) (x) such prepayment is sourced solely from the funds of Mezzanine Borrower or any of its Affiliates (other than Mortgage Borrower or any SPE Component Entity (as defined in the Mortgage Loan Agreement)) and such funds are not derived from any of the Properties or any other collateral for the Mortgage Loan (it being understood and agreed that the Mezzanine Borrower shall in any event be entitled to apply to any such prepayment of the Mezzanine Loan funds sourced or derived from any of the Properties or any other collateral for the Mortgage  Loan to the extent the same have previously been distributed to the Mezzanine Borrower provided such distribution was not in violation of the Mortgage Loan Documents) (provided that

27

the foregoing is subject to Sections 544 and 548 of Title 11 of the United States Code) and (y) no Default or Event of Default shall then exist under the Mortgage Loan Documents or (2) Mortgage Lender shall agree in a writing addressed to Lender to such prepayment in full of the Mezzanine Loan.

(ii)Partial Prepayment.  Provided no Event of Default shall have occurred and is then continuing, commencing on the day after the expiration of the Lockout Period, and upon giving Lender at least thirty (30) days (but not more than ninety (90) days) prior written notice, which said notice can be given prior to the expiration of the Lockout Period in connection with the prepayment to occur following the Lockout Period, Borrower may voluntarily prepay a portion of the Loan on a Payment Date provided such prepayment is being made in connection with a partial prepayment of the Mortgage Loan and the release of a Property pursuant to Section 2.4(c)(ii) of the Mortgage Loan Agreement and the Mortgage Loan Borrower has complied with all of the terms and conditions of Section 2.4(c)(ii) of the Mortgage Loan Agreement, and provided Borrower satisfies the following release conditions:

(A)Borrower shall provide Lender with prior written notice specifying (1) the Payment Date on which Borrower intends to make the partial prepayment (“Release Date”) and (2) the Property proposed to be released from the Lien of the related Mortgage (the “Release Property”)

(B)Borrower shall pay to Lender (i) the applicable Release Price, (ii) all amounts payable under Section 2.4(c)(iii) below in connection with the accompanying prepayment of the Loan, and (iii) any and all expenses incurred by Lender in connection with any such release, including, but not limited to, reasonable attorney’s fees and expenses, as required under clause (F) below;

(C)Borrower shall pay in the event the prepayment occurs at any time during the period after the Lockout Period through and including the Payment Date occurring in December, 2005, a prepayment premium in the amount of 1.75% of the applicable Release Price;

(D)Borrower shall have delivered to Lender written confirmation that Rate Cap in the aggregate notional amount of no less than the principal balance of the Loan as prepaid shall remain in full force and effect after the proposed prepayment;

(E)Borrower shall deliver to Lender such other documents, instruments, opinions and certificates as Lender may reasonably request;

(F)Borrower shall pay all out-of-pocket costs and expenses of Lender incurred in connection with the proposed prepayment, including Lender’s reasonable attorneys’ fees and expenses; and

(G)Without limiting the generality of any of the provisions contained herein, Borrower shall have paid any amounts required to be paid to Mortgage Lender in connection with the release of the Release Property.

28

(iii)Prepayments in General.  All payments and prepayments of the Loan, whether voluntary, involuntary, at the Maturity Date or otherwise (but exclusive of prepayments made pursuant to Section 2.4(d) hereof) shall include in the event that any such repayment or prepayment is made on a day other than a Payment Date, a sum equal to the amount of interest which would have accrued under this Agreement through the end of the Interest Period in which the next Payment Date occurs.  For purposes of this Agreement, an involuntary prepayment shall be deemed to include, but not be limited to, a prepayment of the Loan in connection with or following the Lender’s acceleration of the outstanding balance of the Loan.

(d)Insurance and Condemnation Proceeds; Excess Interest.  Notwithstanding any other provision herein to the contrary, and provided no Default exists, Borrower shall not be required to pay any prepayment premium in connection with any prepayment occurring solely as a result of (i) the application of Insurance Proceeds or Condemnation Proceeds pursuant to the terms of the Loan Documents, or (ii) the application of any interest in excess of the maximum rate permitted by applicable law to the reduction of the Loan.

(e)Prepayments Prior to the Lockout Period.  If, during the Lockout Period, payment of all or any part of the Debt is tendered by Borrower or otherwise recovered by Lender, such tender or recovery shall be (a) made on the next occurring Payment Date together with the Debt Service then due and (b) deemed a voluntary prepayment by Borrower in violation of the prohibition against prepayment set forth in this Section 2.4 and Borrower shall pay, in addition to the Debt being repaid and the accompanying Debt Service payment, (x) an amount equal to the Lockout Yield Maintenance Premium and (y) the accrued and unpaid interest calculated for the full Interest Period in which such voluntary prepayment occurs.

(f)Application of Payments.  All voluntary and involuntary prepayments on the Note shall be applied, to the extent thereof, to accrued but unpaid interest on the amount prepaid, to the remaining principal amount, and any other sums due and unpaid to Lender in connection with the Loan, in such manner and order as Lender may elect in its sole and absolute discretion, including, but not limited to, application to principal installments in inverse order of maturity.  Following the occurrence of an Event of Default, any payment made on the Note shall be applied to accrued but unpaid interest, late charges, accrued fees, the unpaid principal amount of the Note, and any other sums due and unpaid to Lender in connection with the Loan, in such manner and order as Lender may elect in its sole and absolute discretion.

(g)Liquidation Events.

(i)In the event of (A) any Casualty to any Property or any material portion thereof, (B) any Condemnation of any Property or any material portion thereof, (C) any transfer of any Property in connection with a realization thereon following a Mortgage Event of Default, including, without limitation, a foreclosure sale, or (D) any refinancing of any Property or the Mortgage Loan (each, a “Liquidation Event”), Borrower shall cause the related Net Liquidation Proceeds After Debt Service to be deposited directly into an Eligible Account with Lender (the “Mezzanine Debt Service Account”).  On each date on which Lender actually receives a distribution of Net Liquidation Proceeds After Debt Service, Borrower shall prepay the outstanding principal balance of the Note in an

29

amount equal to one hundred percent (100%) of such Net Liquidation Proceeds After Debt Service, together with interest which actually accrued on such amount through the next Payment Date, but without the payment of  a prepayment fee or penalty.  Any amounts of Net Liquidation Proceeds After Debt Service in excess of the Debt shall be paid to Borrower.  Any prepayment received by Lender pursuant to this Section 2.4(g)(i) on a date other than a Payment Date shall be held by Lender as collateral security for the Loan in an interest bearing account, with such interest accruing to the benefit of Borrower, and shall be applied by Lender on the next Payment Date.

(ii)Borrower shall notify Lender of any Liquidation Event no later than one (1) Business Day following the first date on which Borrower has knowledge of such event.  Borrower shall be deemed to have knowledge of (i) a sale (other than a foreclosure sale) of any Property on the date on which a contract of sale for such sale is entered into, and all other contingencies, if any, contained therein have been satisfied and/or waived, and a foreclosure sale, on the date notice of such foreclosure sale is given, and (ii) a refinancing of any Property, on the date on which a commitment for such refinancing has been entered into, and all other contingencies, if any, contained therein have been satisfied and/or waived.  The provisions of this Section 2.4(g)(ii) shall not be construed to contravene in any manner the restrictions and other provisions regarding refinancing of the Mortgage Loan or the Sale or Pledge of any Property set forth in this Agreement and the other Loan Documents.

(h)Prepayment of the Mortgage Loan.  Subject to the provisions of Section 5.33 hereof, in the event that the Mortgage Loan is paid in full at any time prior to the then Maturity Date of the Loan, the Debt shall then be immediately due and payable regardless of the Maturity Date of the Loan.

ARTICLE 3
CONDITIONS PRECEDENT

The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrower or waiver by Lender of the following conditions precedent no later than the Closing Date.

Section 3.1.REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH CONDITIONS

The representations and warranties of Borrower and Affiliated Lessee contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date, and Lender shall have determined that no Default or an Event of Default shall have occurred and be continuing nor will any Default or Event of Default occur immediately following the Closing Date; and Borrower shall be in compliance in all material respects with all terms and conditions set forth in this Agreement and in each other Loan Document on its part to be observed or performed.

30

Section 3.2.DELIVERY OF LOAN DOCUMENTS; REPORTS; LEASES

(a)Pledge Agreement, Loan Agreement and Note.  Lender shall have received from Borrower a fully executed and acknowledged counterparts of the Pledge Agreement and evidence that the Uniform Commercial Code financing statements have been delivered to the title company for recording and/or filing, in the reasonable judgment of Lender, so as to effectively create upon such recording and/or filing valid and enforceable Liens upon the Collateral, of first priority, in favor of Lender (or such other trustee as may be required or desired under local law).  Lender shall have also received from Borrower and Borrower Principal, the applicable Operating Lessee and Manager, as applicable, fully executed counterparts of this Agreement, the Note, each Subordination, Non-Disturbance and Attornment Agreement, each Subordination and Attornment Agreement, and each Subordination of Management Agreement/Estoppel and all other Loan Documents.

(b)Intentionally deleted.

(c)Intentionally deleted.

(d)Insurance.  Lender shall have received copies of the Policies required hereunder or other evidence of insurance, satisfactory to Lender in its sole discretion, and evidence of the payment of all Insurance Premiums payable for the existing policy period.

(e)Environmental Reports.  Lender shall have received an Environmental Report in respect of each Property satisfactory to Lender (or an acceptable update and reliance letter relating to the applicable Environmental Report delivered to Bridge Lender in connection with the Bridge Loan).

(f)Intentionally deleted.

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

(h)Lien Searches.  Borrower shall have delivered to Lender certified search results pertaining to the Borrower, Borrower Principal, Mortgage Borrower, Mortgage Borrower GP, Affiliated Lessee and such other Persons or any SPE Component Entity as reasonably required by Lender for state and federal tax liens, bankruptcy, judgment, litigation and state and local UCC filings.

Section 3.3.RELATED DOCUMENTS

Each additional document not specifically referenced herein, but relating to the transactions contemplated herein, shall have been duly authorized, executed and delivered by all parties thereto and at Lender’s written request, Lender shall have received and approved certified copies thereof.

31

Section 3.4.ORGANIZATIONAL DOCUMENTS

On or before the Closing Date, Borrower shall deliver or cause to be delivered to Lender (a) copies certified by Borrower of all organizational documentation related to Borrower, Borrower Principal, Mortgage Borrower, Mortgage Borrower GP and each SPE Component Entity which must be acceptable to Lender in its sole discretion, and (b) such other evidence of the formation, structure, existence, good standing and/or qualification to do business of the Borrower, Borrower Principal and each SPE Component Entity, as Lender may request in its sole discretion, including, without limitation, good standing or existence certificates, qualifications to do business in the appropriate jurisdictions, resolutions authorizing the entering into of the Loan and incumbency certificates as may be requested by Lender.

Section 3.5.OPINIONS OF BORROWER’S COUNSEL

Lender shall have received opinions of Borrower’s counsel (a) with respect to non-consolidation issues, (b) with respect to due execution, authority, enforceability of the Loan Documents and such other matters as Lender may require, and (c) with respect to the perfection of Lender’s security interest in the Collateral, all such opinions in form, scope and substance satisfactory to Lender and Lender’s counsel in their sole discretion.  In addition, Borrower shall deliver to Lender on the Closing Date an opinion letter from Borrower’s counsel relating to Lender’s security interest in the Collateral being perfected by delivery of certificates evidencing the equity interests or by the filing of the UCC-1 Financing Statement with the Secretary of State of Delaware.

Section 3.6.ANNUAL BUDGET

Borrower shall have delivered, and Lender shall have approved, the Annual Budget with respect to the Properties for the current fiscal year, a copy of which is attached as Exhibit A hereto.

Section 3.7.TAXES AND OTHER CHARGES

Mortgage Borrower shall have paid all Taxes and Other Charges which are due and payable (including any in arrears) relating to each Property, which amounts may be funded with proceeds of the Mortgage Loan and the Loan.

Section 3.8.COMPLETION OF PROCEEDINGS

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

32

Section 3.9.PAYMENTS

All payments, deposits or escrows required to be made or established by Borrower under this Agreement, the Note and the other Loan Documents on or before the Closing Date shall have been paid.

Section 3.10.TRANSACTION COSTS

Except as otherwise expressly provided herein, Borrower shall have paid or reimbursed Lender for all out of pocket expenses in connection with the underwriting, negotiation, and closing of the Loan, including title insurance premiums and other title company charges; recording, registration, filing and similar fees, taxes and charges; transfer, mortgage, deed, stamp or documentary taxes or similar fees or charges; costs of third-party reports, including without limitation, environmental studies, credit reports, seismic reports, engineer’s reports, appraisals and surveys; underwriting and origination expenses; Securitization expenses; and all actual, reasonable legal fees and expenses charged by counsel to Lender.

Section 3.11.NO MATERIAL ADVERSE CHANGE

There shall have been no material adverse change in the financial condition or business condition of any Property, Mortgage Borrower, Mortgage Borrower GP, Borrower, Borrower Principal, Operating Lessee, any SPE Component Entity, any Manager or any other person or party contributing to the operating income and operations of any Property since the date of the most recent financial statements and/or other information delivered to Lender.  The income and expenses of each Property, the occupancy and leases thereof, and all other features of the transaction shall be as represented to Lender without material adverse change.  Neither Mortgage Borrower, Mortgage Borrower GP, Borrower, Borrower Principal, any Operating Lessee, any SPE Component Entity nor any Manager shall be the subject of any bankruptcy, reorganization, or insolvency proceeding.

Section 3.12.OPERATING LEASES

Lender shall have received (i) a certified copy of each Operating Lease, (ii) copies of the fully executed estoppels from the applicable Operating Lessee of each Property delivered to Mortgage Lender pursuant to the Mortgage Loan Agreement, and (iii) fully executed counterparts signed by Mortgage Borrower, Borrower and the applicable Operating Lessee of a Subordination, Non-Disturbance and Attornment Agreement, with respect to the Operating Leases of the Miami Lakes Property and the Miami Airport West Property, and a Subordination and Attornment Agreement, with respect to each of the remaining Operating Leases.

Section 3.13.LEASES; RENT ROLLS

Lender shall have received a Rent Roll or summary of all Leases affecting any Property (other than Operating Leases, which are addressed in Section 3.12), which shall be satisfactory in form and substance to Lender.

33

Section 3.14.TENANT ESTOPPELS

Lender shall have received copies of each executed tenant estoppel letter delivered to Mortgage Lender pursuant to the Mortgage Loan Agreement.

Section 3.15.REA ESTOPPELS

Borrower shall have delivered to Lender copies of each executed REA estoppel letter delivered to Mortgage Lender, from each party to any REA with respect to any Property, as required by Mortgage Lender pursuant to the Mortgage Loan Agreement.

Section 3.16.SUBORDINATION AND ATTORNMENT

Borrower shall have delivered to Lender copies of any and all executed instruments delivered to Mortgage Lender subordinating to the applicable Mortgage certain of the Leases (other than the Operating Leases, which are addressed in Section 3.12) affecting each Property, to the extent required by Mortgage Lender pursuant to the Mortgage Loan Agreement.

Section 3.17.TAX LOT

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

Section 3.18.PHYSICAL CONDITIONS REPORT; PIP REPORT

Lender shall have received copies of (a) the Physical Conditions Report with respect to each Property, delivered to Lender pursuant to the Mortgage Loan Documents, and (b) any PIP Reports issued with respect to any Property, delivered to Mortgage Lender pursuant to the Mortgage Loan Agreement.

Section 3.19.MANAGEMENT AGREEMENT

Lender shall have received a certified copy of each Management Agreement with respect to each Property subject to a Management Agreement, each of which shall be satisfactory in form and substance to Lender.

Section 3.20.APPRAISAL

Lender shall have received an appraisal of each Property, which shall be satisfactory in form and substance to Lender.  Lender hereby acknowledges (a) receipt of appraisals with respect to each Property, as delivered to Bank of America, N.A. in connection with the  Bridge Loan and (b) that each such appraisal together with any reliance letter which Lender may require in its reasonable discretion shall be deemed acceptable for all purpose under this Section 3.20 absent any material adverse change to the applicable Property from and after the date of such appraisal.

34

Section 3.21.FINANCIAL STATEMENTS

Lender shall have received financial statements and related information in form and substance satisfactory to Lender and in compliance with any Legal Requirements promulgated by the Securities and Exchange Commission, including, without limitation, (a) operating statement as of September 30, 2003 with respect to each Property, for the year-to-date 2003, and (b) audited financial statements by an Acceptable Accountant with respect to RFS Partnership, L.P. (the prior direct/indirect owner of each Property) for the years 2002, 2001, 2000 and 1999, in all instances the same shall be accompanied by an unqualified opinion of such Acceptable Accountant that such statements have been prepared in accordance with GAAP applied on a consistent basis.

Section 3.22.NET OPERATING INCOME

The annual Net Operating Income for all the Properties shall not be less than $20,000,000.00 as determined by Lender in its sole discretion pursuant to its standard underwriting procedures for loans which are consummated by Lender for the purpose of any Securitization.

Section 3.23.FRANCHISE AGREEMENTS

Lender shall have received (i) a certified copy of each Franchise Agreement with respect to each Property (other than those previously disclosed to Lender for which there is no Franchise Agreement, only a Management Agreement), and (ii) a franchisor estoppel/comfort letter executed by each Franchisor under each Franchise Agreement, in form and substance reasonably satisfactory to Lender.

Section 3.24.GROUND LEASE

Lender shall have received (a) a certified copy of each Ground Lease and (b) copies of the fully executed ground lessor estoppel from the ground lessor under the Wilmington Ground Lease and the fully executed ground lessor estoppel from the Borrower with respect to the Louisville Southwest Agreement.

Section 3.25.FURTHER DOCUMENTS

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

ARTICLE 4
REPRESENTATIONS AND WARRANTIES

Borrower and, where specifically indicated, each Borrower Principal, represents and warrants to Lender as of the Closing Date that:

35

Section 4.1.ORGANIZATION

Each of Borrower, Borrower Principal (when not an individual), Mortgage Borrower, Mortgage Borrower GP and Affiliated Lessee (a) has been duly organized and is validly existing and in good standing with requisite power and authority to own its properties and to transact the businesses in which it is now engaged, (b) is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations, (c) possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged, and the sole business of Borrower is the ownership, and management of the Mortgage Borrower, and (d) in the case of Borrower, has full power, authority and legal right to grant, bargain, sell, pledge, assign, warrant, transfer and convey the Collateral pursuant to the terms of the Loan Documents, and in the case of Borrower, Mortgage Borrower, each Borrower Principal and Affiliated Lessee, has full power, authority and legal right to keep and observe all of the terms of the Loan Documents and/or Mortgage Loan Documents  to which it is a party.  Borrower and  Borrower Principal represent and warrant that the chart attached hereto as Exhibit B sets forth an accurate ownership structure of Borrower.

Section 4.2.STATUS OF BORROWER; AFFILIATED LESSEE

Borrower’s exact legal name is correctly set forth on the first page of this Agreement, on the Pledge Agreement and on any UCC-1 Financing Statements filed in connection with the Loan.  Borrower is an organization of the type specified on the first page of this Agreement.  Borrower is incorporated in or organized under the laws of the state of Delaware.  Borrower’s principal place of business and chief executive office, and the place where each of Borrower  keeps its books and records, including recorded data of any kind or nature, regardless of the medium of recording, including software, writings, plans, specifications and schematics, has been for the preceding four months (or, if less, the entire period of the existence of Borrower) the address of Borrower set forth on the first page of this Agreement.  The organizational identification number, if any, assigned by the state of incorporation or organization of  Borrower is 3721072.

Section 4.3.VALIDITY OF DOCUMENTS

Borrower, Mortgage Borrower, Affiliated Lessee, and Borrower Principal have taken all necessary action to authorize the execution, delivery and performance of this Agreement, the other Loan Documents and the Mortgage Loan Documents to which they are parties.  This Agreement, the other Loan Documents and the Mortgage Loan Documents have been duly executed and delivered by or on behalf of Borrower, Mortgage Borrower, Affiliated Lessee and  Borrower Principal, as applicable, and constitute the legal, valid and binding obligations of Borrower, Mortgage Borrower, Affiliated Lessee and Borrower Principal, as applicable, enforceable against each, as applicable, in accordance with their respective terms, subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

36

Section 4.4.NO CONFLICTS

The execution, delivery and performance of this Agreement, the other Loan Documents and the Mortgage Loan Documents to be executed by Borrower, Mortgage Borrower, Affiliated Lessee and Borrower Principal, as applicable,  will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents or Mortgage Loan Documents) upon any of the property or assets of Borrower, Mortgage Borrower, Affiliated Lessee or Borrower Principal pursuant to the terms of any agreement or instrument to which Borrower, Mortgage Borrower, Affiliated Lessee or Borrower Principal s a party or by which any of Borrower’s, Mortgage Borrower’s, Affiliated Lessee’s or Borrower Principal’s property or assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower, Mortgage Borrower, Affiliated Lessee or Borrower Principal or any of Borrower’s, Mortgage Borrower’s, Affiliated Lessee’s or Borrower Principal’s properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrower, Mortgage Borrower, Affiliated Lessee or Borrower Principal of this Agreement, any of the other Loan Documents or any of the Mortgage Loan Documents has been obtained and is in full force and effect.

Section 4.5.LITIGATION

There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or, to Borrower’s or Borrower Principal’s knowledge, threatened against or affecting Borrower, Mortgage Borrower, Borrower Principal, any Operating Lessee, any Manager, the Collateral or any Property, which actions, suits or proceedings, if determined against Borrower, Mortgage Borrower, Borrower Principal, any Operating Lessee, any Manager, the Collateral or any Property, would materially adversely affect the condition (financial or otherwise) or business of Borrower, Mortgage Borrower, Borrower Principal or Affiliated Lessee or the condition or ownership of the Collateral or any Property (as applicable).

Section 4.6.AGREEMENTS

None of Borrower, Mortgage Borrower, Borrower Principal nor any Affiliated Lessee is a party to any agreement or instrument or subject to any restriction which would materially and adversely affect Borrower, Mortgage Borrower, Borrower Principal, Affiliated Lessee, the Collateral or any Property, or Borrower’s, Mortgage Borrower’s, Borrower Principal’s or Affiliated Lessee’s business, properties or assets, operations or condition, financial or otherwise.  None of Borrower, Mortgage Borrower, Borrower Principal nor Affiliated Lessee is in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower, Mortgage Borrower, Borrower Principal, Affiliated Lessee or the Collateral is bound.  None of Borrower, Mortgage Borrower, Borrower Principal or Affiliated Lessee has any material financial obligation under any agreement or instrument to which Borrower, Mortgage Borrower, Borrower Principal or Affiliated Lessee is a party or by which Borrower, Mortgage

37

Borrower, Borrower Principal, Affiliated Lessee or the Collateral is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Collateral and (b) its applicable obligations under the Loan Documents or the Mortgage Loan Documents.

Section 4.7.SOLVENCY

Neither Borrower nor Borrower Principal has (a) entered into the transaction or executed the Note (if applicable), this Agreement or any other Loan Documents to which any such Person is a party, with the actual intent to hinder, delay or defraud any creditor and (b) received reasonably equivalent value in exchange for their respective obligations under such Loan Documents.  Giving effect to the Loan, the fair saleable value of the assets of each of Borrower, and Borrower Principal exceeds and will, immediately following the making of the Loan, exceed the total liabilities of each of Borrower and Borrower Principal, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities.  No petition in bankruptcy has been filed against Borrower, Mortgage Borrower, Borrower Principal, Affiliated Lessee or any SPE Component Entity (if any) in the last ten (10) years, and neither Borrower, Mortgage Borrower, Borrower Principal, Affiliated Lessee nor any SPE Component Entity in the last ten (10) years has made an assignment for the benefit of creditors or taken advantage of any Creditors Rights Laws.  Neither Borrower, Mortgage Borrower, Borrower Principal, Affiliated Lessee nor any SPE Component Entity (if any) is contemplating either the filing of a petition by it under any Creditors Rights Laws or the liquidation of all or a major portion of Borrower’s, Mortgage Borrower’s, Borrower Principal’s, SPE Component Entity’s or Affiliated Lessee’s assets or property, and  Borrower has no knowledge of any Person contemplating the filing of any such petition against Borrower, Mortgage Borrower, Borrower Principal, Affiliated Lessee or any SPE Component Entity (if any).

Section 4.8.FULL AND ACCURATE DISCLOSURE

No statement of fact made by or on behalf of Borrower, Mortgage Borrower, any SPE Component Entity (as defined herein and in the Mortgage Loan Agreement), Borrower Principal or Affiliated Lessee in this Agreement or in any of the other Loan Documents or in any other document or certificate delivered by or on behalf of Borrower, Borrower Principal or Affiliated Lessee contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading.  There is no material fact presently known to Borrower, Mortgage Borrower, any SPE Component Entity (as defined herein and in the Mortgage Loan Agreement), Borrower Principal or Affiliated Lessee which has not been disclosed to Lender which adversely affects, nor as far as Borrower, Borrower Principal or Affiliated Lessee can reasonably foresee, might adversely affect, the Collateral or the business, operations or condition (financial or otherwise) of Borrower, Borrower Principal or Affiliated Lessee.

Section 4.9.NO PLAN ASSETS

Neither Borrower nor Borrower Principal is an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of Borrower or Borrower Principal constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101.  Neither Borrower nor Borrower Principal is a

38

“governmental plan” within the meaning of Section 3(32) of ERISA, subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Internal Revenue Code currently in effect, which prohibit or otherwise restrict the transactions contemplated by this Agreement.

Section 4.10.NOT A FOREIGN PERSON

Neither Borrower nor Borrower Principal is a “foreign person” within the meaning of §1445(f)(3) of the Internal Revenue Code.

Section 4.11.ENFORCEABILITY

The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower or Borrower Principal, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable, and neither Borrower nor Borrower Principal has asserted any right of rescission, set-off, counterclaim or defense with respect thereto.  No Default or Event of Default exists under or with respect to any Loan Document.

Section 4.12.BUSINESS PURPOSES

The Loan is solely for the business purpose of Borrower, and is not for personal, family, household, or agricultural purposes.

Section 4.13.COMPLIANCE

Borrower, Mortgage Borrower, Affiliated Lessee and each Property, and the use and operation thereof, comply in all material respects with all Legal Requirements, including, without limitation, building and zoning ordinances and codes and the Americans with Disabilities Act.  Borrower has no knowledge that any of such entities is in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority and Borrower has not received any written notice of any such default or violation.  There has not been committed by Borrower or, to Borrower’s knowledge, any other Person in occupancy of or involved with the operation or use of any Property, any act or omission affording any Governmental Authority the right of forfeiture as against any Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.

Section 4.14.FINANCIAL INFORMATION

All financial data, including, without limitation, the balance sheets, statements of cash flow, statements of income and operating expense and rent rolls, that have been delivered to Lender in respect of Borrower, Borrower Principal, Mortgage Borrower, Mortgage Borrower GP, Affiliated Lessee and/or the Properties (a) are true, complete and correct in all material respects, (b) accurately represent the financial condition of Borrower, Borrower Principal, Mortgage Borrower, Mortgage Borrower GP, Affiliated Lessee or the Properties, as applicable, as of the date of such reports, and (c) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein.  Neither Borrower, Mortgage Borrower, Mortgage

39

 Borrower GP nor Affiliated Lessee has any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and reasonably likely to have a material adverse effect on any Property or the current and/or intended operation thereof, except as referred to or reflected in said financial statements.  Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower, Mortgage Borrower, Mortgage Borrower GP, Borrower Principal or Affiliated Lessee from that set forth in said financial statements.

Section 4.15.ILLEGAL ACTIVITY

No portion of the Collateral or any Property has been or will be purchased with proceeds of any illegal activity, and no part of the proceeds of the Loan will be used in connection with any illegal activity.

Section 4.16.PERMITTED ENCUMBRANCES

None of the Permitted Encumbrances, individually or in the aggregate, materially interferes with the benefits of the security intended to be provided by the Mortgage Loan Documents or Loan Documents, materially and adversely affects the value of any Property, impairs the use or the operation of any Property or impairs Mortgage Borrower’s or Borrower’s ability to pay its obligations in a timely manner.

Section 4.17.FEDERAL RESERVE REGULATIONS

Borrower will use the proceeds of the Loan for the purposes set forth in Section 2.1(d) hereof and not for any illegal activity.  No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or prohibited by the terms and conditions of this Agreement or the other Loan Documents.

Section 4.18.INVESTMENT COMPANY ACT

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

Section 4.19.NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE

All information submitted by Borrower, Mortgage Borrower or its agents to Lender and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by Borrower, Mortgage Borrower, Affiliated Lessee or Borrower Principal  in this Agreement, in

40

any other Loan Document or in any Mortgage Loan Document, are accurate, complete and correct in all material respects.  There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or might materially and adversely affect the Collateral, any Property or the business operations or the financial condition of Borrower, Mortgage Borrower, Affiliated Lessee or Borrower Principal.  Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any representation or warranty made herein to be materially misleading.

Section 4.20.SPECIAL PURPOSE ENTITY

Borrower, Mortgage Borrower, and SPE Component Entity (as defined herein and in the Mortgage Loan Agreement) (if any) meet all of the requirements of Article 6 hereof as of the Closing Date in all material respects.

Section 4.21.INTELLECTUAL PROPERTY

All trademarks, trade names and service marks necessary to the business of Borrower as presently conducted or as Borrower contemplates conducting its business are in good standing and, to the extent of Borrower’s actual knowledge are uncontested.  Borrower has not knowingly infringed, is not knowingly infringing, and has not received notice of infringement with respect to asserted trademarks, trade names and service marks of others.  To Borrower’s knowledge, there is no infringement by others of trademarks, trade names and service marks of Borrower.

Section 4.22.EMBARGOED PERSON

As of the date hereof and at all times throughout the term of the Loan, including after giving effect to any transfers of interests permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower or Borrower Principal constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower or Borrower Principal, as applicable (whether directly or indirectly), is prohibited by law or the Loan made by Lender is in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in Borrower or Borrower Principal, as applicable, with the result that the investment in Borrower or Borrower Principal, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower or Borrower Principal, as applicable, have been derived from any unlawful activity with the result that the investment in Borrower or Borrower Principal, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law.

Section 4.23.PATRIOT ACT

All capitalized words and phrases and all defined terms used in the USA Patriot Act of 2001, 107 Public Law 56 (October 26, 2001) and in other statutes and all orders, rules and

41

regulations of the United States government and its various executive departments, agencies and offices related to the subject matter of the Patriot Act, including Executive Order 13224 effective September 24, 2001 (collectively referred to in this Section only as the “Patriot Act”) and are incorporated into this Section.  Each of Borrower and Borrower Principal hereby represents and warrants that Borrower and Borrower Principal and each and every Person Affiliated with Borrower and Borrower Principal or that to Borrower’s knowledge has an economic interest in Borrower or Borrower Principal, or, to Borrower’s or Borrower Principal’s knowledge, that has or will have an interest in the transaction contemplated by this Agreement or in the Collateral or any Property or will participate, in any manner whatsoever, in the Loan (excluding any holders of publicly traded shares in CNL Hospitality Properties, Inc., a publicly traded real estate investment trust), is:  (i) not a “blocked” person listed in the Annex to Executive Order Nos. 12947, 13099 and 13224 and all modifications thereto or thereof (as used in this Section only, the “Annex”); (ii) in full compliance with the requirements of the Patriot Act and all other requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (as used in this Section only, “OFAC”); (iii) operated under policies, procedures and practices, if any, that are in compliance with the Patriot Act and available to Lender for Lender’s review and inspection during normal business hours and upon reasonable prior notice; (iv) not in receipt of any notice from the Secretary of State or the Attorney General of the United States or any other department, agency or office of the United States claiming a violation or possible violation of the Patriot Act; (v) not listed as a Specially Designated Terrorist or as a “blocked” person on any lists maintained by the OFAC pursuant to the Patriot Act or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of the OFAC issued pursuant to the Patriot Act or on any other list of terrorists or terrorist organizations maintained pursuant to the Patriot Act; (vi) not a person who has been determined by competent authority to be subject to any of the prohibitions contained in the Patriot Act; and (vii) not owned or controlled by or now acting and or will in the future act for or on behalf of any person named in the Annex or any other list promulgated under the Patriot Act or any other person who has been determined to be subject to the prohibitions contained in the Patriot Act.  Borrower covenants and agrees that in the event Borrower receives any notice that Borrower Principal or Borrower (or any of their respective beneficial owners or Affiliates or participants) become listed on the Annex or any other list promulgated under the Patriot Act or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, Borrower shall immediately notify Lender.  It shall be an Event of Default hereunder if Borrower, Borrower Principal, or any other party to any Loan Document becomes listed on any list promulgated under the Patriot Act or is indicted, arraigned or custodially detained on charges involving money laundering or predicate crimes to money laundering.

Section 4.24.MORTGAGE LOAN REPRESENTATIONS

All of the representations and warranties contained in the Mortgage Loan Documents are hereby incorporated into this Agreement and deemed made by Borrower hereunder and are true and correct as of the Closing Date and shall remain incorporated as they may have been waived, amended or otherwise modified by the Mortgage Lender but without regard to whether the related Mortgage Loan Document has been repaid, defeased or otherwise terminated, unless otherwise consented to in writing by Lender.

42

Section 4.25.NO CONTRACTUAL OBLIGATIONS

Other than the Loan Documents, the Borrower Partnership Agreement and the Mortgage Borrower Partnership Agreement, as of the date of this Agreement, Borrower is not subject to any Contractual Obligations and has not entered into any agreement, instrument or undertaking by which it or its assets are bound, or has incurred any indebtedness (other than the Loan), and prior to the date of this Agreement, neither Borrower nor any of its Subsidiaries has entered into any Contractual Obligation, or any agreement, instrument or undertaking by which it or its assets are bound or incurred any indebtedness (other than the Loan or the Mortgage Loan (as applicable)) except for such liabilities, which are immaterial in the aggregate, that are incident to Borrower’s activities as a member of the Mortgage Borrower or that are being satisfied in connection with the funding of the Loan.

Section 4.26.PLEDGED SECURITIES

There are no Liens on the Pledged Securities (other than the Liens created by the Loan Documents).

Section 4.27.TAXES

Mortgage Borrower, Borrower, Borrower Principal and Affiliated Lessee have filed all federal, state, county, municipal, and city income, personal property and other tax returns required to have been filed by them and paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by them.  Neither Borrower, Mortgage Borrower, Borrower Principal nor Affiliated Lessee knows of any basis for any additional assessment in respect of any such taxes and related liabilities for prior years.

Section 4.28.SURVIVAL; MISCELLANEOUS

Borrower agrees that, unless expressly provided otherwise, all of the representations and warranties of Borrower and of Borrower Principal set forth in this Agreement and in the other Loan Documents shall survive for so long as any portion of the Debt remains owing to Lender.  All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.

ARTICLE 5
BORROWER COVENANTS

From the date hereof and until repayment of the Debt in full and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of the Pledge Agreement (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, Borrower Principal (as to Sections 5.11 and 5.33 only) and Borrower each hereby covenants and agrees with Lender that:

43

Section 5.1.EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS

(a)           Borrower and Mortgage Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply with all Legal Requirements applicable to it, and each Property.  Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording any Governmental Authority the right of forfeiture as against the Collateral, any Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.  Borrower shall at all times cause Mortgage Borrower to maintain, preserve and protect all franchises and trade names used by it, Affiliated Lessee and any Affiliated Manager in connection with the operation of each Property.  To the extent anything this Article 5 or any other section of this Agreement requires Borrower to cause Mortgage Borrower to take any action, such requirement shall require Borrower to act solely in its capacity as an equity owner of Mortgage Borrower and Mortgage Borrower SPE.

(b)           After prior written notice to Lender, Borrower, at its own expense, may cause Mortgage Borrower to contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the Legal Requirements affecting any Property, provided that (i) no Default or Event of Default has occurred and is continuing; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower, Mortgage Borrower or the applicable Property is subject and shall not constitute a default thereunder; (iii) neither such Property, any part thereof or interest therein, any of the tenants or occupants thereof, including, but not limited to the applicable Operating Lessee and Manager, nor Mortgage Borrower, nor Borrower shall be affected in any material adverse way as a result of such proceeding; (iv) non-compliance with the Legal Requirements shall not impose civil or criminal liability on Borrower, Mortgage Borrower or Lender; (v) Borrower shall have furnished, or shall have caused Mortgage Borrower to furnish, the security as may be required in the proceeding or by Lender to ensure compliance by Borrower and Mortgage Borrower with the Legal Requirements; and (vi) Borrower shall have furnished, or shall have caused Mortgage Borrower to furnish, to Lender all other items reasonably requested by Lender.

Section 5.2.MAINTENANCE AND USE OF PROPERTY

Borrower shall cause Mortgage Borrower to maintain each Property in a good and safe condition and repair. The Improvements and the Personal Property shall not be removed, demolished or other than in accordance with the provisions of Section 5.21, materially altered (except for normal replacement of the Personal Property) without the prior written consent of Lender.  If under applicable zoning provisions the use of all or any portion of any Property is or shall become a nonconforming use, Borrower will not cause or permit the nonconforming use to be discontinued or the nonconforming Improvement to be abandoned without the express written consent of Lender, such consent not to be unreasonably withheld.

Section 5.3.WASTE

Borrower shall not commit or suffer, and shall not cause Mortgage Borrower to commit or suffer, any waste of any Property or make any change in the use of any Property which will in

44

any way materially increase the risk of fire or other hazard arising out of the operation of such Property, or take any action that might invalidate or give cause for cancellation of any Policy, or do or permit to be done thereon anything that may in any way impair the value of any Property or the security for the Loan.  Borrower will not, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of any Property, regardless of the depth thereof or the method of mining or extraction thereof.

Section 5.4.TAXES AND OTHER CHARGES

(a)           Borrower shall cause Mortgage Borrower to pay all Taxes and Other Charges now or hereafter levied or assessed or imposed against any Property or any part thereof as the same become due and payable; provided, however, Borrower’s obligation to cause Mortgage Borrower to directly pay (or cause to be paid) Taxes shall be suspended for so long as Mortgage Borrower complies with the terms and provisions of Section 9.6 of the Mortgage Loan Agreement.  Borrower shall cause Mortgage Borrower to furnish to Lender receipts for the payment of the Taxes and the Other Charges prior to the date the same shall become delinquent (provided, however, that Borrower is not required to cause Mortgage Borrower to furnish such receipts for payment of Taxes in the event that such Taxes have been paid by Mortgage Lender pursuant to Section 9.6 of the Mortgage Loan Agreement).  Borrower shall cause Mortgage Borrower to not suffer and shall promptly cause Mortgage Borrower to pay or transfer to bond and in either instance discharge (or fully and unconditionally release) any Lien or charge whatsoever which may be or become a Lien or charge against any Property, and shall cause Mortgage Borrower to promptly pay for (or cause to be paid for) all utility services provided to any Property.

(b)           After prior written notice to Lender, Borrower, at its own expense, may permit Mortgage Borrower to contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, or any involuntary Lien or other charge, provided that (i) no Default or Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower or Mortgage Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable Legal Requirements; (iii) neither the applicable Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost; (iv) Borrower shall cause Mortgage Borrower to promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (v) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the applicable Property; and (vi) Mortgage Borrower shall have furnished Mortgage Lender with such security as may be required in the proceeding, or shall have delivered to Mortgage Lender such reserve deposits or indemnification in lieu thereof as may be reasonably requested by Mortgage Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon (unless Mortgage Borrower has paid all of the Taxes or Other Charges under protest).

45

Section 5.5.LITIGATION

Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened in writing against Borrower, Borrower Principal, Mortgage Borrower or Affiliated Lessee which might materially adversely affect Borrower’s, Mortgage Borrower’s, Borrower Principal’s or Affiliated Lessee’s condition (financial or otherwise) or business or any Property or the Collateral.

Section 5.6.ACCESS TO PROPERTY

Borrower shall cause Mortgage Borrower to permit agents, representatives and employees of Lender to inspect any Property or any part thereof at reasonable hours upon reasonable advance notice.

Section 5.7.NOTICE OF DEFAULT

Borrower shall promptly advise Lender of any material adverse change in the condition (financial or otherwise) of Borrower, Mortgage Borrower, Borrower Principal, Affiliated Lessee or any Property or of the occurrence of any Default or Event of Default of which Borrower has knowledge.

Section 5.8.COOPERATE IN LEGAL PROCEEDINGS

Borrower shall at Borrower’s expense cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings.

Section 5.9.PERFORMANCE BY BORROWER

Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term and provision to be observed and performed by Borrower under this Agreement and the other Loan Documents and any other agreement or instrument affecting or pertaining to the Collateral and any amendments, modifications or changes thereto.

Section 5.10.AWARDS; INSURANCE PROCEEDS

Borrower shall, and shall cause Mortgage Borrower and Affiliated Lessee to, cooperate with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with any Property, and Lender shall be reimbursed for any reasonable out-of-pocket expenses incurred in connection therewith (including reasonable, actual attorneys’ fees and disbursements, and the payment by Borrower of the expense of an appraisal on behalf of Lender in case of a Casualty or Condemnation materially affecting any Property or any material part thereof) out of such Awards or Insurance Proceeds.

46

Section 5.11.FINANCIAL REPORTING

(a)           Borrower and Borrower Principal shall, and shall cause Mortgage Borrower to, keep adequate books and records of account in accordance with GAAP, or in accordance with other methods acceptable to Lender in its sole discretion, consistently applied and shall furnish or cause to be furnished to Lender:

(i)            quarterly and annual certified rent rolls signed and dated by Borrower and Mortgage Borrower, detailing the names of all Tenants under Major Leases, the portion of the Improvements (in terms of square footage) occupied by each such Tenant, the base rent, additional rent and any other charges payable under each such Major Lease (including annual store sales required to be reported by Tenant under any Lease), and the term of each such Major Lease, including the commencement and expiration dates and any tenant extension, expansion or renewal options, the extent to which any Tenant is in default under any such Major Lease, and any other information as is reasonably required by Lender, within forty-five (45) days after the end of each fiscal quarter or ninety (90) days after the close of each fiscal year of Borrower, as applicable;

(ii)           quarterly and annual operating statements of each Property, prepared by Borrower or, if applicable, by Manager in form reasonably acceptable to Lender and certified by Borrower and Mortgage Borrower in the form required by Lender, detailing the revenues received, the expenses incurred and the net operating income before and after debt service (principal and interest) and major capital improvements for the period of calculation and containing appropriate year-to-date information, within forty-five (45) days after the end of each fiscal quarter or ninety (90) days after the close of each fiscal year of Borrower, as applicable;

(iii)          quarterly and annual balance sheets, profit and loss statements, statements of cash flows, and statements of change in financial position of Borrower and Borrower Principal in the form required by Lender (with the annual financial statements prepared and audited by an Acceptable Accountant), together with a certificate by an authorized officer of the general partner of Borrower Principal certifying as to Borrower Principal’s then Consolidated Tangible Net Worth (which certificate shall be accompanied by a description of the computation of such Consolidated Tangible Net Worth reasonably acceptable to Lender), all within forty-five (45) days after the end of each fiscal quarter or ninety (90) days after the close of each fiscal year of Borrower and Borrower Principal, as applicable, as the case may be; and

(iv)          an Annual Budget in form reasonably acceptable to Lender with respect to the operations of each Property, not later than the later of (i) (5) Business Days after Borrower’s or any Affiliate’s receipt thereof and (ii) thirty (30) days or in the instance of each Marriott Managed Property (as defined in the Mortgage Loan Agreement) fifteen (15) days prior to the commencement of each fiscal year of Borrower, but in no event later than February 15^th of any calendar year.  In the event that Lender reasonably objects to a proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of such objections within fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise

47

such Annual Budget and resubmit the same to Lender.  Lender shall advise Borrower of any reasonable objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise the same in accordance with the process described in this subsection until Lender approves such Annual Budget.  In the event Lender shall fail to respond in writing to any proposed Annual Budget or revised Annual Budget within the above-stated time period, Lender shall be deemed to have approved the same, provided that any proposed or revised Annual Budget submitted to Lender pursuant to the terms hereof shall state in bold face type, 16” font and all capital letters on the cover letter accompanying each such (A) proposed Annual Budget “ATTACHED IS A PROPOSED ANNUAL BUDGET FOR THE BELOW REFERENCED PROPERTY(IES), YOUR FAILURE TO RESPOND IN WRITING TO THE UNDERSIGNED REGARDING THE SAME WITHIN FIFTEEN (15) DAYS OF THE DATE OF YOUR RECEIPT OF SAID PROPOSED ANNUAL BUDGET, SHALL BE DEEMED TO CONSTITUTE YOUR APPROVAL OF THE SAME” and (B) revised Annual Budget “ATTACHED IS A REVISED ANNUAL BUDGET FOR THE BELOW REFERENCED PROPERTY(IES), YOUR FAILURE TO RESPOND IN WRITING TO THE UNDERSIGNED REGARDING THE SAME WITHIN FIFTEEN (15) DAYS OF THE DATE OF YOUR RECEIPT OF SAID REVISED ANNUAL BUDGET SHALL BE DEEMED TO CONSTITUTE YOUR APPROVAL OF THE SAME”.  Until such time that Lender approves a proposed or revised Annual Budget, which approval shall not be unreasonably withheld, conditioned or delayed, or is deemed to have approved the same, the most recent Annual Budget with respect to such Property shall apply; provided that, such approved Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance Premiums, utilities expenses and other expenses under the applicable Management Agreement, if any.

(b)           Upon request from Lender, Borrower shall promptly furnish to Lender:

(i)            a property management report regarding operating and financial performance for any Property, in reasonable detail and certified by Borrower under penalty of perjury to be true and complete, but no more frequently than quarterly;

(ii)           to the extent applicable, an accounting of all security deposits held in connection with any Lease of any part of any Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name of the Person to contact at such financial institution, along with any authority or release necessary for Lender to obtain information regarding such accounts directly from such financial institutions; and

(iii)          to the extent applicable, a report of all letters of credit provided by any Tenant in connection with any Lease of any part of any Property, including the account numbers of such letters of credit, the names and addresses of the financial institutions that issued such letters of credit and the names of the Persons to contact at such financial institutions, along with any authority or release necessary for Lender to obtain information regarding such letters of credit directly from such financial institutions.

48

(c)           Intentionally Omitted.

(d)           Borrower and Borrower Principal shall furnish Lender (or cause Mortgage Borrower to furnish Lender) with such other additional financial or management information (including state and federal tax returns) as may, from time to time, be reasonably required by Lender in form and substance satisfactory to Lender (including, without limitation, any financial reports required to be delivered by any Tenant or any guarantor of any Lease pursuant to the terms of such Lease), and shall furnish to Lender and its agents convenient facilities for the examination and audit of any such books and records.

(e)           All items requiring the certification of Borrower or Mortgage Borrower shall, except where Borrower is an individual, require a certificate executed by the general partner, managing member or chief executive officer of Borrower or Mortgage Borrower, as applicable (and the same rules shall apply to any sole shareholder, general partner or managing member which is not an individual).

Section 5.12.ESTOPPEL STATEMENT

(a)           After request by Lender, Borrower shall within ten (10) Business Days furnish Lender with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, (ii) the rate of interest on the Note, (iii) the unpaid principal amount of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi) that the Note, this Agreement, the Pledge Agreement and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification.

(b)           Borrower shall use its best efforts to deliver to Lender, promptly upon request, duly executed estoppel certificates from (i) the applicable lessor under either Ground Lease pursuant to the applicable terms and conditions of the applicable ground lease estoppel and agreement executed in connection herewith, and (ii) any one or more Tenants as required by Lender attesting to such facts regarding the related Lease as Lender may require, including, but not limited to attestations that each Lease covered thereby is in full force and effect with no defaults thereunder on the part of any party, that none of the Rents have been paid more than one month in advance, except as security, and that the Tenant claims no defense or offset against the full and timely performance of its obligations under the Lease.

Section 5.13.OPERATING LEASE; LEASING MATTERS

(a)           Borrower shall (or shall cause Mortgage Borrower to) (i) promptly perform and observe all of the covenants required to be performed and observed by it under the Operating Leases and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any material default under any Operating Lease of which it is aware; (iii) promptly deliver to Lender a copy of any notice of default or other material notice under any Operating Lease delivered to any Operating Lessee by Mortgage Borrower; (iv) promptly give notice to Lender of any notice or information that Mortgage Borrower receives which indicates that an Operating Lessee is terminating its Operating Lease or that any Operating Lessee is otherwise discontinuing its operation of the applicable  Property;

49

and (v) promptly enforce the performance and observance of all of the material covenants required to be performed and observed by the Operating Lessee under the applicable Operating Lease.

(b)           If at any time after the occurrence and during the continuance of an Event of Default Lender realizes on the Collateral, Borrower shall (A) in the instance of an Operating Lease between Mortgage Borrower and an Affiliated Lessee, cause Mortgage Borrower to cooperate and not in any way hinder, delay  or otherwise interfere with the termination of the applicable Operating Lease in accordance with the terms of the applicable Subordination and Attornment Agreement or (b) in the instance of an Operating Lease with a Non-Affiliated Lessee, cause Mortgage Borrower to terminate such Operating Lease to the extent permitted under the terms of such Operating Lease under and in accordance with terms of the applicable Subordination, Non-Disturbance and Attornment Agreement.

(c)           Borrower shall not, without the prior written consent of Lender (which consent shall not be unreasonably withheld, conditioned or delayed) permit or cause Mortgage Borrower to: (i) surrender, terminate or cancel any Operating Lease or otherwise replace any Operating Lessee or enter into any other operating lease with respect to any Property; (ii) reduce or consent to the reduction of the term of any Operating Lease; or (iii) enter into, renew, amend, modify, waive any provisions of , reduce Rents under, or shorten the term of any Operating Lease.

(d)           Borrower shall (or shall cause Mortgage Borrower to) ensure that any replacement Operating Lessee shall in all events be a Qualified Lessee, and shall be a party to an Operating Lease approved in writing by Lender, in its reasonable discretion and shall be approved by Mortgage Lender in accordance with the Mortgage Loan Documents. In addition, any new or replacement Operating Lessee (i) Affiliated with Borrower, shall execute a form of Subordination and Attornment Agreement in form substantially similar to the form delivered in connection with the closing of the Loan and (ii) not Affiliated with Borrower, shall execute a of Subordination and Attornment Agreement in form reasonably acceptable to Lender.

(e)           Other than any new or replacement Operating Lease, Borrower may permit Mortgage Borrower to enter into a proposed Lease (including the renewal or extension of an existing Lease (a “Renewal Lease”)) (or cause or permit any Operating Lessee to enter into a proposed Lease or Renewal Lease) without the prior written consent of Lender, provided such proposed Lease or Renewal Lease (i) provides for rental rates and terms comparable to existing local market rates and terms (taking into account the type and quality of the tenant) as of the date such Lease is executed by Mortgage Borrower or Operating Lessee, as the case may be (unless, in the case of a Renewal Lease, the rent payable during such renewal, or a formula or other method to compute such rent, is provided for or contemplated in the original Lease), (ii) is an arm’s-length transaction with a bona fide, independent third party tenant, (iii) does not have a materially adverse effect on the value of the applicable Property taken as a whole, (iv) does not contain any option, offer, right of first refusal, or other similar right to acquire all or any portion of the applicable Property, (v) has a base term of less than fifteen (15) years including options to renew, (vi) as to Major Leases, has no rent, credits, free rents or concessions granted thereunder, and (vii) as to Major Leases, is written on customary form of lease reasonably acceptable to Lender.  All proposed Leases which do not satisfy the requirements set forth in this subsection shall be subject to the prior approval of Lender and its counsel, at Borrower’s expense.

50

Borrower shall promptly deliver to Lender copies of all Major Leases and to the extent requested by Lender other Leases which are entered into pursuant to this subsection together with Borrower’s certification that such Leases satisfy all of the conditions of this Section.

(f)            Without limiting any other provision contained herein, Borrower (i) shall (or shall cause Mortgage Borrower or the applicable Operating Lessee to) observe and perform all the obligations imposed upon the landlord under the Leases and shall not do or permit to be done anything to impair the value of any of the Leases as security for the Debt; (ii) shall cause Mortgage Borrower to promptly send copies to Lender of all notices of default which Mortgage Borrower shall send or receive under any Major Lease (and any other Lease to pursuant to any request made by Lender); (iii) shall enforce (or cause or permit Mortgage Borrower or the applicable Operating Lessee to enforce) all of the material terms, covenants and conditions contained in the Leases upon the part of the tenant thereunder to be observed or performed; (iv) shall not collect (or cause or permit Mortgage Borrower or any Operating Lessee to collect) any of the Rents more than one (1) month in advance (except security deposits shall not be deemed Rents collected in advance); (v) shall not execute (or cause or permit Mortgage Borrower or any Operating Lessee to execute) any other assignment of the landlord’s interest in any of the Leases or the Rents; and (vi) shall not consent (or cause or permit Mortgage Borrower or any Operating Lessee to consent) to any assignment of or subletting under any Leases not in accordance with their terms, without the prior written consent of Lender.

(g)           Notwithstanding any other provision contained herein, other than with respect to a Major Lease (including, but not limited to, any Operating Lease) Borrower may, without the prior written consent of Lender, permit Mortgage Borrower to amend, modify or waive the provisions of any Lease or terminate, reduce Rents under, accept a surrender of space under, or shorten the term of, any Lease (including any guaranty, letter of credit or other credit support with respect thereto) (or cause or permit Mortgage Borrower or any Operating Lessee to do any of the foregoing) provided that such action (taking into account, in the case of a termination, reduction in rent, surrender of space or shortening of term, the planned alternative use of the affected space) does not have a materially adverse effect on the value of the applicable Property taken as a whole, and provided that such Lease, as amended, modified or waived, is otherwise in compliance with the requirements of this Agreement and any subordination agreement binding upon Lender with respect to such Lease.  A termination of a Lease (other than an Operating Lease) with a tenant who is in default beyond applicable notice and grace periods shall not be considered an action which has a materially adverse effect on the value of the applicable Property taken as a whole.  Any amendment, modification, waiver, termination, rent reduction, space surrender or term shortening which does not satisfy the requirements set forth in this subsection shall be subject to the prior approval of Lender and its counsel (not to be unreasonably withheld), at Borrower’s expense.  Borrower shall promptly deliver to Lender copies of amendments, modifications and waivers for Major Leases (and any other Lease pursuant to any request made by Lender) which are entered into pursuant to this subsection together with Borrower’s certification that all conditions of this subsection have been satisfied.

(h)           Notwithstanding anything contained herein to the contrary, Borrower shall not permit Mortgage Borrower, without the prior written consent of Lender to enter into, renew, extend, amend, modify, waive any provisions of, terminate, reduce Rents under, accept a surrender of space under, or shorten the term of any Major Lease (or in the instance of a Major

51

Lease other than an Operating Lease, cause or permit the applicable Operating Lessee to do any of the foregoing).

(i)            Notwithstanding anything contained herein to the contrary, Borrower shall not, without the prior written consent of Lender, cause Mortgage Borrower to enter into, renew, extend, amend, modify, waive any provisions of, terminate, reduce Rents under, accept a surrender of space under, or shorten the term of any Lease during a Excess Cash Flow Sweep Period (as defined in the Mortgage Loan Agreement) (or cause or permit the Mortgage Borrower to cause or permit the applicable Operating Lessee to do any of the foregoing).

Section 5.14.PROPERTY MANAGEMENT

(a)           Borrower shall cause Mortgage Borrower or the applicable Operating Lessee to (i) promptly perform and observe all of the covenants required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any default under the Management Agreement of which it is aware; (iii) promptly deliver to Lender a copy of any notice of default or other material notice received by Mortgage Borrower under the Management Agreement; (iv) promptly give notice to Lender of any notice or information that Mortgage Borrower receives which indicates that Manager is terminating the Management Agreement or that Manager is otherwise discontinuing its management of the applicable Property; and (v) promptly enforce the performance and observance of all of the covenants required to be performed and observed by Manager under the Management Agreement.

(b)           Subject to the rights of the Mortgage Lender and the applicable provisions of the Mortgage Loan Documents, if at any time, an event shall occur (i) under any Management Agreement which constitutes a material monetary default by Manager as determined by Lender or a material non-monetary default by Manager as determined by Lender which default materially and adversely affects the value, use or operation of the Property or the Borrower’s obligation to pay the Debt and permits Mortgage Borrower or Operating Lessee to terminate the applicable Manager or (ii) under any Subordination of Management Agreement/Estoppel permits Lender, Mortgage Borrower or Operating Lessee to terminate the applicable Manager, Borrower shall, at the request of Lender, cause Mortgage Borrower to promptly terminate (or cause Operating Lessee to terminate) the applicable Management Agreement in accordance with the terms (including the minimum time periods for termination) of such Management Agreement and/or Subordination of Management Agreement/Estoppel, and replace Manager with a Qualified Manager approved by Lender on terms and conditions satisfactory to Lender, it being understood and agreed that the management fee for such replacement manager shall not exceed then prevailing market rates.  Without limiting the foregoing, in the event any Subordination of Management Agreement/Estoppel shall permit Lender to terminate the Management Agreement directly, upon Lender’s election to so terminate any such Management Agreement, Borrower shall reasonably cooperate and not in any way interfere with any act by Lender’s to so terminate such Management Agreement.

(c)           Borrower shall not cause or permit Mortgage Borrower to, without the prior written consent of Lender (which consent shall not be unreasonably withheld, conditioned or delayed): (i) surrender, terminate or cancel the Management Agreement or otherwise replace any

52

Manager or enter into any other management agreement with respect to any Property (or cause or permit the applicable Operating Lessee to do any of the foregoing); (ii) reduce or consent to the reduction of the term of any Management Agreement (or cause or permit the applicable Operating Lessee to do any of the foregoing); (iii) increase or consent to the increase of the amount of any charges under any Management Agreement (or cause or permit the applicable Operating Lessee to do any of the foregoing); or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, any Management Agreement in any material respect (or cause or permit the applicable Operating Lessee to do any of the foregoing).

(d)           Borrower shall (or shall cause Mortgage Borrower to) ensure that any replacement Manager shall in all events be a Qualified Manager, and shall be a party to a Management Agreement approved in writing by Lender, in its reasonable discretion.  Any new or replacement manager shall execute a form of Subordination of Management Agreement/Estoppel as may be approved by Lender in its reasonable discretion.

Section 5.15.LIENS

Borrower shall not permit Mortgage Borrower, without the prior written consent of Lender, to create, incur, assume or suffer to exist any Lien on any portion of any Property or permit any such action to be taken, except Permitted Encumbrances.  Borrower shall not incur, assume or suffer to exist any Lien on any portion of the Collateral or permit any such action to be taken.

Section 5.16.DEBT CANCELLATION

Borrower shall not cancel or otherwise forgive or release any claim or debt owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower’s business.  Borrower shall not permit Mortgage Borrower to cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance hereunder) owed to Mortgage Borrower by any person, except for adequate consideration and in the ordinary course of Mortgage Borrower’s business.

Section 5.17.ZONING

Borrower shall not permit Mortgage Borrower to initiate or consent to any zoning reclassification of any portion of any Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of any Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior written consent of Lender.

Section 5.18.ERISA

(a)           Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA.

53

(b)           Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of the Loan, as requested by Lender in its sole discretion, that (i) Borrower is not and does not maintain an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(3) of ERISA; (ii) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true:

(A)          Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

(B)           Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

(C)           Borrower qualifies as an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).

Section 5.19.NO JOINT ASSESSMENT

Borrower shall not permit Mortgage Borrower to suffer, permit or initiate the joint assessment of any Property with (a) any other real property constituting a tax lot separate from such Property, or (b) any portion of such Property which may be deemed to constitute personal property, or any other procedure whereby the Lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such Property.

Section 5.20.RECIPROCAL EASEMENT AGREEMENTS

Borrower shall not permit Mortgage Borrower to enter into, terminate or modify any REA without Lender’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.  Borrower shall cause Mortgage Borrower to enforce, comply with, and cause each of the parties to each REA to comply with all of the material economic terms and conditions contained in each REA.

Section 5.21.ALTERATIONS

Lender’s prior approval (which shall not be unreasonably withheld) shall be required in connection with any alterations to any Improvements, exclusive of alterations to tenant spaces required under any Lease, (a) that may have a material adverse effect on any Property, (b) that are structural in nature or (c) that, together with any other alterations undertaken at the same time (including any related alterations, improvements or replacements), are reasonably anticipated to have a cost in excess of the Alteration Threshold.  If the total unpaid amounts incurred and to be incurred with respect to such alterations to the Improvements shall at any time exceed the Alteration Threshold, Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrower’s obligations under the Loan Documents any of the following: (i) cash, (ii) direct non-callable obligations of the United States of America or other obligations which are “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, to the extent acceptable to the applicable Rating Agencies,

54

(iii) other securities acceptable to Lender and the Rating Agencies, (iv) Letter of Credit acceptable to Lender and the Rating Agencies or (v) a completion bond, provided that such completion bond is acceptable to the Lender and the Rating Agencies.  Such security shall be in an amount equal to the excess of the total unpaid amounts incurred and to be incurred with respect to such alterations to the Improvements over the Alteration Threshold.

Section 5.22.          FRANCHISE AGREEMENTS.

(a)           Borrower shall ensure that each Property (other than any Property for which with Lender’s consent there is no Franchise Agreement in place) shall be operated under the terms and conditions of the applicable Franchise Agreement.  Borrower shall cause Mortgage Borrower or the applicable Operating Lessee to (i) pay all sums required to be paid by the franchisee under each Franchise Agreement, (ii) diligently perform, observe and enforce all of the terms, covenants and conditions of each Franchise Agreement on the part of the franchisee thereunder to be performed, observed and enforced to the end that all things shall be done which are necessary to keep unimpaired the rights of said franchisee under each Franchise Agreement, (iii) promptly notify Lender of the giving of any notice to Mortgage Borrower and/or Operating Lessee of any default by the franchisee in the performance or observance of any of the terms, covenants or conditions of any Franchise Agreement on the part of the franchisee thereunder to be performed and observed and deliver to Lender a true copy of each such notice, and (iv) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditure plan, notice of default under the Franchise Agreement, report regarding operations of the related Property, estimates of any monetary nature and any other items reasonably requested by Lender, in each case received by Borrower, Mortgage Borrower or Affiliated Lessee under any Franchise Agreement.

(b)           Subject to the rights of the Mortgage Lender, Borrower shall not cause or permit Mortgage Borrower or any Operating Lessee to, without the prior consent of the Lender, surrender any Franchise Agreement or terminate or cancel any Franchise Agreement or modify, change, supplement, alter or amend any Franchise Agreement, in any respect, either orally or in writing.

(c)           If any franchisee shall default in the performance or observance of any material term, covenant or condition of any Franchise Agreement on the part of the franchisee thereunder to be performed or observed, then, without limiting the generality of the other provisions of this Agreement, and without waiving or releasing Borrower from any of its obligations hereunder and subject to the rights of the Mortgage Lender, Lender shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of such Franchise Agreement on the part of the franchisee to be performed or observed to be promptly performed or observed on behalf of Mortgage Borrower, to the end that the rights of said franchisee (and/or Mortgage Borrower and/or Operating Lessee) in, to and under such Franchise Agreement shall be kept unimpaired and free from default.  Any such amounts so advanced by Lender together with interest thereon from the date expended by Lender at the Default Rate shall be part of the Debt, and Borrower shall immediately repay such amounts to Lender upon demand.  Pursuant to the terms of the applicable Subordination Non-Disturbance Attornment Agreement, Subordination and Attornment Agreement and/or Subordination of Management Agreement/Estoppel, Lender and

55

any person designated by Lender shall have, and are hereby granted, the right to enter upon the applicable Property at any time and from time to time for the purpose of taking any such action.  If any Franchisor shall deliver to Lender a copy of any notice sent to Mortgage Borrower, Borrower and/or Operating Lessee of any default under any Franchise Agreement, such notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender in good faith, in reliance thereon.

(d)           Subject to the rights of the Mortgage Lender, Borrower shall cause the Mortgage Borrower or the applicable Operating Lessee to exercise each individual option, if any, to extend or renew the term of each Franchise Agreement upon demand by Lender made at any time within ninety (90) days prior to the last day upon which any such option may be exercised, and Borrower hereby expressly authorizes and appoints Lender as its attorney-in-fact to exercise (or cause the applicable Operating Lessee to exercise) any such option in the name of and upon behalf of Mortgage Borrower should Borrower fail to cause the Mortgage Borrower to do so, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest.

(e)           Any sums expended by Lender pursuant to this Section shall bear interest at the Default Rate from the date such cost is incurred to the date of payment to Lender, shall be deemed to constitute a portion of the Debt , shall be secured by the lien of the Pledge Agreement and the other Loan Documents and shall be immediately due and payable upon demand by Lender therefor.

(f)            Borrower shall (or shall cause Mortgage Borrower to), promptly upon request of Lender, use its diligent best efforts to obtain and deliver (or cause to be delivered) an estoppel certificate from each Franchisor stating that (i) each applicable Franchise Agreement is in full force and effect and has not been modified, amended or assigned, (ii) neither such Franchisor nor the franchisee named thereunder is in default under any of the terms, covenants or provisions of each applicable Franchise Agreement and such Franchisor knows of no event which, but for the passage of time or the giving of notice or both, would constitute an event of default under each applicable Franchise Agreement, (iii) neither such Franchisor nor the franchisee thereunder has commenced any action or given or received any notice for the purpose of terminating any applicable Franchise Agreement and (iv) all sums due and payable to such Franchisor under each applicable Franchise Agreement have been paid in full.

(g)           Upon the termination of any Franchise Agreement, Borrower shall (or shall cause Mortgage Borrower or Operating Lessee to) promptly enter into a new Franchise Agreement with a replacement Franchisor, which shall deliver a comfort or similar letter to and in favor of Lender, all upon terms and conditions acceptable to Lender in its discretion.

Section 5.23.GROUND LEASE

(a)           With respect to each Ground Lease, Borrower shall cause Mortgage Borrower to (i) subject to Section 9.10, pay all rents, additional rents and other sums required to be paid by Mortgage Borrower, as tenant under and pursuant to the provisions of the Ground Lease, (ii) diligently perform and observe all of the terms, covenants and conditions of the Ground Lease on the part of Mortgage Borrower, as tenant thereunder, (iii) promptly notify Lender of the giving of any notice by the landlord under the Ground Lease to Mortgage Borrower of any default by

56

Mortgage Borrower, as tenant thereunder, and deliver to Lender a true copy of each such notice within five (5) Business Days of receipt and (iv) promptly notify Lender of any bankruptcy, reorganization or insolvency of the landlord under the Ground Lease or of any notice thereof, and deliver to Lender a true copy of such notice within five (5) Business Days of Mortgage Borrower’s receipt.  Mortgage Borrower shall not, without the prior written consent of Lender, surrender the leasehold estate created by the Ground Lease or terminate or cancel the Ground Lease or modify, change, supplement, alter or amend the Ground Lease, either orally or in writing, and if Mortgage Borrower shall default in the performance or observance of any term, covenant or condition of the Ground Lease on the part of Mortgage Borrower, as tenant thereunder, and shall fail to cure the same prior to the expiration of any applicable cure period provided thereunder, Lender (subject to the rights of Mortgage Lender) shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all of the terms, covenants and conditions of the Ground Lease on the part of Mortgage Borrower to be performed or observed on behalf of Mortgage Borrower, to the end that the rights of Mortgage Borrower in, to and under the Ground Lease shall be kept unimpaired and free from default.  If the landlord under the Ground Lease shall deliver to Lender a copy of any notice of default under the Ground Lease, such notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender, in good faith, in reliance thereon.  Mortgage Borrower shall exercise each individual option, if any, to extend or renew the term of the Ground Lease upon demand by Lender made at any time within ninety (90) days prior to the last day upon which any such option may be exercised, and Mortgage Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to exercise any such option in the name of and upon behalf of Mortgage Borrower should Mortgage Borrower fail to do so, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest.

(b)           Other than as permitted by this Agreement, notwithstanding anything contained in either Ground Lease to the contrary, Borrower shall not cause or permit Mortgage Borrower to further sublet any portion of applicable Property subject to such Ground Lease (other than as permitted pursuant to the applicable terms and conditions hereof) without prior written consent of Lender.  In addition, (i) any such sublease shall not terminate or be terminable by the lessee thereunder, including, but not limited to, in the event of any action for the foreclosure of the Security Instrument (unless a judgment is obtained therein against such sublessee); and (ii) in the event that the Ground Lease is terminated as aforesaid, the sublessee under the sublease shall attorn to the lessor under the Ground Lease or to the purchaser at the sale of the applicable Property on such foreclosure, as the case may be.  In the event that any portion of the applicable Property shall be sublet pursuant to the terms of this subsection, such sublease shall be deemed to be included in the applicable Property.

Section 5.24.INTEREST RATE CAP AGREEMENT

(a)           Prior to or contemporaneously with the Closing Date, Borrower shall have obtained the Rate Cap, which shall continue until the end of the Interest Period in which the Maturity Date of the Loan shall occur and have a notional amount which shall not at any time be less than the outstanding principal balance of the Loan.  The Rate Cap shall be maintained throughout the term of the Loan with an Acceptable Counterparty.  If the provider of the Rate Cap or any Replacement Rate Cap ceases to be an Acceptable Counterparty, Borrower shall

57

obtain a Replacement Rate Cap at Borrower’s sole cost and expense within ten (10) days of receipt of notice from Lender or Borrower’s obtaining knowledge that the provider is no longer an Acceptable Counterparty.

(b)           Borrower shall collaterally assign to Lender pursuant to the Collateral Assignment of Interest Rate Cap Agreement all of its right, title and interest to receive any and all payments under the Rate Cap or any Replacement Rate Cap (and any related guarantee, if any) and shall deliver to Lender counterparts of such Collateral Assignment of Interest Rate Cap Agreement executed by the Borrower and by the Acceptable Counterparty and notify the Acceptable Counterparty of such collateral assignment (either in such Rate Cap or by separate instrument).  At such time as the Loan is repaid in full, all of Lender’s right, title and interest in the Rate Cap and any Replacement Rate Cap shall terminate and Lender shall execute and deliver at Borrower’s sole cost and expense, such documents as may be required to evidence Lender’s release of the Rate Cap and any Replacement Rate Cap and to notify the Acceptable Counterparty of such release.

(c)           Borrower shall comply with all of its obligations under the terms and provisions of the Rate Cap and any Replacement Rate Cap.  All amounts paid by the Acceptable Counterparty under the Rate Cap to Borrower or Lender shall be deposited immediately into an account designated by Lender.  Provided no Event of Default shall then exist, to the extent any funds actually received in such account when combined with funds actually received by and due Mezzanine Lender under this Agreement, the other Loan Documents and the Intercreditor Agreement, exceed amounts then due Lender under this Agreement and the other Loan Documents, such excess shall be distributed to Borrower.  Borrower shall take all actions reasonably requested by Lender to enforce Lender’s rights under the Rate Cap and any Replacement Rate Cap in the event of a default by the Acceptable Counterparty and shall not waive, amend or otherwise modify any of its rights thereunder.

(d)           In the event that Borrower fails to purchase and deliver to Lender the Rate Cap or any Replacement Rate Cap as and when required hereunder, or fails to maintain such agreement in accordance with the terms and provisions of this Agreement, Lender may purchase the Rate Cap or any Replacement Rate Cap, as applicable, and the cost incurred by Lender in purchasing the Rate Cap or any Replacement Rate Cap, as applicable, shall be paid by Borrower to Lender with interest thereon at the Default Rate from the date such cost was incurred by Lender until such cost is reimbursed by Borrower to Lender.

(e)           In connection with the Rate Cap and any Replacement Rate Cap, Borrower shall obtain and deliver to Lender an opinion from counsel (which counsel may be in house counsel for the Acceptable Counterparty) for the Acceptable Counterparty (upon which Lender and its successors and assigns may rely) which shall provide, in relevant part, that:

(i)            the Acceptable Counterparty is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has the organizational power and authority to execute and deliver, and to perform its obligations under, the Rate Cap or the Replacement Rate Cap, as applicable;

58

(ii)           the execution and delivery of the Rate Cap or the Replacement Rate Cap, as applicable, by the Acceptable Counterparty, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been and remain duly authorized by all necessary action and do not contravene any provision of its certificate of incorporation or by laws (or equivalent organizational documents) or any law, regulation or contractual restriction binding on or affecting it or its property;

(iii)          all consents, authorizations and approvals required for the execution and delivery by the Acceptable Counterparty of the Rate Cap or the Replacement Rate Cap, as applicable, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been obtained and remain in full force and effect, all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with any governmental authority or regulatory body is required for such execution, delivery or performance; and

(iv)          the Rate Cap or the Replacement Cap, as applicable, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, has been duly executed and delivered by the Acceptable Counterparty and constitutes the legal, valid and binding obligation of the Acceptable Counterparty, enforceable against the Acceptable Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

Section 5.25.NOTICES

Borrower shall give notice, or cause notice to be given, to Lender promptly upon the occurrence of:

(a)           any Event of Default, or a Default or Event of Default under the Mortgage Loan Documents;

(b)           any material default or event of default under any Contractual Obligation of Borrower, or, to the knowledge of Borrower, Mortgage Borrower, or Borrower Principal that could reasonably be expected to have a material adverse effect on Borrower, the ability of Borrower to perform under the Loan Documents or the rights and remedies of Lender under the Loan Documents;

(c)           any litigation or proceeding affecting Borrower, or, to the knowledge of Borrower, affecting any of Mortgage Borrower or Borrower Principal, in which the amount involved in each case is $100,000.00 or more and not fully covered by insurance, or in which injunctive or similar relief is sought; or

(d)           a change in the business, operations, property or financial or other condition or prospects of Borrower, or, to the knowledge of Borrower, Mortgage Borrower or Borrower Principal which could reasonably be expected to have a material adverse effect on Borrower,

59

the ability of Borrower to perform under the Loan Documents or the rights and remedies of Lender under the Loan Documents.

Section 5.26.CURING

Lender shall have the right, but shall not have the obligation, to exercise Borrower’s rights under the Mortgage Borrower Partnership Agreement (a) to cure a Default or Event of Default under the Mortgage Loan, and (b) to satisfy any Liens, claims or judgments against any Property (except for Liens permitted by the Mortgage Loan Documents), in the case of either (a) or (b), unless Borrower or Mortgage Borrower shall be diligently pursuing remedies to cure to Lender’s sole satisfaction.  Borrower shall reimburse Lender on demand for any and all costs incurred by Lender in connection with curing any such Default or Event of Default under the Mortgage Loan or satisfying any Liens, claims or judgments against any Property.

Section 5.27.          SPECIAL DISTRIBUTIONS

On each date on which amounts are required to be paid to Lender under any of the Loan Documents, Borrower shall exercise its rights under the Mortgage Borrower Partnership Agreement to cause Mortgage Borrower (to the extent of any and all available cash after payment of all amounts due under or required to be paid pursuant to the Mortgage Loan Documents) to make to Borrower a distribution in an aggregate amount such that Lender shall receive the amount required to be paid to Lender on such date, after consideration of all amounts  (a) to be paid to Lender under the Cash Management Agreement on such date (and actually received by Lender on such date) and (b) any other amounts actually received by Lender (and due Lender under the Intercreditor Agreement) as of such date.  Nothing contained herein shall in any way modify (or be deemed to modify) any other obligation of Borrower hereunder, including, but not limited to any other payment obligations of Borrower hereunder.

Section 5.28.LIMITATION ON SECURITIES ISSUANCES

None of Borrower or any of its subsidiaries shall issue any membership interests or other securities, other than those that have been issued as of the Closing Date.

Section 5.29.LIMITATIONS ON DISTRIBUTIONS

Following (a) the occurrence and during the continuance of a monetary Event of Default, (b) the occurrence and during the continuance of an Event of Default under Section 11.1(f) hereof or (c) the occurrence of any other Event of Default with respect to which Lender has accelerated the Loan, Borrower shall not make any distributions to its members.

Section 5.30.OTHER LIMITATIONS

Prior to the payment in full of the Debt, neither Borrower nor any of its Subsidiaries shall, nor permit Mortgage Borrower to, without the prior written consent of Lender (which may be furnished or withheld at its sole and absolute discretion, except as otherwise provided herein), give its consent or approval to any of the following actions or items:

(a)           except as expressly permitted pursuant to and in accordance with the terms hereof (including, without limitation, the provisions of Section 5.34 hereof, with respect to a refinance

60

of the Mortgage Loan, and the provisions of Section 2.4(c)(ii) hereof, with respect to the Release of a Property) (i) any refinance of the Mortgage Loan, (ii) any prepayment in full of the Mortgage Loan, (iii) any Transfer or Release of a Property or any portion thereof, or (iv) any action in connection with or in furtherance of the foregoing;

(b)           except as expressly permitted pursuant to and in accordance with the terms hereof, creating, incurring, assuming or suffering to exist any additional Liens on any portion of the Properties except for Permitted Encumbrances;

(c)           any modification, amendment, consolidation, spread, restatement, waiver or termination of any of the Mortgage Loan Documents;

(d)           approve the terms of any Annual Budget (unless pursuant to and in accordance with the provisions of Section 5.11(a)(iv));

(e)           the distribution to the partners, members or shareholders of Mortgage Borrower of property other than cash;

(f)            except as set forth in an approved Annual Budget or as permitted under the Mortgage Loan Documents, any (i) improvement, renovation or refurbishment of all or any part of a Property to a materially higher standard or level than that of comparable properties in the same market segment and in the same geographical area as such Property, (ii) removal, demolition or material alteration of the improvements or equipment on a Property or (iii) material increase in the square footage or gross leasable area of the improvements on a Property if a material portion of any of the expenses in connection therewith are paid or incurred by Mortgage Borrower; provided that Mezzanine Lender will not unreasonably withhold, delay or condition its consent to any such actions to the extent the same are to be funded in full by an additional capital contribution to Borrower;

(g)           any material change in the method of conduct of the business of Mortgage Borrower or Borrower or any of its subsidiaries, such consent to be given in the reasonable discretion of the Lender;

(h)           the settlement of any claim against Mortgage Borrower or Borrower or any of its Subsidiaries, other than (i) any settlement provided for in an Approved Annual Budget or (ii) a fully insured third party claim, in any amount greater than $100,000 (in the case of Borrower or Mortgage Borrower), such consent to be given in the sole discretion of the Lender; or

(i)            except as required by the Loan Documents or the Mortgage Loan Documents, any determination to restore a Property after a Casualty or Condemnation, except to the extent funded solely from additional capital contributions to Borrower.

Section 5.31.CONTRACTUAL OBLIGATIONS

Other than the Loan Documents, the Borrower Partnership Agreement (and the initial membership interests in Borrower issued pursuant thereto), the Mortgage Loan Documents and the Mortgage Borrower Partnership Agreement, neither Borrower nor any of its assets shall be subject to any Contractual Obligations, and Borrower shall not enter into any agreement,

61

instrument or undertaking by which it or its assets are bound, except for such liabilities, not material in the aggregate, that are incidental to its activities as a limited partner or regular member, as applicable, of Mortgage Borrower.

Section 5.32.MANAGER OF FLINT PROPERTY

The initial Manager of the Flint Property as of the Closing Date is Flagstone.  Borrower anticipates entering into with Interstate a new Management Agreement (“Flint Interstate Management Agreement”) in the exact same form as the form in place on the Closing Date with Interstate on the other Interstate Properties.  On or before February 15, 2004, Borrower shall provide Lender with a copy of the executed Flint Interstate Management Agreement as well as the Subordination of Management Agreement/Estoppel in the form delivered on the Closing Date and executed by Interstate for the other Interstate Managed Properties.

Section 5.33.          CONSOLIDATED TANGIBLE NET WORTH

Borrower Principal shall not permit the Consolidated Tangible Net Worth of Borrower Principal and its Subsidiaries on a consolidated basis at any time to be less than the sum of $150,000,000.00 plus the cost basis of the Properties subject to the Lien of the Mortgage at such time as set forth on Schedule I hereto minus the aggregate then outstanding principal balance of the Loan and Mortgage Loan.

Section 5.34.          REFINANCING

Borrower shall not consent to or permit a refinancing of the Mortgage Loan unless it obtains the prior written consent of Lender, which consent may be withheld in the event (a) Lender shall determine in its sole and absolute discretion that the terms of such new mortgage loan are not at least equivalent to the terms of the Mortgage Loan, (b) without limiting the foregoing, (i) the principal balance of the new mortgage loan shall in no event exceed the principal balance of the Mortgage Loan on the date of the refinancing, (ii) the new mortgage loan shall have an interest rate that is no higher than the then current interest rate for the Mortgage Loan, as determined by Lender in its sole discretion (and shall provide for an interest rate cap agreement substantially identical to the Rate Cap), (iii) the new mortgage loan shall have an amortization schedule that provides for repayment in monthly installments each of which is no greater than the monthly principal payments due under the Mortgage Note , (iv) the new mortgage loan shall have a maturity date that is no earlier than that provided for under the Mortgage Loan at the time of the closing thereof, as such maturity date may be extended pursuant to the Mortgage Loan Agreement, and (v) the terms of the new mortgage loan shall permit the Loan, (c) the new mortgage lender shall refuse to enter into an intercreditor agreement with Lender no less favorable to Lender (as determined in Lender’s sole and absolute discretion) than the Intercreditor Agreement, (d) Borrower shall fail to execute and deliver such amendments to this Agreement and the other Loan Documents as Lender may determine necessary to preserve all rights granted Lender under this Agreement and the other Loan Documents, (e) Borrower shall fail to deliver to Lender such settlement statements, pay-off letters, opinions and other documentation as Lender shall request in connection with such refinancing, or (f) Borrower shall fail to pay all costs and expenses incurred by Lender (including, but not limited to, attorneys’ fees) in connection with such refinancing.

62

ARTICLE 6
ENTITY COVENANTS

Section 6.1.SINGLE PURPOSE ENTITY/SEPARATENESS

Until the Debt has been paid in full, Borrower represents, warrants and covenants as follows (provided, however, any Borrower covenant that it will cause Mortgage Borrower to take any action shall be deemed to mean that the Borrower shall act in Borrower’s capacity as an equity owner of Mortgage Borrower and Mortgage Borrower GP):

(a)           Borrower has not and will not and will not permit Mortgage Borrower or SPE Component Entity thereof to:

(i)            with respect to (x) Borrower, engage in any business or activity other than the ownership of the Pledged Securities and the Collateral and any activities incidental thereto and (y) Mortgage Borrower, engage in any business or activity other than the ownership, operation and maintenance of the Properties, and activities incidental thereto;

(ii)           with respect to (x) Borrower acquire any assets other than (A) the Pledged Securities and the Collateral and (B) such incidental Personal Property as may be necessary for the operation of the Pledged Securities and the Collateral (y) Mortgage Borrower acquire or own any assets other than (A) the Properties, and (B) such incidental Personal Property as may be necessary for the operation of each Property;

(iii)          merge into or consolidate with any Person, or dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without the prior written consent of Lender and after a Securitization written confirmation from each of the applicable Rating Agencies that the same shall not result in the qualification, withdrawal or downgrade of the initial, or if higher, then current ratings issued in connection with a Securitization;

(iv)          fail to observe all organizational formalities, or fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the applicable Legal Requirements of the jurisdiction of its organization or formation, or amend, modify, terminate or fail to comply with the provisions of its organizational documents;

(v)           own any subsidiary, or make any investment in, any Person, without the prior written consent of Lender and after a Securitization written confirmation from each of the applicable Rating Agencies that said ownership or investment shall not result in the qualification, withdrawal or downgrade of the initial, or if higher, then current ratings issued in connection with a Securitization;

(vi)          commingle its assets with the assets of any other Person;

(vii)         with respect to (x) Borrower , incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (A) the Debt, (B) trade

63

and operational indebtedness incurred in the ordinary course of business with trade creditors (including obligations in respect of alterations, replacements and capital improvements permitted under the Loan Documents), provided such indebtedness is (1) unsecured, (2) not evidenced by a note, (3) on commercially reasonable terms and conditions, and (4) due not more than sixty (60) days past the date incurred and paid on or prior to such date, and/or (C) financing leases and purchase money indebtedness incurred in the ordinary course of business relating to Personal Property on commercially reasonable terms and conditions; provided however, the aggregate amount of the indebtedness described in (B) and (C) shall , when combined with any similar indebtedness then held by the Affiliated Lessee, not exceed at any time five percent (5%) of the outstanding principal amount of the Note; and (y) Mortgage Borrower or any SPE Component Entity thereof, incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than as permitted under the Mortgage Loan Documents;

(viii)        fail to maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person; except that Borrower’s and Mortgage Borrower’s financial position, assets, liabilities, net worth and operating results may be included in the consolidated financial statements of an Affiliate, provided that such consolidated financial statements clearly and conspicuously identify the Borrower as a separate legal entity;

(ix)           enter into any contract or agreement with any general partner, member, shareholder, principal, guarantor of the obligations of Borrower or of Mortgage Borrower, or any Affiliate of the foregoing, except upon terms and conditions that are intrinsically fair, commercially reasonable and substantially similar to those that would be available on an arm’s-length basis with unaffiliated third parties;

(x)            maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

(xi)           except as otherwise expressly permitted by the Loan Documents, assume or guaranty the debts of any other Person (other than any commercially reasonable guaranty of any Affiliated Lessee’s obligations under any Franchise Agreement or Management Agreement consented to by Lender), hold itself out to be responsible for the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person;

(xii)          make any loans or advances to any Person, without the prior written consent of Lender and after a Securitization written confirmation from each of the applicable Rating Agencies that the same shall not result in the qualification, withdrawal or downgrade of the initial, or if higher, then current ratings issued in connection with a Securitization;

(xiii)         fail to file its own tax returns or fail to file a consolidated tax return on which Borrower (and as applicable, Mortgage Borrower and any SPE Component Entity

64

thereof) is identified as a separate entity from all other Persons, or which otherwise complies with or if necessary is promptly amended to comply with all applicable Rating Agency requirements;

(xiv)        fail either to hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

(xv)         fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

(xvi)        if it is a partnership or limited liability company, without the unanimous written consent of all of its partners or members, as applicable, and the written consent of 100% of the directors or managers as applicable, of each SPE Component Entity (if any), including, without limitation, each Independent Director, (a) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any Creditors Rights Laws, (b) seek or consent to the appointment of a receiver, liquidator or any similar official, (c) take any action that might cause such entity to become insolvent, or (d) make an assignment for the benefit of creditors;

(xvii)       fail to allocate shared expenses (including, without limitation, shared office space and services performed by an employee of an Affiliate) among the Persons sharing such expenses and to use separate stationery, invoices and checks;

(xviii)      (A) fail to remain solvent or (B) fail to pay its own liabilities (including, without limitation, salaries of its own employees) only from its own funds;

(xix)         acquire obligations or securities of its partners, members, shareholders or other Affiliates, as applicable;

(xx)          violate or cause to be violated the assumptions made with respect to Borrower and its principals in any opinion letter pertaining to substantive consolidation delivered to Lender in connection with the Loan;

(xxi)         fail to maintain a sufficient number of employees in light of its contemplated business operations; or

(xxii)        form, acquire, or hold any subsidiary (other than Mortgage Borrower and Mortgage Borrower GP).

(b)           If Borrower is a partnership or limited liability company which is not a single member limited liability company, each general partner in the case of a general partnership, each general partner in the case of a limited partnership, or the managing member in the case of a limited liability company (each an “SPE Component Entity”) of Borrower, as applicable, shall be a corporation or a single member Delaware limited liability company (which shall comply with all additional provisions contained herein with respect to Delaware limited liability companies) whose sole asset is its interest in Borrower.  Each SPE Component Entity (i) will at all times

65

comply with each of the covenants, terms and provisions contained in Section 6.1(a)(iii) - (vi) and (viii) - (xxi), as if such representation, warranty or covenant was made directly by such SPE Component Entity; (ii) will not engage in any business or activity other than owning an interest in Borrower; (iii) will not acquire or own any assets other than its partnership, membership, or other equity interest in Borrower; (iv) will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation); and (v) will cause Borrower to comply with the provisions of this Section 6.1 and Section 6.4.  Prior to the withdrawal or the disassociation of any SPE Component Entity from Borrower, Borrower shall immediately appoint a new general partner or managing member whose articles of incorporation (or other applicable formation and entity documentation) are substantially similar to those of such SPE Component Entity and, if an opinion letter pertaining to substantive consolidation was required at closing, deliver a new opinion letter acceptable to Lender and the Rating Agencies with respect to the new SPE Component Entity and its equity owners.  Notwithstanding the foregoing, to the extent Borrower is a single member Delaware limited liability company, so long as Borrower maintains such formation status, no SPE Component Entity shall be required.

(c)           In the event Borrower is a single member Delaware limited liability company, the limited liability company agreement of Borrower (the “LLC Agreement”) shall provide that (i) upon the occurrence of any event that causes the sole member of Borrower (“Member”) to cease to be the member of Borrower (other than (A) upon an assignment by Member of all of its limited liability company interest in Borrower and the admission of the transferee in accordance with the Loan Documents and the LLC Agreement, or (B) the resignation of Member and the admission of an additional member of Borrower in accordance with the terms of the Loan Documents and the LLC Agreement), any person acting as Independent Director of Borrower shall, without any action of any other Person and simultaneously with the Member ceasing to be the member of Borrower, automatically be admitted to Borrower as a member thereof (“Special Member”) and shall continue Borrower without dissolution and (ii) Special Member may not resign from Borrower or transfer its rights as Special Member unless (A) a successor Special Member has been admitted to Borrower as Special Member in accordance with requirements of Delaware law and (B) such successor Special Member has also accepted its appointment as an Independent Director.  The LLC Agreement shall further provide that (i) Special Member shall automatically cease to be a member of Borrower upon the admission to Borrower of a substitute Member, (ii) Special Member shall be a member of Borrower that has no interest in the profits, losses and capital of Borrower and has no right to receive any distributions of Borrower assets, (iii) pursuant to Section 18-301 of the Delaware Limited Liability Company Act (the “Act”), Special Member shall not be required to make any capital contributions to Borrower and shall not receive a limited liability company interest in Borrower, (iv) Special Member, in its capacity as Special Member, may not bind Borrower and (v) except as required by any mandatory provision of the Act, Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, Borrower, including, without limitation, the merger, consolidation or conversion of Borrower; provided, however, such prohibition shall not limit the obligations of Special Member, in its capacity as Independent Director, to vote on such matters required by the Loan Documents or the LLC Agreement.  In order to implement the admission to Borrower of Special Member, Special Member shall execute a counterpart to the LLC Agreement.  Prior to its admission to Borrower as Special Member, Special Member shall not be a member of Borrower.

66

Upon the occurrence of any event that causes the Member to cease to be a member of Borrower, to the fullest extent permitted by law, the personal representative of Member shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of Member in Borrower, agree in writing (i) to continue Borrower and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of Borrower, effective as of the occurrence of the event that terminated the continued membership of Member of Borrower in Borrower.  Any action initiated by or brought against Member or Special Member under any Creditors Rights Laws shall not cause Member or Special Member to cease to be a member of Borrower and upon the occurrence of such an event, the business of Borrower shall continue without dissolution.  The LLC Agreement shall provide that each of Member and Special Member waives any right it might have to agree in writing to dissolve Borrower upon the occurrence of any action initiated by or brought against Member or Special Member under any Creditors Rights Laws, or the occurrence of an event that causes Member or Special Member to cease to be a member of Borrower.

Section 6.2.CHANGE OF NAME, IDENTITY OR STRUCTURE

Borrower shall not change or permit to be changed (a) Borrower’s name, (b) Borrower’s identity (including its trade name or names), (c) Borrower’s principal place of business set forth on the first page of this Agreement, (d) the corporate, partnership or other organizational structure of Borrower, Borrower Principal, Mortgage Borrower or SPE Component Entity (if any), (e) Borrower’s state of organization, or (f) Borrower’s organizational identification number, without in each case notifying Lender of such change in writing at least thirty (30) days prior to the effective date of such change and, in the case of a change in Borrower’s structure, without first obtaining the prior written consent of Lender.  In addition, Borrower shall not change or permit to be changed any organizational documents of Borrower or any SPE Component Entity (if any) if such change would adversely impact the covenants set forth in Section 6.1 and Section 6.4 hereof.  Borrower authorizes Lender to file any financing statement or financing statement amendment required by Lender to establish or maintain the validity, perfection and priority of the security interest granted herein.  At the request of Lender, Borrower shall execute a certificate in form satisfactory to Lender listing the trade names under which Borrower intends to operate each Property, and representing and warranting that Borrower does business under no other trade name with respect to such Property.  If Borrower does not now have an organizational identification number and later obtains one, or if the organizational identification number assigned to Borrower subsequently changes, Borrower shall promptly notify Lender of such organizational identification number or change.

Section 6.3.BUSINESS AND OPERATIONS

(a)           Borrower will qualify to do business and will remain in good standing under the laws of the applicable State as and to the extent the same are required for the ownership, maintenance, management and operation of the Pledged Securities and the Collateral.  Borrower shall not enter into any line of business other than the ownership of the Pledged Securities and the Collateral, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business.

67

(b)           Borrower will cause Mortgage Borrower to qualify to do business and to remain in good standing under the laws of each State as and to the extent the same are required for the ownership, maintenance, management and operation of the Property.  Borrower shall not permit Mortgage Borrower to enter into any line of business other than the ownership of the Property, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business.

Section 6.4.INDEPENDENT DIRECTOR

(a)           The organizational documents of each SPE Component Entity (if any) shall provide that at all times there shall be, and Borrower shall cause there to be, at least two duly appointed members of the board of directors, board of managers or equivalent governing board (each an “Independent Director”) of such SPE Component Entity reasonably satisfactory to Lender each of whom are not at the time of such individual’s initial appointment, and shall not have been at any time during the preceding five (5) years, and shall not be at any time while serving as an Independent Director of such SPE Component Entity, either (i) a shareholder (or other equity owner) of, or an officer, director, partner, manager, member (other than as a Special Member in the case of a single member Delaware limited liability company, or in the instance in which such Independent Director is an employee, representative or officer of a corporate service company which in the ordinary course of business serves as Independent Director for an Affiliate of Borrower other than any Affiliate which has a direct interest in Borrower, Affiliated Lessee or any of Borrower’s constituent entities), employee, attorney or counsel of, Borrower, such SPE Component Entity or any of  their respective shareholders, partners, members, subsidiaries or Affiliates; (ii) a customer or creditor of, or supplier to, Borrower or any of its respective shareholders, partners, members, subsidiaries or Affiliates who derives any of its purchases or revenue from its activities with Borrower or such SPE Component Entity or any Affiliate of any of them; (iii) a Person who Controls or is under common Control with any such shareholder, officer, director, partner, manager, member, employee, supplier, creditor or customer; or (iv) a member of the immediate family of any such shareholder, officer, director, partner, manager, member, employee, supplier, creditor or customer.

(b)           The organizational documents of each SPE Component Entity (if any) shall provide that the board of directors, board of managers or equivalent governing board of such SPE Component Entity shall not take any action which, under the terms of any certificate of incorporation, certificate of formation, limited liability company agreement, by-laws, similar entity governance document or any voting trust agreement with respect to any common stock, requires an unanimous vote of the board of directors of such SPE Component Entity of Borrower unless at the time of such action there shall be at least two members of the board of directors who are Independent Directors.  Such SPE Component Entity will not, without the unanimous written consent of its board of directors, board of managers or other equivalent governing board including each Independent Director, on behalf of itself or Borrower, (i) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any applicable Creditors Rights Laws; (ii) seek or consent to the appointment of a receiver, liquidator or any similar official; (iii) take any action that might cause such entity to become insolvent; or (iv) make an assignment for the benefit of creditors.

68

ARTICLE 7
NO SALE OR ENCUMBRANCE

Section 7.1.TRANSFER DEFINITIONS

For purposes of this Article 7 an “Affiliated Manager” shall mean any managing agent in which Borrower, Mortgage Borrower, Affiliated Lessee, Borrower Principal, any SPE Component Entity (if any) or any Affiliate of such entities has, directly or indirectly, any legal, beneficial or economic interest; “Control” shall mean the power to direct the management and policies of a Restricted Party, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise; “Restricted Party” shall mean Borrower, Mortgage Borrower, Affiliated Lessee, Borrower Principal, any SPE Component Entity (if any), any Affiliated Manager, or any shareholder, partner, member or non-member manager, or any direct or indirect legal or beneficial owner of Borrower, Mortgage Borrower, Affiliated Lessee, Borrower Principal, any SPE Component Entity (if any), any Affiliated Manager or any non-member manager; and a “Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, grant of any options with respect to, or any other transfer or disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) of a legal or beneficial interest.

Section 7.2.NO SALE/ENCUMBRANCE

(a)           Borrower shall not cause or permit a Sale or Pledge of the Collateral or any Property or any part thereof or any legal or beneficial interest therein held by Borrower nor permit a Sale or Pledge of an interest in any Restricted Party (in each case, a “Prohibited Transfer”), other than pursuant to Leases of space in the Improvements to Tenants in accordance with the provisions of Section 5.13, without the prior written consent of Lender.  Nothing set forth herein shall or shall be deemed to prohibit the sale of publicly traded shares in CNL Hospitality Properties, Inc.

(b)           A Prohibited Transfer shall include, but not be limited to, (i) an installment sales agreement wherein Mortgage Borrower agrees to sell any Property or any part thereof for a price to be paid in installments; (ii) other than an Operating Lease, an agreement by Mortgage Borrower leasing all or a substantial part of any Property for other than actual occupancy by a Tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Mortgage Borrower’s right, title and interest in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge of such corporation’s stock or the creation or issuance of new stock in one or a series of transactions; (iv) if a Restricted Party is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership interest of any general or limited partner or any profits or proceeds relating to such partnership interests or the creation or issuance of new partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of any member or any profits or proceeds relating to such membership interest; (vi) if a Restricted Party

69

is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests; or (vii) the removal of Manager, the acceptance by Borrower of the resignation of Manager when such Manager was not entitled under the applicable Management Agreement to resign or the resignation of the Manager in collusion with the Borrower, in each case other than in accordance with Section 5.14.

Section 7.3.PERMITTED TRANSFERS

Notwithstanding the provisions of Section 7.2, the following transfers shall not be deemed to be a Prohibited Transfer:  (a) a transfer by devise or descent or by operation of law upon the death of a member, partner or shareholder of a Restricted Party; (b) the transfer, in one or a series of transactions, of not more than forty-nine percent (49%) of the stock, limited partnership interests or non-managing membership interests (as the case may be) in a Restricted Party (other than a transfer or issuance of any interests in the Mortgage Borrower or the Mortgage Borrower GP which shall be a Prohibited Transfer); provided, however, no such transfers shall result in a change in Control in the Restricted Party or change in control of any Property, and as a condition to each such transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed transfer; (c) the pledge by Borrower of its interest in Mortgage Borrower and Borrower its interest in Mortgage Borrower GP pursuant to the Pledge Agreement; (d) a transfer permitted under the Intercreditor Agreement; (e) a transfer in a transaction (including, without limitation, a merger or consolidation) whereby CNL Rose Acquisition Corp., CNL Rose GP Corp. or CNL Hospitality Properties, Inc. transfer their interests in Borrower Principal provided that following such transaction a majority of the interests in Borrower Principal continue to be owned, directly or indirectly, by CNL Hospitality Properties, Inc. and CNL Hospitality Properties, Inc. shall continue to Control Borrower Principal; or (f) other than as to Borrower Principal or any of Borrower Principal’s Subsidiaries any transaction, including, without limitation, a merger or consolidation involving a Restricted Party, whereby, immediately following such transaction (i) a majority of the ownership interests in such Restricted Party are owned, directly or indirectly, by Persons who owned, directly or indirectly, a majority of the ownership interests of such Restricted Party immediately prior to such transaction, and (ii) as to any entity other than CNL Hospitality Properties, Inc., there is no resulting change in Control. Notwithstanding the foregoing, any transfer that results in any Person owning in excess of forty-nine percent (49%) of the ownership interest in a Restricted Party other than a transfer permitted under the Intercreditor Agreement or a transfer permitted under items (e) or (f) above, shall comply with the requirements of Section 7.4 hereof.

Section 7.4.LENDER’S RIGHTS

All expenses incurred by Lender shall be payable by Borrower whether or not Lender consents to the Prohibited Transfer.  Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon a Prohibited Transfer made without Lender’s consent. This provision shall apply to each and every Prohibited Transfer, whether or not Lender has consented to any previous Prohibited Transfer.  Notwithstanding anything to the contrary contained in this Section 7.4, in the event a substantive non-consolidation opinion was delivered to Lender and the Rating Agencies in connection with the closing of the Loan, and if any Sale or Pledge permitted

70

under this Article 7 results in any Person and its Affiliates owning in excess of forty-nine percent (49%) of the ownership interests in a Restricted Party, Borrower shall, prior to such transfer, and in addition to any other requirement for Lender consent contained herein, deliver a revised substantive non-consolidation opinion to Lender reflecting such Prohibited Transfer, which opinion shall be in form, scope and substance acceptable in all respects to Lender and the Rating Agencies.

Section 7.5.ASSUMPTION

Borrower and Lender acknowledge and agree that no transfer of all of the Collateral or of all the Properties to, and the related assumption of the Loan or Mortgage Loan, respectively, by, any Person shall be permitted under this Agreement.

ARTICLE 8
INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

Section 8.1.INSURANCE

(a)           Borrower shall cause Mortgage Borrower to obtain and maintain, at all times insurance for Mortgage Borrower and for each Property required by the Mortgage Lender, and if for any reason not being provided, Borrower shall cause Mortgage Borrower to provide at least the following coverages for each Property:

(i)            comprehensive “all risk” insurance on the Improvements and the Personal Property, in each case (A) in an amount equal to one hundred percent (100%) of the “Full Replacement Cost,” which for purposes of this Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation; (B) containing an agreed amount endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions; (C) providing for no deductible in excess of $50,000 for all such insurance coverage; and (D)  if any of the Improvements or the use of such Property shall at any time constitute legal non-conforming structures or uses, providing coverage for contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements and containing an “Ordinance or Law Coverage” or “Enforcement” endorsement.  In addition, Borrower shall obtain: (y) if any portion of the Improvements is currently or at any time in the future located in a  “special flood hazard area” designated by the Federal Emergency Management Agency, flood hazard insurance in an amount equal to the maximum amount of such insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended; and (z) earthquake insurance in amounts and in form and substance reasonably satisfactory to Lender in the event such Property is located in an area with a high degree of seismic risk, provided that the insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this subsection (i);

(ii)           Commercial General Liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about such

71

Property, including “Dram Shop” or other liquor liability coverage if alcoholic beverages are sold from or may be consumed at such Property, with such insurance (A) to be on the so-called “occurrence” form with a general aggregate limit of not less than $2,000,000 and a per occurrence limit of not less than $1,000,000; (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations; (3) independent contractors; (4) blanket contractual liability; and (5) contractual liability covering the indemnities contained in clauses (a) through (e) and (f) in Section 14.01 hereof to the extent the same is available;

(iii)          loss of rents insurance or business income insurance, as applicable, (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; and (C) which provides that after the physical loss to the Improvements and Personal Property occurs, the loss of rents or income, as applicable, will be insured until completion of Restoration or the expiration of eighteen (18) months, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) which contains an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of six (6) months from the date that such Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period.  The amount of such loss of rents or business income insurance, as applicable, shall be determined prior to the date hereof and at least once each year thereafter based on Borrower’s reasonable estimate of the gross income from such Property for the succeeding period of coverage required above.  Subject to the rights of the Mortgage Lender under the Mortgage Loan Agreement, all proceeds payable to Lender pursuant to this subsection shall be held by Lender and shall be applied to the obligations secured by the Loan Documents from time to time due and payable hereunder and under the Note; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in the Note, this Agreement and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such loss of rents or business income insurance, as applicable;

(iv)          at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if such Property coverage form does not otherwise apply, (A) owner’s contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the above mentioned commercial general liability insurance policy; and (B) the insurance provided for in subsection (i) above written in a so-called Builder’s Risk Completed Value form (1) on a non-reporting basis, (2) against “all risks” insured against pursuant to subsection (i) above, (3) including permission to occupy such Property, and (4) with an agreed amount endorsement waiving co-insurance provisions;

72

(v)           workers’ compensation, subject to the statutory limits of the State, and employer’s liability insurance in respect of any work or operations on or about such Property, or in connection with such Property or its operation (if applicable);

(vi)          comprehensive boiler and machinery insurance, if applicable, in amounts as shall be reasonably required by Lender on terms consistent with the commercial property insurance policy required under subsection (i) above;

(vii)         excess liability insurance in an amount not less than $50,000,000 per occurrence on terms consistent with the commercial general liability insurance required under subsection (ii) above or as otherwise approved by Lender;

(viii)        sinkhole and mine subsidence insurance, if required, and if such Property is located in an “earthquake prone zone” as determined by the U.S. Geological Survey, earthquake insurance in an amount not less than the probable maximum loss, all as determined by a recognized engineering firm acceptable to and approved by Lender, less any applicable deductibles, including business interruption coverage in an amount not less than that set forth in clause (iii) above;

(ix)           a blanket fidelity bond and errors and omissions insurance coverage insuring against losses resulting from dishonest or fraudulent acts committed by (A) Borrower’s personnel; (B) any employees of outside firms that provide appraisal, legal, data processing or other services for Borrower or (C) temporary contract employees or student interns;

(x)            motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence, including umbrella coverage, of One Million and No/100 Dollars ($1,000,000)

(xi)           environmental insurance for the Louisville Property in form acceptable to Lender for an initial term of two years past the initial Maturity Date and, if Borrower extends the Maturity Date in accordance with Section 2.3(b) hereof, for each Extended Maturity Date, for two years from each such Extended Maturity Date; and

(xii)          upon sixty (60) days’ written notice, such other reasonable insurance and in such reasonable amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to such Property located in or around the region in which such Property is located.

With respect to the Policies required to be maintained pursuant to clauses (i), (iii) and (iv) above, Borrower shall maintain insurance coverage against Losses resulting from acts of terrorism.

(b)           All insurance provided for in Section 8.1(a) shall be obtained under valid and enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and shall be subject to the approval of Lender as to insurance companies, amounts, deductibles, loss payees and insureds.  The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a claims paying ability rating of “A”

73

or better by S&P (or such other ratings approved by Lender) and a general policy rating of “A” or better and a financial class of VIII or better by A.M. Best Company, Inc.  To the extent such Policies are not available as of the Closing Date, Borrower shall deliver to Lender certified copies of all Policies or other evidence of insurance reasonably acceptable to Lender not later than thirty (30) days after the Closing Date.  Not less than ten (10) days prior to the expiration dates of the Policies theretofore furnished to Lender, renewal Policies or other evidence of insurance reasonably acceptable to Lender accompanied by evidence satisfactory to Lender of payment of the premiums due thereunder (the “Insurance Premiums”) shall be delivered by Borrower to Lender.

(c)           Any blanket insurance Policy shall specifically allocate to each Property the amount of coverage from time to time required hereunder and shall otherwise provide the same protection as would a separate Policy insuring only the applicable Property in compliance with the provisions of Section 8.1(a).

(d)           All Policies provided for or contemplated by Section 8.1(a), except for the Policy referenced in Section 8.1(a)(v), shall name Mortgage Borrower as the insured, Lender as a “Named Insured” and Mortgage Lender as an additional insured, as their interests may appear, and in the case of property damage, boiler and machinery, flood and earthquake insurance, shall contain a so-called New York standard non-contributing mortgagee clause in favor of Mortgage Lender and Lender providing that the loss thereunder shall be payable to Mortgage Lender, as mortgagee and loss payee.

(e)           All Policies provided for in Section 8.1(a) shall contain clauses or endorsements to the effect that:

(i)            except as may otherwise prohibited by applicable law, no act or negligence of Mortgage Borrower, or anyone acting for Mortgage Borrower, or of any Tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned;

(ii)           the Policies shall not be materially changed (other than to increase the coverage provided thereby) or canceled without at least thirty (30) days’ prior written notice to Lender and any other party named therein as an additional insured;

(iii)          the issuers thereof shall give written notice to Lender if the Policies have not been renewed thirty (30) days prior to its expiration;

(iv)          Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder; and

(v)           the Policies described in clauses (i), (iii) and (vi) above do not contain an exclusion for acts of terror or similar acts of sabotage.

(f)            If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right, without notice to Borrower, to take such action as Lender deems necessary to protect its interest in the applicable

74

Property, including, without limitation, obtaining such insurance coverage as Lender in its sole discretion deems appropriate.  All premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, shall be secured by the Mortgage and shall bear interest at the Default Rate.

(g)           Subject to the prior right of the Mortgage Lender under the Mortgage Loan Agreement to receive any payments paid under the Policy described in Section 8.1(a)(xi), Borrower shall cause such payments to be paid to Lender.

Section 8.2.CASUALTY

If any Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give prompt notice of such damage to Lender to the extent required hereunder and shall cause Mortgage Borrower to promptly commence and diligently prosecute the Restoration of such Property in accordance with Section 8.4 hereof and Section 8.4 of the Mortgage Loan Agreement, whether or not Mortgage Lender or Lender makes any Net Proceeds available pursuant to said Section 8.4.  Borrower shall cause Mortgage Borrower to pay all costs of such Restoration whether or not such costs are covered by insurance.

Section 8.3.CONDEMNATION

Borrower shall promptly give Lender notice of the actual or threatened commencement of any proceeding for the Condemnation of any Property of which Borrower has knowledge and shall cause Mortgage Borrower to deliver to Lender copies of any and all papers served in connection with such proceedings.  Subject to the rights of Mortgage Lender under the Mortgage Loan Agreement, Lender may participate in any such proceedings, and Borrower shall from time to time deliver to Lender all instruments requested by it to permit such participation.  Borrower shall cause Mortgage Borrower to, at its expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings.  Notwithstanding any taking by any public or quasi-public authority through Condemnation or otherwise (including but not limited to any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until any Award shall have been actually received and applied by Lender, after the deduction of expenses of collection, to the reduction or discharge of the Debt.  Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note.  If any Property or any portion thereof is taken by a condemning authority, Borrower shall promptly commence and diligently prosecute the Restoration of such Property and otherwise comply with the provisions of Section 8.4 hereof and Section 8.4 of the Mortgage Loan Agreement, whether or not Lender or Mortgage Lender makes any Net Proceeds available pursuant to Section 8.4 hereof or Section 8.4 of the Mortgage Loan Agreement (as applicable).  Subject to the terms and provisions of the Mortgage Loan Documents, to the extent Lender is entitled to receive any Award as Net Liquidation Proceeds after Debt Service pursuant to the terms hereof, if the Collateral is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the

75

Note shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt.

Section 8.4.RESTORATION

Subject to the rights of Mortgage Lender and the obligations of Mortgage Borrower and the Mortgage Loan Documents and only to the extent the Mortgage Loan is not outstanding and has been paid in full, the following provisions shall apply in connection with any Restoration of a Property:

(a)           If the costs of completing the Restoration shall be less than five percent (5%) of the Allocated Loan Amount with respect to the affected Property, the Net Proceeds will be disbursed by Lender to Borrower or Mortgage Borrower upon receipt, provided that all of the conditions set forth in Section 8.4(b)(i) below are each met and Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of the Mortgage Loan Agreement.

(b)           If the costs of completing the Restoration are equal to or greater than five percent (5%) of the Allocated Loan Amount with respect to the affected Property, Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 8.4.  The term “Net Proceeds” for purposes of this Section 8.4 shall mean: (1) the net amount of all insurance proceeds received by Lender pursuant to Section 8.1(a)(i), (iv), (vi) and (vii) as a result of a Casualty, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting the same (“Insurance Proceeds”), or (2) the net amount of the Award as a result of a Condemnation, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting the same (“Condemnation Proceeds”), whichever the case may be.

(i)            The Net Proceeds shall be made available to Borrower or Mortgage Borrower for Restoration provided that each of the following conditions are met:

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

(B)           (1) in the event the Net Proceeds are Insurance Proceeds, less than ten percent (10%) of the aggregate fair market value of the Improvements at all the Properties (immediately prior to the applicable Casualty) has been damaged, destroyed or rendered unusable as a result of a Casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less than ten percent (10%) of the land constituting the affected Property is taken, such land is located along the perimeter or periphery of the affected Property, and no portion of the Improvements is located on such land;

(C)           the Operating Leases of the affected Property in effect as of the date of the occurrence of such Casualty or Condemnation, whichever the case may be, and each other Major Lease, if any, in effect as of such date shall remain in full force and effect during and after the completion of the Restoration without abatement of rent beyond the time required for Restoration;

76

(D)          Borrower shall commence or cause Mortgage Borrower to commence the Restoration as soon as reasonably practicable (but in no event later than ninety (90) days after such Casualty or Condemnation, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion;

(E)           Lender shall be satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note, which will be incurred with respect to the affected Property as a result of the occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of the insurance coverage referred to in Section 8.1(a)(iii) above;

(F)           Lender shall be satisfied that the Restoration will be completed on or before the earliest to occur of (1) six (6) months prior to the Maturity Date, (2) the earliest date required for such completion under the terms of any Leases (including, without limitation, any Ground Lease) or material agreements affecting the affected Property, (3) such time as may be required under applicable zoning law, ordinance, rule or regulation, or (4) the expiration of the insurance coverage referred to in Section 8.1(a)(iii);

(G)           the affected Property and the use thereof after the Restoration will be in compliance with and permitted under all Legal Requirements;

(H)          the Restoration shall be done and completed by Borrower or Mortgage Borrower in an expeditious and diligent fashion and in compliance with all applicable Legal Requirements;

(I)            such Casualty or Condemnation, as applicable, does not result in the loss of access to the affected Property or the Improvements;

(J)            Borrower shall deliver, or cause to be delivered, to Lender a signed detailed budget approved in writing by Mortgage Borrower’s architect or engineer stating the entire cost of completing the Restoration, which budget shall be acceptable to Lender; and

(K)          the Net Proceeds together with any cash or cash equivalent deposited by Borrower or Mortgage Borrower with Lender are sufficient in Lender’s reasonable judgment to cover the cost of the Restoration.

(ii)           The Net Proceeds shall be held by Lender until disbursements commence, and, until disbursed in accordance with the provisions of this Section 8.4, shall constitute additional security for the Debt and other obligations under the Loan Documents.  The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower or Mortgage Borrower from time to time during the course of the Restoration, upon receipt of evidence satisfactory to Lender that (A) all the conditions precedent to such advance, including those set forth in Section 8.4(b)(i), have been satisfied, (B) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the related Restoration item have been paid for in full, and (C) there exist no notices of pendency, stop orders, mechanic’s

77

or materialman’s liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the affected Property which have not either been fully bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company issuing the Title Insurance Policy.  Notwithstanding the foregoing, Insurance Proceeds from the Policies required to be maintained by Borrower or Mortgage Borrower pursuant to Section 8.1(a)(iii) shall be controlled by Lender at all times, shall not be subject to the provisions of this Section 8.4 and shall be used solely for the payment of the obligations under the Loan Documents and Operating Expenses.

(iii)          All plans and specifications required in connection with the Restoration shall be subject to prior review and acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the “Restoration Consultant”).  Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration.  The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts in excess of $100,000 under which they have been engaged, shall be subject to prior review and acceptance by Lender and the Restoration Consultant.  All costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration, including, without limitation, reasonable counsel fees and disbursements and the Restoration Consultant’s fees, shall be paid by Borrower or Mortgage Borrower.

(iv)          In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Restoration Consultant, minus the Restoration Retainage.  The term “Restoration Retainage” shall mean an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Restoration Consultant, until the Restoration has been completed.  The Restoration Retainage shall be reduced to five percent (5%) of the costs incurred upon receipt by Lender of satisfactory evidence that fifty percent (50%) of the Restoration has been completed.  The Restoration Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 8.4(b), be less than the amount actually held back by Borrower or Mortgage Borrower from contractors, subcontractors and materialmen engaged in the Restoration.  The Restoration Retainage shall not be released until the Restoration Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 8.4(b) and that all approvals necessary for the re-occupancy and use of the affected Property have been obtained from all appropriate Governmental Authorities, and Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Restoration Retainage; provided, however, that Lender will release the portion of the Restoration Retainage being held with respect to any contractor, subcontractor or

78

materialman engaged in the Restoration as of the date upon which the Restoration Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractor’s, subcontractor’s or materialman’s contract, the contractor, subcontractor or materialman delivers the lien waivers and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender.  If required by Lender, the release of any such portion of the Restoration Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman.

(v)           Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.

(vi)          If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the reasonable opinion of Lender in consultation with the Restoration Consultant, be sufficient to pay in full the balance of the costs which are estimated by the Restoration Consultant to be incurred in connection with the completion of the Restoration, Borrower or Mortgage Borrower shall deposit without duplication the deficiency (the “Net Proceeds Deficiency”) with Lender, before any further disbursement of the Net Proceeds shall be made.  The Net Proceeds Deficiency, if any, deposited with Lender shall be held by Lender in an interest bearing account (with interest credited to Borrower) and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 8.4(b) shall constitute additional security for the Debt and other obligations under the Loan Documents.

(vii)         The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender after the Restoration Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 8.4(b), and the receipt by Lender of evidence satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Lender to Borrower (or as directed by Borrower), provided no Event of Default shall have occurred and shall be continuing under the Note, this Agreement or any of the other Loan Documents.

(c)           All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section 8.4(b)(vii) may (x) be retained and applied by Lender toward the payment of the Debt whether or not then due as an involuntary partial prepayment thereof, or, (y) at the sole discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes and upon such conditions as Lender shall designate.

(d)           Notwithstanding anything herein to the contrary, in the event that the Property is being restored by Mortgage Borrower pursuant to the Mortgage Loan Documents, Lender shall agree to the release of the Net Proceeds for Restoration of the Property pursuant to the terms and provisions of the Mortgage Loan Documents, subject to Lender’s rights to receive and approve in its discretion all deliverables set forth in this Section 8.4.

79

ARTICLE 9
RESERVE FUNDS

Borrower shall cause Mortgage Borrower to comply with all of its obligations under Article 9 of the Mortgage Loan Agreement.  Notwithstanding anything to the contrary contained in this Agreement, if at any time and for any reason (including, without limitation, the satisfaction of the Mortgage Loan), Mortgage Borrower is no longer maintaining any of the Reserve Accounts required to be maintained by Mortgage Borrower in accordance with the terms of the Mortgage Loan Documents, (i) Borrower shall be required to promptly establish and maintain with Lender and for the benefit of Lender reserves in replacement and substitution thereof, which substitute reserves shall be subject to all of the same terms and conditions applicable under the Mortgage Loan Documents with respect to the Reserve Account being replaced (including, but not limited to, Article 10 of the Mortgage Loan Agreement relating to cash management and Borrower shall, and shall cause Mortgage Borrower to, executed a cash management agreement in form substantially similar to the Cash Management Agreement) and (ii) to the extent not prohibited by Mortgage Lender under the Mortgage Loan Documents, Borrower shall or shall cause Mortgage Lender to remit to Lender any funds from Reserve Accounts that were remaining in such reserves at the time of the termination of such reserves for the purpose of funding the equivalent substitute reserves.

ARTICLE 10
CASH MANAGEMENT

Borrower and Lender acknowledge and agree that all Rents and other income from the Property payable to Borrower or Mortgage Borrower will be deposited and disbursed in accordance with the terms of the Cash Management Agreement.  Notwithstanding anything to the contrary contained in this Agreement, if at any time and for any reason (including, without limitation, the satisfaction of the Mortgage Loan), Mortgage Borrower is no longer maintaining the accounts established pursuant to the Cash Management Agreement or if the Cash Management Agreement is no longer in full force and effect, Borrower shall promptly enter into a substitute cash management agreement with such other depository institution as Lender shall direct, or an agent selected by Borrower and reasonably acceptable to Lender and, if the Loan is securitized, acceptable to the Rating Agencies, which such agent shall be an Eligible Institution on substantially the same terms as the agreements entered into as of the date hereof in connection with the related Mortgage Loan.

ARTICLE 11
EVENTS OF DEFAULT; REMEDIES

Section 11.1.EVENT OF DEFAULT

The occurrence of any one or more of the following events shall constitute an “Event of Default”:

(a)           if any portion of the Debt is not paid on or prior to the date the same is due or if the entire Debt is not paid on or before the Maturity Date; provided, however, Borrower shall not be in default so long as there is sufficient money in the Cash Management Account for payment

80

of all amounts then due and payable (including any deposits into Mortgage Reserve Accounts) and Lender’s access to such money has not been constrained or constricted in any manner;

(b)           except as otherwise expressly provided in the Loan Documents, if any of the Taxes or Other Charges (including Ground Rents as defined in the Mortgage Loan Agreement) are not paid when the same are due and payable, unless there is sufficient money in the Tax and Insurance Reserve Account or (as defined in the Mortgage Loan Agreement) Ground Rent Reserve Account (as defined in the Mortgage Loan Agreement), as applicable for payment of amounts then due and payable and Lender’s access to such money has not been constrained or restricted in any manner;

(c)           if the Policies are not kept in full force and effect, or if certified copies of the Policies are not delivered to Lender as provided in Section 8.1;

(d)           if Borrower breaches any covenant with respect to Borrower, Mortgage Borrower, Mortgage Borrower GP or any SPE Component Entity (if any) contained in (i) Article 6 and Borrower shall within fifteen (15) days of the earlier of Borrower’s knowledge or notice of such breach, fail to cure the same and deliver an updated non-consolidation opinion acknowledging such breach in form and substance acceptable to Lender or (ii) any covenant contained in Article 7 hereof;

(e)           if any representation or warranty of, or with respect to, Borrower, Mortgage Borrower, Affiliated Lessee, Borrower Principal, any SPE Component Entity, or any member, general partner, principal or beneficial owner of any of the foregoing, made herein, in any other Loan Document, or in any certificate, report, financial statement or other instrument or document furnished to Lender at the time of the closing of the Loan or during the term of the Loan shall have been false or misleading in any material respect when made;

(f)            if (i) Borrower, any managing member or general partner of Borrower, Mortgage Borrower, Operating Lessee, Borrower Principal or any SPE Component Entity (if any) shall commence any case, proceeding or other action (A) under any Creditors Rights Laws, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Borrower, Mortgage Borrower, Operating Lessee, any managing member or general partner of Borrower, Mortgage Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Borrower, Mortgage Borrower, Operating Lessee, any managing member or general partner of Borrower, Mortgage Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (iii) there shall be commenced against Borrower, Mortgage Borrower, Operating Lessee, any managing member or general partner of Borrower, Mortgage Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order for any such relief which

81

shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (iv) Borrower, Mortgage Borrower, Operating Lessee, any managing member or general partner of Borrower, Mortgage Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Borrower, Mortgage Borrower, Operating Lessee, any managing member or general partner of Borrower, Mortgage Borrower, Operating Lessee, Borrower Principal, or any SPE Component Entity (if any) shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due;

(g)           if Borrower shall be in default beyond applicable notice and grace periods under any other pledge or other security agreement covering any part of the Collateral, whether it be superior or junior in lien to the Pledge Agreement;

(h)           if Mortgage Borrower shall be in default beyond applicable notice and grace periods under any mortgage, deed of trust, deed to secure debt of other security agreement covering any party of any Property;

(i)            if any Property becomes subject to any mechanic’s, materialman’s or other Lien other than a Lien for any Taxes or Other Charges not then due and payable and such Lien shall remain undischarged of record (by payment, bonding or otherwise) for a period of sixty (60) days, or if any portion of the Collateral becomes subject to any Lien and such Lien shall remain undischarged of record (by payment, bonding or otherwise) for a period of fifteen (15) days;

(j)            if any federal tax lien is filed against Borrower, any member or general partner of Borrower, Mortgage Borrower, Affiliated Lessee, Borrower Principal, or any SPE Component Entity (if any) or any Property and same is not discharged of record within (a) fifteen (15) days after the same is filed in the instance of a lien filed against Mortgage Borrower or Mortgage Borrower’s general partner or (b) thirty (30) days after same is filed in the instance of a lien filed against any of the other above stated entities;

(k)           if a judgment is filed against the Borrower in excess of $100,000 which judgment is not covered by insurance proceeds and is not vacated or discharged within 30 days;

(l)            if any default occurs under any guaranty or indemnity executed in connection herewith and such default continues after the expiration of applicable grace periods, if any;

(m)          if Borrower shall cause Mortgage Borrower to permit any event within Mortgage Borrower’s control to occur that would cause any REA to terminate without notice or action by any party thereto or would entitle any party to terminate any REA and the term thereof by giving notice to Mortgage Borrower; or any REA shall be surrendered, terminated or canceled for any reason or under any circumstance whatsoever except as provided for in such REA; or any term of any REA shall be modified or supplemented without Lender’s prior written consent; or Borrower shall fail to cause Mortgage Borrower, within ten (10) Business Days after demand by Lender, to exercise Mortgage Borrower’s option to renew or extend the term of any REA or shall fail or neglect to pursue diligently all actions necessary to exercise such renewal rights pursuant to such REA except as provided for in such REA and the same shall have (or shall be reasonably

82

expected to have) a material and adverse affect on the value, use, operation or enjoyment of the applicable Property as a hotel of a similar type as the hotel situated on such Property as of the Closing Date or on the ability of Borrower to perform its obligations (including its payment obligations under this Agreement, the Note and the other Loan Documents);

(n)           if Borrower breaches any of its covenants contained in Section 5.24;

(o)           if a default has occurred and is continuing beyond any applicable cure period under any Franchise Agreement or Management Agreement, which entitles such Franchisor or Manager, as the case may be, to terminate or cancel such Franchise Agreement or Management Agreement;

(p)           if Borrower shall breach any of the material terms of:

(i)            Section 2.4(g) (Payments upon a Liquidation Event);

(ii)           Intentionally Omitted;

(iii)          Section 5.25 (Notices), to the extent such default shall continue for a period of five (5) days after Lender’s notice thereof to Borrower;

(iv)          Section 5.27 (Special Distributions);

(v)           Section 5.28 (Limitations on Securities Issuances);

(vi)          Section 5.29 (Limitations on Distributions);

(vii)         Section 5.30 (Other Limitations);

(viii)        Section 5.31 (Contractual Obligations); or

(ix)           Section 5.34 (Refinancing);

(q)           if Borrower shall cause Mortgage Borrower, without Lender’s consent, to modify, amend, terminate or cancel (or to permit or direct Operating Lessee to modify, amend, terminate or cancel) any Franchise Agreement or to operate any Property under the name of any hotel chain or system other than the name such Property is operated under as of the date hereof

(r)            if Borrower shall cause Mortgage Borrower, without Lender’s consent, to modify, amend, terminate or cancel (or to permit or direct any Affiliated Lessee to modify, amend, terminate or cancel) any Management Agreement;

(s)           if any Affiliated Lessee is in default beyond any applicable notice or cure period under the applicable Operating Lease;

(t)            if any Affiliated Lessee shall default in the performance or observance of the obligations under the applicable Subordination and Attornment Agreement beyond any applicable notice or cure period set forth therein or (b) an “Event of Default” shall occur under

83

any Subordination, Attornment and Security Agreement (as defined in the Mortgage Loan Agreement);

(u)           if there shall occur any default by Mortgage Borrower, as tenant under either Ground Lease, in the observance or performance of any term, covenant or condition of the applicable Ground Lease on the part of Mortgage Borrower to be observed or performed and said default is not cured following the expiration of any applicable grace and notice periods therein provided, or if the leasehold estate created by the applicable Ground Lease shall be surrendered or if the applicable Ground Lease shall cease to be in full force and effect or the applicable Ground Lease shall be terminated or canceled for any reason or under any circumstances whatsoever, or if any of the terms, covenants or conditions of the applicable Ground Lease shall in any manner be modified, changed, supplemented, altered, or amended without the consent of Lender;

(v)           if Borrower Principal breaches its covenant set forth in Section 5.33 unless within five (5) days of written notice from Lender, CNL Hospitality Properties, Inc. executes this Agreement assuming all obligations of Borrower Principal hereunder and in connection therewith provides Lender with a corporate and enforceability opinion with respect to such execution and the obligations so assumed, all acceptable to Lender in its reasonable discretion;

(w)          if Borrower shall continue to be in default under any other term, covenant or condition of this Agreement or any of the Loan Documents for more than ten (10) days after notice from Lender to Borrower in the case of any default which can be cured by the payment of a sum of money or for thirty (30) days after notice from Lender to Borrower in the case of any other default, provided that if such default cannot reasonably be cured within such thirty (30) day period and Borrower shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall require Borrower in the exercise of due diligence to cure such default, it being agreed that no such extension shall be for a period in excess of sixty (60) days; or

(x)            if a Mortgage Loan Event of Default occurs.

Section 11.2.REMEDIES

(a)           Upon the occurrence of an Event of Default (other than an Event of Default described in Section 11.1(f) above) and at any time thereafter during the continuance of such Event of Default Lender may, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in the Collateral, including, without limitation, declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents and may exercise all the rights and remedies of a secured party under the UCC, as adopted and enacted by the State of New York, against Borrower and the Collateral (or any portion thereof), including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in Section 11.1(f) above, the Debt and all other obligations of Borrower hereunder and under the other Loan Documents shall immediately and

84

automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding.

(b)           Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Collateral.  Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singularly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents.

ARTICLE 12
ENVIRONMENTAL PROVISIONS

Section 12.1.ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants, based upon an Environmental Report of each Property and information that Borrower knows or should reasonably have known, and subject to all matters disclosed in the Environmental Reports delivered pursuant to the provisions of (or referenced in) Section 3.2(e) hereof that:  (a) there are no Hazardous Materials or underground storage tanks in, on, or under any Property, except those that are both (i) in compliance with Environmental Laws and with permits issued pursuant thereto (if such permits are required), if any, and (ii) either (A) in the case of Hazardous Materials, in amounts not in excess of that necessary to operate such Property for the purposes set forth herein or (B) fully disclosed to and approved by Lender in writing pursuant to an Environmental Report; (b) there are no past, present or threatened Releases of Hazardous Materials in violation of any Environmental Law or which would require remediation by a Governmental Authority in, on, under or from any Property except as described in the Environmental Report; (c) there is no threat of any Release of Hazardous Materials migrating to any Property except as described in the Environmental Report; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with any Property except as described in the Environmental Report; (e) Borrower does not know of, and has not received, any written or oral notice or other communication from any Person relating to Hazardous Materials in, on, under or from any Property; and (f) Borrower has truthfully and fully provided to Lender, in writing, any and all information relating to environmental conditions in, on, under or from such Property known to Borrower or contained in Borrower’s files and records, including but not limited to any reports relating to Hazardous Materials in, on, under or migrating to or from such Property and/or to the environmental condition of such Property.

85

Section 12.2.ENVIRONMENTAL COVENANTS

Borrower covenants and agrees that so long as Mortgage Borrower owns, manages, is in possession of, or otherwise controls the operation of the Properties (but not any time after the date on which Lender (or any purchaser at a foreclosure sale) actually acquires title to the equity interest of Borrower in Mortgage Borrower and Mortgage Borrower’s general partner):  (a) all uses and operations on or of each Property, whether by Mortgage Borrower or any other Person, shall be in compliance in all material respects with all Environmental Laws and permits issued pursuant thereto; (b) there shall be no Releases of Hazardous Materials in, on, under or from any Property; (c) there shall be no Hazardous Materials in, on, or under any Property, except those that are both (i) in compliance with all Environmental Laws and with permits issued pursuant thereto, if and to the extent required, and (ii) (A) in amounts not in excess of that necessary to operate any Property for the purposes set forth herein or (B) fully disclosed to and approved by Lender in writing; (d) cause Mortgage Borrower to keep each Property free and clear of all Environmental Liens; (e) cause Mortgage Borrower to, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Section 12.4 below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (f) Borrower shall cause Mortgage Borrower to, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with each Property, pursuant to any reasonable written request of Lender, upon Lender’s reasonable belief that such Property is not in full compliance with all Environmental Laws, and share with Lender the reports and other results thereof, and Lender and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; (g) Borrower shall cause Mortgage Borrower to, at its sole cost and expense, comply with all reasonable written requests of Lender to (i) reasonably effectuate remediation of any Hazardous Materials in, on, under or from such Property; and (ii) comply with any Environmental Law; (h) Borrower shall cause Mortgage Borrower not to allow any tenant or other user of any Property to violate any Environmental Law; and (i) Borrower shall cause Mortgage Borrower to immediately notify Lender in writing after it has become aware of (A) any presence or Release or threatened Release of Hazardous Materials in, on, under, from or migrating towards any Property; (B) any non-compliance with any Environmental Laws related in any way to any Property; (C) any actual or potential Environmental Lien against any Property; (D) any required or proposed remediation of environmental conditions relating to any Property; and (E) any written or oral notice or other communication of which Borrower becomes aware from any source whatsoever (including but not limited to a Governmental Authority) relating in any way to Hazardous Materials.  Any failure of Borrower to cause Mortgage Borrower to perform such obligations pursuant to this Section 12.2 shall constitute bad faith waste with respect to the Properties.

Section 12.3.LENDER’S RIGHTS

Lender and any other Person designated by Lender, including but not limited to any representative of a Governmental Authority, and any environmental consultant, and any receiver appointed by any court of competent jurisdiction, shall have the right, but not the obligation, to enter upon any Property at all reasonable times to assess any and all aspects of the environmental condition of each Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Lender’s reasonable discretion) and taking samples of soil, groundwater or other water, air, or building materials, and conducting

86

other invasive testing.  Borrower shall cooperate with and provide access to Lender and any such person or entity designated by Lender.

Section 12.4.OPERATIONS AND MAINTENANCE PROGRAMS

If recommended by the Environmental Report or any other environmental assessment or audit of any Property,  Borrower shall cause Mortgage Borrower to establish and comply with an operations and maintenance program with respect to any such Property, in form and substance reasonably acceptable to Lender, prepared by an environmental consultant reasonably acceptable to Lender, which program shall address any asbestos-containing material or lead based paint that may now or in the future be detected at or on any such Property.  Without limiting the generality of the preceding sentence, Lender may require (a) periodic notices or reports to Lender in form, substance and at such intervals as Lender may specify, (b) an amendment to such operations and maintenance program to address changing circumstances, laws or other matters, (c) at Borrower’s sole expense, supplemental examination of any such Property by consultants specified by Lender, (d) access to each Property by Lender, its agents or servicer, to review and assess the environmental condition of each Property and Borrower’s compliance with any operations and maintenance program, and (e) variation of the operations and maintenance program in response to the reports provided by any such consultants.

Section 12.5.ENVIRONMENTAL DEFINITIONS

“Environmental Law” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, standards, policies and other government directives or requirements, as well as common law, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act, that apply to Borrower or any Property and relate to Hazardous Materials or protection of human health or the environment.  “Environmental Liens” means all Liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Borrower or any other Person.  “Environmental Report” means the written reports resulting from the environmental site assessments of any Property delivered to Lender in connection with the Loan.  “Hazardous Materials” shall mean petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on any Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a “hazardous substance,” “hazardous material”, “hazardous waste”, “toxic substance”, “toxic pollutant”, “contaminant”, or “pollutant” within the meaning of any Environmental Law.  “Release” of any Hazardous Materials includes but is not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials.

87

Section 12.6.INDEMNIFICATION

(a)           Borrower and Borrower Principal covenant and agree at their sole cost and expense, to protect, defend, indemnify, release and hold Indemnified Parties harmless from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following:  (i) any presence of any Hazardous Materials in, on, above, or under any Property; (ii) any past, present or threatened Release of Hazardous Materials in, on, above, under or from any Property; (iii) any activity by Borrower or Mortgage Borrower, any Person Affiliated with Borrower or Mortgage Borrower, and any Tenant or other user of any Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from any Property of any Hazardous Materials at any time located in, under, on or above any Property or any actual or proposed remediation of any Hazardous Materials at any time located in, under, on or above any Property, whether or not such remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (iv) any past, present or threatened non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with any Property or operations thereon, including but not limited to any failure by Borrower or Mortgage Borrower, any person or entity Affiliated with Borrower or Mortgage Borrower, and any tenant or other user of any Property to comply with any order of any Governmental Authority in connection with any Environmental Laws; (v) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumbering any Property; (vi) any acts of Borrower or Mortgage Borrower, any person or entity Affiliated with Borrower or Mortgage Borrower, and any tenant or other user of any Property in (A) arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Materials at any facility or incineration vessel containing such or similar Hazardous Materials or (B) accepting any Hazardous Materials for transport to disposal or treatment facilities, incineration vessels or sites from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for remediation; and (vii) any misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to this Agreement relating to environmental matters.

(b)           Upon written request by any Indemnified Party, Borrower and Borrower Principal shall defend same (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals reasonably approved by the Indemnified Parties.  Notwithstanding the foregoing, any Indemnified Parties may, in their sole discretion, engage their own attorneys and other professionals to defend or assist them, and, at the option of Indemnified Parties, their attorneys shall control the resolution of any claim or proceeding.  Upon demand, Borrower and Borrower Principal shall pay or, in the sole discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith.

(c)           Notwithstanding the foregoing, Borrower shall have no liability for any Losses imposed upon or incurred by or asserted against any Indemnified Parties and described in

88

subsection (a) above to the extent that Borrower can conclusively prove both that such Losses were caused solely by actions, conditions or events that first occurred after the date that Lender (or any purchaser at a foreclosure sale) actually acquired title to the equity interest of Borrower in Mortgage Borrower and Mortgage Borrower’s general partner and that such Losses were not caused by the direct or indirect actions of Borrower, Borrower Principal, or any partner, member, principal, officer, director, trustee or manager of Borrower or Borrower Principal or any employee, agent, contractor or Affiliate of Borrower or Borrower Principal (other than Mortgage Borrower to the extent arising after the Foreclosure Date (as defined in Section 15.1(e))).  The obligations and liabilities of Borrower and Borrower Principal under this Section 12.6 shall fully survive indefinitely notwithstanding any termination, satisfaction or assignment of the Pledge Agreement.

ARTICLE 13
SECONDARY MARKET

Section 13.1.TRANSFER OF LOAN

Lender may, at any time, sell, transfer or assign the Loan Documents, or grant participations therein (“Participations”) or syndicate the Loan (“Syndication”) or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (“Securities”) (a Syndication or the issuance of Participations and/or Securities, a “Securitization”).

Section 13.2.DELEGATION OF SERVICING

At the option of Lender, the Loan may be serviced by a servicer/trustee selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to such servicer/trustee pursuant to a servicing agreement between Lender and such servicer/trustee.

Section 13.3.DISSEMINATION OF INFORMATION

Lender may forward to each purchaser, transferee, assignee, or servicer of, and each participant, or investor in, the Loan, or any Participations and/or Securities or any of their respective successors (collectively, the “Investor”) or any Rating Agency rating the Loan, or any Participations and/or Securities, each prospective Investor, and any organization maintaining databases on the underwriting and performance of commercial mortgage loans, all documents and information which Lender now has or may hereafter acquire relating to the Debt and to Borrower, any managing member or general partner thereof, Mortgage Borrower, Borrower Principal, any SPE Component Entity (as defined herein and in the Mortgage Loan Agreement) (if any) and any Property, including financial statements, whether furnished by Borrower or otherwise, as Lender determines necessary or desirable.  Borrower irrevocably waives any and all rights it may have under applicable Legal Requirements to prohibit such disclosure, including but not limited to any right of privacy.

89

Section 13.4.COOPERATION

Borrower and Borrower Principal agree to cooperate with Lender in connection with any sale or transfer of the Loan, Syndication or any Participation and/or Securities created pursuant to this Article 13.  At the request of the holder of the Note and, to the extent not already required to be provided by Borrower under this Agreement, Borrower and Borrower Principal shall take such reasonable actions for the benefit of, and use reasonable efforts to provide information not in the possession of the holder of the Note in order to satisfy the market standards (which may include such holder’s delivery of information with respect to Borrower, Mortgage Borrower, Borrower Principal, the Collateral and the Property to any Investor or prospective Investor) to which the holder of the Note customarily adheres or which may be reasonably required in the marketplace or by the Rating Agencies in connection with such sales or transfers, including, without limitation, to:

(a)           provide or cause the Mortgage Borrower to provide, (i) updated financial, budget and other information (including, but not limited to, updated Rent Rolls meeting the requirements set forth in Section 5.11(a)(i) hereof and operating statements for each Property meeting the requirements set forth in Section 5.11(a)(ii) hereof) with respect to each Property, Borrower, Mortgage Borrower, Borrower Principal and Manager and (ii) modifications and/or updates to the appraisals, market studies, environmental reviews and reports and engineering reports of any Property obtained in connection with the making of the Loan (all of the foregoing being referred to as the “Provided Information”), together, if customary, with appropriate verification and/or consents of the Provided Information through letters of auditors or opinions of counsel of independent attorneys acceptable to Lender and the Rating Agencies;

(b)           make reasonable changes to the organizational documents of Borrower, Mortgage Borrower or any SPE Component Entity and their respective principals, including, but not limited to, changes to the ownership structure of Borrower as may be necessary to create a second Borrower acceptable to Lender in its reasonable discretion;

(c)           Intentionally Omitted;

(d)           permit site inspections, appraisals, market studies and other due diligence investigations of any Property, as may be reasonably requested by the holder of the Note or the Rating Agencies or as may be necessary or appropriate in connection with the Securitization;

(e)           make the representations and warranties with respect to any or all Properties, the Collateral, the Borrower, Mortgage Borrower, Borrower Principal and the Loan Documents as are made in the Loan Documents and such other representations and warranties as may be reasonably requested by the holder of the Note or the Rating Agencies;

(f)            execute such amendments to the Loan Documents as may be requested by the holder of the Note or the Rating Agencies or otherwise to effect the Securitization including, without limitation, bifurcation of the Loan into two or more components and/or separate notes and/or creating a senior/subordinate note structure and/or additional mezzanine note components and/or adjusting the relative loan amounts of the Loan and the Mortgage Loan; provided, however, that Borrower shall not be required to modify or amend any Loan Document if such

90

modification or amendment would (i) change the interest rate or the stated maturity, except in connection with a bifurcation of the Loan which may result in varying LIBOR Rates for each component thereof, but which shall have the same weighted average coupon of the LIBOR Rate that existed immediately prior to such modification, or (ii) in the reasonable judgment of Borrower, modify or amend any other material economic term of the Loan, or (iii) in the reasonable judgment of Borrower, materially increase Borrower’s obligations and liabilities under the Loan Documents;

(g)           deliver to Lender and/or any Rating Agency, (i) one or more certificates executed by an officer of the Borrower certifying as to the accuracy, as of the closing date of the Securitization, of all representations made by Borrower in the Loan Documents as of the Closing Date in all relevant jurisdictions or, if such representations are no longer accurate, certifying as to what modifications to the representations would be required to make such representations accurate as of the closing date of the Securitization, and (ii) certificates of the relevant Governmental Authorities in all relevant jurisdictions indicating the good standing and qualification of Borrower as of the date of the closing date of the Securitization;

(h)           have reasonably appropriate personnel participate in a bank meeting and/or presentation for the Rating Agencies or Investors; and

(i)            cooperate with and assist Lender in obtaining ratings of the Securities from two (2) or more of the Rating Agencies.

Upon Lender’s modification the Selected Day pursuant to the terms of Section 2.2(d) above, Borrower and Borrower Principal shall promptly deliver to Lender such modifications to the Rate Cap and the Collateral Assignment of Interest Rate Cap reasonably required by Lender as result of such designation.

Borrower shall not be responsible for any costs and expenses incurred by Borrower or Lender in connection with Borrower’s complying with the requests and requirements made under this Section 13.4 (including, without limitation, the fees and expenses of the Rating Agencies).

In the event that Borrower requests any consent or approval hereunder and the provisions of this Agreement or any Loan Documents require the receipt of written confirmation from each Rating Agency with respect to the rating on the Securities, or, in accordance with the terms of the transaction documents relating to a Securitization, such a rating confirmation is required in order for the consent of Lender to be given, Borrower shall pay all of the costs and expenses of Lender, Lender’s servicer and each Rating Agency in connection therewith, and, if applicable, shall pay any fees imposed by any Rating Agency as a condition to the delivery of such confirmation.

Section 13.5.SECURITIZATION INDEMNIFICATION

(a)           Borrower and Borrower Principal understand that certain of the Provided Information may be included in disclosure documents in connection with the Securitization, including, without limitation, a prospectus, prospectus supplement, offering memorandum or private placement memorandum (each, a “Disclosure Document”) and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act or the

91

Exchange Act, or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers relating to the Securitization.  In the event that the Disclosure Document is required to be revised prior to the sale of all Securities, Borrower and Borrower Principal will cooperate with the holder of the Note in updating the Disclosure Document by providing all current information necessary to keep the Disclosure Document accurate and complete in all material respects.

(b)           Borrower and Borrower Principal agree in connection with each of (i) a preliminary and a final offering memorandum or private placement memorandum or similar document (including any Investor or Rating Agency “term sheets” or presentations relating to any Property, the Collateral and/or the Loan) or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, (A) that Borrower and Borrower Principal will provide a certificate certifying that Borrower and Borrower Principal have carefully examined such memorandum or prospectus or other document (including any Investor or Rating Agency “term sheets” or presentations relating to any Property, the Collateral and/or the Loan), as applicable, including without limitation, the sections entitled “Special Considerations,” and/or “Risk Factors,” and “Certain Legal Aspects of the Mortgage Loan,” or similar sections, and all sections relating to Borrower, Borrower Principal, Manager, their Affiliates, the Loan, the Loan Documents, the Collateral, and any Property, and any risks or special considerations relating thereto, and that, to the best of Borrower’s knowledge, such sections (and any other sections reasonably requested) do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (B) that Borrower will provide an indemnification certificate (1) indemnifying Lender (and for purposes of this Section 13.5, Lender hereunder shall include its officers and directors) and the Affiliate of Lender that (i) has filed the registration statement, if any, relating to the Securitization and/or (ii) which is acting as issuer, depositor, sponsor and/or a similar capacity with respect to the Securitization (any Person described in (i) or (ii), an “Issuer Person”), and each director and officer of any Issuer Person, and each Person or entity who controls any Issuer Person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Issuer Group”), and each Person which is acting as an underwriter, manager, placement agent, initial purchaser or similar capacity with respect to the Securitization, each of its directors and officers and each Person who controls any such Person within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act (collectively, the “Underwriter Group”) for any Losses to which Lender, the Issuer Group or the Underwriter Group may become subject insofar as the Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact which is in fact untrue contained in such sections (including any Investor or Rating Agency “term sheets” or presentations relating to any Property and/or the Loan) or arise out of or are based upon the omission or alleged omission which is in fact an omission to state therein a material fact required to be stated in such sections (including any Investor or Rating Agency “term sheets” or presentations relating to any Property, the Collateral and/or the Loan) or necessary in order to make the statements in such sections (including any Investor or Rating Agency “term sheets” or presentations relating to any Property and/or the Loan) or in light of the circumstances under which they were made, not misleading (collectively the “Securities Liabilities”) and (2) agreeing to reimburse Lender, the Issuer Group and the Underwriter Group for any legal or other expenses reasonably incurred by Lender and Issuer Group in connection with investigating or defending the Securities Liabilities; provided, however, that Borrower will be liable in any such case under

92

clauses (1) or (2) above only to the extent that any such Securities Liabilities arise out of or is based upon any such untrue statement or omission made therein in reliance upon and in conformity with information furnished to Lender or any member of the Issuer Group or Underwriter Group by or on behalf of Borrower or Borrower Principal with respect to the Borrower, Mortgage Borrower, Borrower Principal, Affiliated Lessee, the Property and/or the Loan in connection with the preparation of the memorandum or prospectus or other document (including any Investor or Rating Agency “term sheets” or presentations relating to any Property and/or the Loan) or in connection with the underwriting of the Loan, including, without limitation, financial statements of Borrower or Borrower Principal, operating statements, rent rolls, environmental site assessment reports and Property condition reports with respect to any Property.  This indemnity agreement will be in addition to any liability which Borrower may otherwise have.  Moreover, the indemnification provided for in Clauses (1) and (2) above shall be effective whether or not certificate described in (A) above is provided and shall be applicable based on information previously provided by Borrower and Borrower Principal or their Affiliates if Borrower or Borrower Principal do not provide the indemnification certificate.

(c)           In connection with filings under the Exchange Act or any information provided to holders of Securities on an ongoing basis, Borrower agrees to indemnify (i) Lender, the Issuer Group and the Underwriter Group for Losses to which Lender, the Issuer Group or the Underwriter Group may become subject insofar as the Securities Liabilities arise out of or are based upon the omission or alleged omission which is in fact an omission to state in the Provided Information a material fact required to be stated in the Provided Information in order to make the statements in the Provided Information, in light of the circumstances under which they were made not misleading and (ii) reimburse Lender, the Issuer Group or the Underwriter Group for any legal or other expenses reasonably incurred by Lender, the Issuer Group or the Underwriter Group in connection with defending or investigating the Securities Liabilities.

(d)           Promptly after receipt by an indemnified party under this Section 13.5 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 13.5, notify the indemnifying party in writing of the commencement thereof, but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability which the indemnifying party may have to any indemnified party hereunder except to the extent that failure to notify causes prejudice to the indemnifying party.  In the event that any action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled, jointly with any other indemnifying party, to participate therein and, to the extent that it (or they) may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party.  After notice from the indemnifying party to such indemnified party under this Section 13.5 the indemnifying party shall be responsible for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there are any legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on

93

behalf of such indemnified party or parties.  The indemnifying party shall not be liable for the expenses of more than one such separate counsel unless an indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to another indemnified party.

(e)           In order to provide for just and equitable contribution in circumstances in which the indemnity agreements provided for in  Section 13.5(c) or Section 13.5(d) is or are for any reason held to be unenforceable by an indemnified party in respect of any losses, claims, damages or liabilities (or action in respect thereof) referred to therein which would otherwise be indemnifiable under Section 13.5(c) or Section 13.5(d), the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages or liabilities (or action in respect thereof); provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  In determining the amount of contribution to which the respective parties are entitled, the following factors shall be considered:  (i) the indemnified party’s, Borrower’s and Borrower Principal’s relative knowledge and access to information concerning the matter with respect to which claim was asserted; (ii) the opportunity to correct and prevent any statement or omission; and (iii) any other equitable considerations appropriate in the circumstances.  Lender and Borrower hereby agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation.

(f)            The liabilities and obligations of Borrower, Borrower Principal and Lender under this Section 13.5 shall survive the satisfaction of this Agreement and the satisfaction and discharge of the Debt.

Section 13.6.INTENTIONALLY OMITTED.

ARTICLE 14
INDEMNIFICATIONS

Section 14.1.GENERAL INDEMNIFICATION

Borrower shall indemnify, defend and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about any Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (b) any use, nonuse or condition in, on or about any Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) performance of any labor or services or the furnishing of any materials or other property in respect of any Property or any part thereof; (d) any failure of any Property or the Collateral to be in compliance with any Applicable Legal Requirements; (e) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease; (f) the holding or investing of the Mortgage Reserve Accounts or the performance of the Required Work, Additional Required

94

Repairs or Additional Replacements (all as defined in the Mortgage Loan Agreement), or (g) the payment of any commission, charge or brokerage fee to anyone which may be payable in connection with the funding of the Loan (collectively, the “Indemnified Liabilities”); provided, however, that Borrower shall not have any obligation to Lender hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of Lender.  To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Lender.

Section 14.2.INTANGIBLE TAX INDEMNIFICATION

Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making of the Pledge Agreement, the Note or any of the other Loan Documents, but excluding any income, franchise or other similar taxes.

Section 14.3.ERISA INDEMNIFICATION

Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys’ fees and costs incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in Lender’s sole discretion) that Lender may incur, directly or indirectly, as a result of a default under Section 4.8 or Section 5.18 of this Agreement.

Section 14.4.SURVIVAL

The obligations and liabilities of Borrower under this Article 14 shall fully survive indefinitely notwithstanding any termination, satisfaction or assignment of the Pledge Agreement.

ARTICLE 15
EXCULPATION

Section 15.1.EXCULPATION

(a)           Subject to the qualifications below, Lender shall not enforce the liability and obligation of Borrower or Borrower Principal, as applicable, to perform and observe the obligations contained herein or in the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring action under the UCC, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon this Agreement, the Note, the Pledge Agreement and the other Loan Documents, and the interest in the Collateral and any other collateral given to Lender created by this Agreement, the Note, the Pledge Agreement and the other Loan Documents; provided, however, that, except as specifically provided herein, any

95

judgment in any such action or proceeding shall be enforceable against Borrower or Borrower Principal, as applicable, only to the extent of Borrower’s or Borrower Principal’s interest in the Collateral and in any other collateral given to Lender.  Lender, by accepting this Agreement, the Note, the Pledge Agreement and the other Loan Documents, agrees that it shall not, except as otherwise provided in this Section 15.1, sue for, seek or demand any deficiency judgment against any Borrower, its members, partners, shareholders, officers or directors or Borrower Principal or its members, partners, shareholders, officers or directors in any such action or proceeding, under or by reason of or under or in connection with this Agreement, the Note, the Pledge Agreement or the other Loan Documents.  The provisions of this Section 15.1 shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by this Agreement, the Note, the Pledge Agreement or the other Loan Documents; (ii) impair the right of Lender to name Borrower or Borrower Principal as a party defendant in any action or suit for judicial foreclosure and sale under this Agreement and the Pledge Agreement; (iii) affect the validity or enforceability of any indemnity (including, without limitation, those contained in the Article 12 and in Section 13.5 and Article 14 of this Agreement), guaranty, master lease or similar instrument made in connection with this Agreement, the Note, the Pledge Agreement and the other Loan Documents; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the assignment of leases provisions contained in the Pledge Agreement; (vi) impair the right of Lender to obtain a deficiency judgment or other judgment on the Note against Borrower or Borrower Principal if necessary to obtain any Insurance Proceeds or Awards to which Lender would otherwise be entitled under this Agreement; or (vii) impair the right of Lender to enforce its rights under the Indemnity; provided however, Lender shall only enforce such judgment to the extent of the Insurance Proceeds and/or Awards.

(b)           Notwithstanding the provisions of this Section 15.1 to the contrary, Borrower and Borrower Principal shall be personally liable to Lender on a joint and several basis for Losses due to:

(i)            fraud or intentional misrepresentation by Borrower, Mortgage Borrower, Borrower Principal or any other Affiliate of Borrower, Mortgage Borrower or Borrower Principal in connection with the execution and the delivery of this Agreement, the Note, the Pledge Agreement, the Mortgage Note, the Mortgage Loan Agreement, the Security Instrument and any of the other Loan Documents or the Mortgage Loan Documents, or any certificate, report, financial statement or other instrument or document furnished to Lender at the time of the closing of the Loan or during the term of the Loan;

(ii)           Mortgage Borrower’s or Borrower’s misapplication or misappropriation of Rents received by Mortgage Borrower or Borrower, after the occurrence of an Event of Default;

(iii)          Mortgage Borrower’s or Borrower’s misapplication or misappropriation of tenant security deposits or Rents collected in advance;

(iv)          the misapplication or misappropriation of Insurance Proceeds or Awards;

96

(v)           Borrower’s or Mortgage Borrower’s failure to pay Taxes or Other Charges (except to the extent that sums sufficient to pay such amounts have been deposited in escrow with Mortgage Lender pursuant to the terms of the Mortgage Loan Agreement and there exists no impediment to Mortgage Lender’s utilization thereof), charges for labor or materials or other charges that can create liens on any property beyond any applicable notice and each cure period specified herein and in the Mortgage Loan Agreement;

(vi)          Borrower’s or Mortgage Borrower’s failure to return or to reimburse Lender for all Personal Property taken from the Property by or on behalf of Mortgage Borrower or Borrower and not replaced with Personal Property of the same utility and of the same or greater value;

(vii)         any act of actual waste or arson by Borrower or Mortgage Borrower or any principal, Affiliate, member of general partner of either such party or by Borrower Principal, any principal, affiliate, member of general partner thereof;

(viii)        the misappropriation by Mortgage Borrower or Borrower of any Net Liquidation Proceeds or other amounts due to Lender;

(ix)           any breach of any representation, warranty or covenant contained in Sections 4(f), (g) and/or (h) of the Pledge Agreement;

(x)            any violation of the environmental covenants contained in Article 12 of this Agreement;

(xi)           Borrower’s or Mortgage Borrower’s gross negligence or willful misconduct;

(xii)          the failure by Borrower to pay directly to Lender any distributions from Mortgage Borrower as required by the Loan Documents, following and during the continuance of an Event of Default; or

(xiii)         Mortgage Borrower or any Affiliated Lessee shall take any action of any kind or nature whatsoever, either directly or indirectly to oppose, impede, obstruct, challenge, hinder, frustrate, enjoin or otherwise interfere with (A) any termination of any Operating Lease with any Affiliated Lessee, (B) the Mortgage Borrower (in full substitution of the applicable Affiliated Lessee) being deemed the “Owner” under the Management Agreements, (C) the execution, delivery or effectiveness of a replacement Management Agreement directly between the Mortgage Borrower and the applicable Manager or (D)  any payment or other transfer by Manager of funds which would otherwise be paid to any Affiliated Lessee under any Operating Lease directly to Mortgage Borrower, in each case after or as a result of the automatic termination of the applicable Operating Lease pursuant to the applicable Subordination and Attornment Agreement, or shall, either directly or indirectly, cause or permit any other person to take any action which, if taken by such Affiliated Lessee would constitute an event described in this Section 15.1(b)(xiii).

97

(c)           Notwithstanding the foregoing, the agreement of Lender not to pursue recourse liability as set forth in subsection (a) above SHALL BECOME NULL AND VOID and shall be of no further force and effect and the Debt shall become fully recourse to Borrower and Borrower Principal; jointly and severally, in the event (i) of a breach by Borrower or SPE Component Entity of any of the covenants set forth in Article 6 of this Agreement (other than the covenants set forth in Sections 6.1(xv) and 6.1 (xviii) hereof) or a breach by Affiliated Lessee of any of the covenants set forth in Section 6 of the Subordination and Attornment Agreement (other than the covenants set forth in Sections 6(o) and 6(q) of the Subordination and Attornment Agreement), in all events except to the extent that any such breach was inadvertent, immaterial and is promptly cured, (ii) of a breach of any of the covenants set forth in Article 7 hereof, or (iii) the Property, the Collateral or any part thereof shall become an asset in (A) a voluntary bankruptcy or insolvency proceeding of Mortgage Borrower, Borrower, Affiliated Lessee or Borrower Principal, or (B) an involuntary bankruptcy or insolvency proceeding of Mortgage Borrower, Borrower, Affiliated Lessee or Borrower Principal in connection with which Mortgage Borrower, Borrower, Affiliated Lessee, Borrower Principal, SPE Component Entity or any Affiliate of any of the foregoing has or have colluded in any way with the creditors commencing or filing such proceeding and such proceeding is not dismissed in ninety (90) days.

(d)           Nothing herein shall be deemed to be a waiver of any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provision of the U.S. Bankruptcy Code to file a claim for the full amount of the indebtedness secured by the Pledge Agreement or to require that all collateral shall continue to secure all of the indebtedness owing to Lender in accordance with this Agreement, the Note, the Pledge Agreement or the other Loan Documents.

(e)           Notwithstanding the foregoing, Borrower and Borrower Principal shall have no liability for any Losses under Section 15.1(b) (other than 15.1(b)(i)), or recourse liability as a result of any action, of Mortgage Borrower or Mortgage Borrower’s general partner described in Section 15.1(c)(iii) (any such event, a “Recourse Event”), to the extent that a court finally determines, after the exhaustion of all applicable appeal periods, both that (i) such Losses were caused solely by, or such Recourse Event relates solely to, actions of Mortgage Borrower or Mortgage Borrower’s general partners taken or conditions or events conclusively proven to have first occurred after the date that Lender (or any purchaser at a foreclosure sale) actually acquired title to the equity interest of Borrower in Mortgage Borrower and Mortgage Borrower’s general partner (such date, the “Foreclosure Date”), and (ii) such Losses were not, or Recourse Event was not, caused by (A) the direct or indirect actions or failures to act of Borrower, Borrower Principal or any Affiliate of Borrower or Borrower Principal, or any partner, member, principal, officer, director, trustee or manager of Borrower or Borrower Principal or any Affiliate of Borrower or Borrower Principal or any employee, agent or contractor of Borrower, Borrower Principal or any Affiliate of Borrower or Borrower Principal (other than Mortgage Borrower or Mortgage Borrower’s general partner to the extent conclusively proven to have first arisen after the Foreclosure Date), or (B) by any other actions, conditions, occurrence or circumstance giving rise to liability under Section 15.1(b) occurring or existing prior to the Foreclosure Date.  Without limiting any other provision contained herein, Borrower and Borrower Principal hereby agree that the foregoing shall not excuse Borrower or Borrower Principal from any liability for any Losses or recourse liability relating to the actions or failure to act of Borrower, Borrower Principal or any employee, agent, contractor or Affiliate of Borrower or Borrower Principal (other than Mortgage Borrower or Mortgage Borrower’s general partner to the extent

98

conclusively proven to have first arisen after the Foreclosure Date) which relate to any act or failure to act arising after the Foreclosure Date.  Nothing contained in this Section 15.1(c) shall in any way limit, alter or otherwise modify (a) Borrower or Borrower Principal’s liability for Losses due to the events described in Section 15.1(b)(xii) hereof or (b) the terms and conditions of, and the obligations of Borrower Principal under the Indemnity.

ARTICLE 16
NOTICES

Section 16.1.NOTICES

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

If to Lender:	Fleet National Bank
	Structured Real Estate
	100 Federal Street
	MA DE 10009A
	Boston, Massachusetts 02110
	Attention:  James B. McLaughlin
	Facsimile No.: (617) 434-7108
With a copy to:	McKenna Long & Aldridge LLP
	303 Peachtree Street, Suite 5300
	Atlanta, Georgia 30308
	Attention:  William Timmons, Esq.
	Facsimile No.: (404) 527-4198
If to Borrower:	c/o CNL Hospitality Properties
	450 South Orange Avenue, 12th Floor
	Orlando, Florida 32801-3336
	Attention:  Chief Financial Officer
	Facsimile No.: (407) 650-1085
With a copy to:	Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
	215 North Eola Drive
	Orlando, Florida 32801-3336
	Attention:  Richard J. Fildes, Esq.
	Facsimile No.: (407) 843-4444

99

If to Borrower
Principal:	CNL Hospitality Properties
	450 South Orange Avenue, 12th Floor
	Orlando, Florida 32810-3336
	Attention: Chief Financial Officer
	Facsimile No.: (407) 650-1085
With a copy to:	Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
	215 North Eola Drive
	Orlando, Florida 32801-3336
	Attention:  Richard J. Fildes, Esq.
	Facsimile No.: (407) 843-4444

A notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day.

ARTICLE 17
FURTHER ASSURANCES

Section 17.1.REPLACEMENT DOCUMENTS

Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor.

Section 17.2.INTENTIONALLY OMITTED

Section 17.3.          FURTHER ACTS, ETC.

Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every further acts, deeds, conveyances, deeds of trust, mortgages, assignments, security agreements, control agreements, notices of assignments, transfers and assurances as Lender shall, from time to time, reasonably require, for the better assuring, conveying, assigning, transferring, and confirming unto Lender any Property and rights hereby mortgaged, deeded, granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and transferred or intended now or hereafter so to be, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out the intention or facilitating the performance of the terms of this Agreement or for filing or registering the Pledge Agreement, or for complying with all Legal Requirements.  Borrower, on demand, will execute and deliver, and in the event it shall fail to so execute and deliver, hereby authorizes Lender to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements and financing statement amendments to

100

evidence more effectively, perfect and maintain the priority of the security interest of Lender in any Property.  Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Lender at law and in equity, including without limitation, such rights and remedies available to Lender pursuant to this Section 17.3.

Section 17.4.CHANGES IN TAX, DEBT, CREDIT AND DOCUMENTARY STAMP LAWS

(a)           If any law is enacted or adopted or amended after the date of this Agreement which deducts the Debt from the value of the Property or the Collateral for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Debt or Lender’s interest in any Property or the Collateral (other than taxes imposed on Lender’s receipt of amounts payable hereunder), Borrower will pay the tax, with interest and penalties thereon, if any.  If Lender is advised by counsel chosen by it that the payment of tax by Borrower would be unlawful or taxable to Lender or unenforceable or provide the basis for a defense of usury then Lender shall have the option by written notice of not less than one hundred twenty (120) days to declare the Debt immediately due and payable.

(b)           Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against any Property or the Collateral, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of any Property or the Collateral, or any part thereof, for real estate tax purposes by reason of the Mortgage, the Pledge Agreement or the Debt.  If such claim, credit or deduction shall be required by law, Lender shall have the option, by written notice of not less than one hundred twenty (120) days, to declare the Debt immediately due and payable.

If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, the Pledge Agreement, or any of the other Loan Documents or impose any other tax or charge on the same, Borrower will pay for the same, with interest and penalties thereon, if any.

Section 17.5.EXPENSES

Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender within ten (10) days of receipt of written notice from Lender for all reasonable costs and expenses (including reasonable, actual attorneys’ fees and disbursements and the allocated costs of internal legal services and all actual disbursements of internal counsel) reasonably incurred by Lender in accordance with this Agreement in connection with (a) the preparation, negotiation, execution and delivery of this Agreement, the Pledge Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower (including without limitation any opinions requested by Lender as to any legal matters arising under this Agreement or the other Loan Documents with respect to any Property or the Collateral); (b) any default by Borrower in Borrower’s ongoing performance of and compliance with Borrower’s respective agreements and covenants contained in this Agreement, the Pledge Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date, including, without limitation, confirming compliance with environmental and insurance requirements; (c) following a request

101

by Borrower, Lender’s ongoing performance and compliance with all agreements and conditions contained in this Agreement, the Pledge Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date; (d) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters requested by Lender; (e) securing Borrower’s compliance with any requests made pursuant to the provisions of this Agreement; (f) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in favor of Lender pursuant to this Agreement, the Pledge Agreement and the other Loan Documents; (g) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents, the Collateral, or any other security given for the Loan; and (h) enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to any Property or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or of any insolvency or bankruptcy proceedings; provided, however, that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender.

ARTICLE 18
WAIVERS

Section 18.1.REMEDIES CUMULATIVE; WAIVERS

The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower or Borrower Principal pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise.  Lender’s rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion.  No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient.  A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon.

Section 18.2.MODIFICATION, WAIVER IN WRITING

No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given.  Except as otherwise expressly provided herein, no notice to, or demand on Borrower, shall

102

entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.

Section 18.3.DELAY NOT A WAIVER

Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

Section 18.4.TRIAL BY JURY

BORROWER, BORROWER PRINCIPAL AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, BORROWER PRINCIPAL AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  EACH OF LENDER, BORROWER PRINCIPAL AND BORROWER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER, BORROWER PRINCIPAL AND LENDER.

Section 18.5.WAIVER OF NOTICE

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

103

Section 18.6.REMEDIES OF BORROWER

In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary damages, and Borrower’s sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment.  The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment.  Lender agrees that, in such event, it shall cooperate in expediting any action seeking injunctive relief or declaratory judgment.

Section 18.7.WAIVER OF MARSHALLING OF ASSETS

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

Section 18.8.WAIVER OF STATUTE OF LIMITATIONS

Borrower hereby expressly waives and releases, to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to payment of the Debt or performance of its Other Obligations.

Section 18.9.WAIVER OF COUNTERCLAIM

Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.

ARTICLE 19
GOVERNING LAW

Section 19.1.CHOICE OF LAW

This Agreement shall be deemed to be a contract entered into pursuant to the laws of the State of New York and shall in all respects be governed, construed, applied and enforced in accordance with the laws of the State of New York.

Section 19.2.SEVERABILITY

Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be

104

prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

Section 19.3.PREFERENCES

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

ARTICLE 20
MISCELLANEOUS

Section 20.1.SURVIVAL

This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents.  Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party.  All covenants, promises and agreements in this Agreement,  by or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and assigns of Lender.

Section 20.2.LENDER’S DISCRETION

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

Section 20.3.HEADINGS

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

105

Section 20.4.COST OF ENFORCEMENT

In the event (a) that the Pledge Agreement is foreclosed in whole or in part, (b) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Mortgage Borrower or Borrower or any of its constituent Persons or an assignment by Mortgage Borrower or Borrower or any of its constituent Persons for the benefit of its creditors, or (c) Lender exercises any of its other remedies under this Agreement or any of the other Loan Documents pursuant to its rights under any Loan Document, Borrower shall be chargeable with and agrees to pay all costs of collection and defense, including attorneys’ fees and costs, incurred by Lender or Borrower in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, together with all required service or use taxes.

Section 20.5.SCHEDULES INCORPORATED

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

Section 20.6.OFFSETS, COUNTERCLAIMS AND DEFENSES

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

Section 20.7.NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY BENEFICIARIES

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

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

106

(c)           The general partners, members, principals and (if Borrower is a trust) beneficial owners of Borrower are experienced in the ownership and operation of properties similar to any Property and the Collateral, and Borrower and Lender are relying solely upon such expertise and business plan in connection with the ownership and operation of any Property and the Collateral.  Borrower is not relying on Lender’s expertise, business acumen or advice in connection with any Property or the Collateral.

(d)           Notwithstanding anything to the contrary contained herein, Lender is not undertaking the performance of (i) any obligations under the Leases; or (ii) any obligations with respect to such agreements, contracts, certificates, instruments, franchises, permits, trademarks, licenses and other documents.

(e)           By accepting or approving anything required to be observed, performed or fulfilled or to be given to Lender pursuant to this Agreement, the Pledge Agreement, the Note or the other Loan Documents, including, without limitation, any officer’s certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Lender shall not be deemed to have warranted, consented to, or affirmed the sufficiency, the legality or effectiveness of same, and such acceptance or approval thereof shall not constitute any warranty or affirmation with respect thereto by Lender.

(f)            Borrower recognizes and acknowledges that in accepting this Agreement, the Note, the Pledge Agreement and the other Loan Documents, Lender is expressly and primarily relying on the truth and accuracy of the representations and warranties set forth in Article 4 of this Agreement without any obligation to investigate any Property or the Collateral and notwithstanding any investigation of any Property or the Collateral by Lender; that such reliance existed on the part of Lender prior to the date hereof, that the warranties and representations are a material inducement to Lender in making the Loan; and that Lender would not be willing to make the Loan and accept this Agreement, the Note, the Pledge Agreement and the other Loan Documents in the absence of the warranties and representations as set forth in Article 4 of this Agreement.

Section 20.8.PUBLICITY

All news releases, publicity or advertising by Borrower or its Affiliates through any media intended to reach the general public which refers to the Loan, Lender, or any of its Affiliates shall be subject to the prior written approval of Lender, not to be unreasonably withheld.  Lender shall be permitted to make any news, releases, publicity or advertising by Lender or its Affiliates through any media intended to reach the general public which refers to the Loan, the Collateral, any Property, Mortgage Borrower, Affiliated Lessee, Borrower, Borrower Principal and their respective Affiliates without the approval of Borrower or any such Persons.  Borrower also agrees that Lender may share any information pertaining to the Loan with its Affiliates, in connection with the sale or transfer of the Loan or any Participations and/or Securities created.

107

Section 20.9.CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE

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

Section 20.10.ENTIRE AGREEMENT

This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written between Borrower and Lender are superseded by the terms of this Agreement and the other Loan Documents.

Section 20.11.TAX DISCLOSURE

Notwithstanding anything herein to the contrary, except as reasonably necessary to comply with applicable securities laws, each party (and each employee, representative or other agent of each party) hereto may disclose to any and all persons, without limitation of any kind, any information with respect to the United States federal income “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to such parties (or their representatives) relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the United States federal income tax treatment or tax structure of the transactions contemplated hereby.

108

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

BORROWER:
ROSE MEZZANINE SPE, LP, a Delaware limited partnership
By:	Rose Mezzanine SPE 1 GP, LLC, a Delaware limited liability company, its general partner
	By:
		Paul H. Williams
		Senior Vice President
BORROWER PRINCIPAL:
Acknowledged and agreed to with respect to its obligations set forth in Article 4, Section 5.11, Section 5.33, Section 12.6, Article 13, Article 15 and Article 18 hereof:
RFS PARTNERSHIP, L.P., a Tennessee limited partnership
By:	CNL Rose GP CORP., a Delaware corporation, its general partner
	By:
			Paul H. Williams
			Senior Vice President

LENDER:
FLEET NATIONAL BANK, a national banking association
By:
	Name:
	Title:

[Signature Page 2 of 2 to the Mezzanine Loan Agreement]

EXHIBIT A

Annual Budget

EXHIBIT B

Borrower Equity Ownership Structure

Exhibit B to Loan Agreement
ROSE SPE Structure for CMBS (26 Pool)

~~ ~~

HI Phoenix Chandler, AZ; HOM Phoenix Chandler, AZ; HI Sedona, AZ; RI Sacramento/Cal Expo, CA; DT San Diego Del Mar, CA; HI Denver SW Lakewood, CO; RI Wilmington/Newark, DE;  HI Ft. Lauderdale/Cypress, FL;  TPS Miami Airport West, FL;  TPS Miami Lakes, FL;  RI Orlando International Drive, FL; HOL Crystal Lake, IL;  HOL Louisville Southwest, KY; RI Ann Arbor, MI;  CY Flint, MI;  HI Minneapolis Minnetonka, MN;  HI Hattiesburg, MS;  HI Lincoln Airport I-80, NE;  RI Fishkill, NY;  HI Oklahoma City Airport, OK;  HI Tulsa, OK;  RI Warwick, RI; RI Ft. Worth River Plaza, TX; TPS Fort Worth Southwest, TX;  HI Laredo, TX;  and  RI Tyler, TX

v.3.03  11-5-2003

CONFIDENTIALITY NOTICE:  The information contained herein is confidential and intended only for the use of CNL Hospitality Properties, Inc. or it’s affiliates and legal counsel.  If the reader is not the intended recipient, you are hereby notified that any dissemination, distribution or copying of this information is strictly prohibited.

SCHEDULE A

Properties and Initial Allocated Loan Amounts and Percentages

Property	Initial Allocated Loan Amount		Initial Allocated Loan Percentage
Hampton Inn Phoenix Chandler Chandler, Arizona	$	620,000	1.8	%
Homewood Suites Phoenix Chandler Chandler, Arizona	$	700,000	2.0	%
Hampton Inn Sedona Sedona, Arizona	$	630,000	1.8	%
Residence Inn Sacramento/Cal Expo Sacramento, California	$	2,650,000	7.6	%
Doubletree Hotel San Diego Del Mar San Diego, California	$	1,960,000	5.6	%
Hampton Inn Denver SW Lakewood Lakewood, Colorado	$	400,000	1.1	%
Residence Inn Wilmington/Newark (the “Wilmington Newark Property”) Wilmington, Delaware	$	2,000,000	5.7	%
Hampton Inn Ft. Lauderdale-Cypress Creek Ft. Lauderdale, Florida	$	750,000	2.1	%
Towne Place Suites Miami Airport West (the “Miami Airport West Property”) Miami, Florida	$	800,000	2.3	%
Towne Place Suites Miami Lakes (The “Miami Lakes Property”) Miami, Florida	$	800,000	2.3	%
Residence Inn by Marriott International Drive Orlando, Florida	$	2,020,000	5.8	%
Holiday Inn Crystal Lake Crystal Lake, Illinois	$	2,270,000	6.5	%
Holiday Inn Southwest Louisville (the “Louisville Southwest Property”) Louisville, Kentucky	$	1,300,000	3.7	%
Residence Inn Ann Arbor Ann Arbor, Michigan	$	1,175,000	3.4	%
Courtyard Flint Flint, Michigan (the “Flint Property”)	$	1,076,000	3.1	%
Hampton Inn Minneapolis Minnetonka Minnetonka, Minnesota	$	370,000	1.1	%
Hampton Inn Hattiesburg Hattiesburg, Mississippi	$	1,240,000	3.5	%

Property	Initial Allocated Loan Amount		Initial Allocated Loan Percentage
Hampton Inn Lincoln Airport I-80 Lincoln, Nebraska	$	883,000	2.5	%
Residence Inn Fishkill Fishkill, New York	$	3,906,000	11.2	%
Hampton Inn Oklahoma City-Airport I-40 Oklahoma City, Oklahoma	$	1,139,000	3.3	%
Hampton Inn Tulsa Tulsa, Oklahoma	$	800,000	2.3	%
Residence Inn Warwick Warwick, Rhode Island	$	1,700,000	4.9	%
Ft. Worth Towne Place Suites-Southwest Ft. Worth, Texas	$	938,000	2.7	%
Residence Inn - Ft. Worth River Plaza Ft. Worth, Texas	$	1,950,000	5.6	%
Hampton Inn - Laredo Laredo, Texas	$	1,820,000	5.2	%
Residence Inns Tyler Tyler, Texas	$	1,103,000	3.2	%

SCHEDULE B

Initial Property Manager and Franchisor

Property	Initial Property Manager	Initial Franchisor
Hampton Inn Phoenix Chandler Chandler, Arizona	Promus Hotel, Inc. (“Promus”)	Promus
Homewood Suites Phoenix Chandler Chandler, Arizona	Promus	Promus
Hampton Inn Sedona Sedona, Arizona	Promus	Promus
Residence Inn Sacramento/Cal Expo Sacramento, California	Residence Inn by Marriott, Inc. (“Residence Inn”)	N/A
Doubletree Hotel San Diego Del Mar San Diego, California	DT Management, Inc.	Double Tree Hotel Systems, Inc.
Hampton Inn Denver SW Lakewood Lakewood, Colorado	Promus	Promus
Residence Inn Wilmington/Newark Wilmington, Delaware	Residence Inn	N/A
Hampton Inn Ft. Lauderdale-Cypress Creek Ft. Lauderdale, Florida	Promus	Promus
Towne Place Suites Miami Airport West (the “Miami Airport West Property”) Miami, Florida(1)	N/A	N/A
Towne Place Suites Miami Lakes (the “Miami Lakes Property”) Miami, Florida(1)	N/A	N/A
Residence Inn by Marriott International Drive Orlando, Florida	Residence Inn	N/A
Holiday Inn Crystal Lake Crystal Lake, Illinois	Interstate Management Company, LLC (“Interstate”)	Holiday Hospitality Franchising, Inc. (“Holiday”)

(1) With respect to the Miami Airport West Property and the Miami Lakes Property, such Properties are leased to the Non-Affiliated Lessee which may or may not have entered into management agreements and/or franchise agreements for such Properties.

Property	Initial Property Manager	Initial Franchisor
Holiday Inn Southwest Louisville Louisville, Kentucky (“Louisville Property”)	Interstate	Holiday
Residence Inn Ann Arbor Ann Arbor, Michigan	Residence Inn	N/A
Courtyard Flint Flint, Michigan (the “Flint Property”)	Flagstone/Interstate(2)	Marriott International, Inc.
Hampton Inn Minneapolis Minnetonka Minnetonka, Minnesota	Promus	Promus
Hampton Inn Hattiesburg Hattiesburg, Mississippi	Promus	Promus
Hampton Inn Lincoln Airport I-80 Lincoln, Nebraska	Promus	Promus
Residence Inn Fishkill Fishkill, New York	Residence Inn	N/A
Hampton Inn Oklahoma City-Airport I-40 Oklahoma City, Oklahoma	Promus	Promus
Hampton Inn Tulsa Tulsa, Oklahoma	Promus	Promus
Residence Inn Warwick Warwick, Rhode Island	Residence Inn	N/A
Ft. Worth Towne Place Suites-Southwest Ft. Worth, Texas	Towne Place Management Corporation (“Towne Place”)	N/A
Residence Inn - Ft. Worth River Plaza Ft. Worth, Texas	Residence Inn	N/A
Hampton Inn - Laredo Laredo, Texas	Promus	Promus
Residence Inns Tyler Tyler, Texas	Residence Inn	N/A

(2) On the Closing Date the Initial Manager is Flagstone Hospitality Management LLC, a Tennessee limited liability company (“Flagstone”).  Borrower anticipates entering into a new Management Agreement in the exact same form as the ones with Interstate for the other Interstate Properties in effect on the Closing Date with Interstate on or before February 15, 2004.

SCHEDULE I

COST BASIS OF PROPERTIES

	Property Name	Brand	Total Assigned Value (from Purch. Accounting)	Land	FF&E	Automobiles	Renovations (Building)		Building	Total Purchase Acctg NBV at 7/10/03
CMBS	Flint	Courtyard	9,769,249	963,479	155,919	4,397	—		8,645,454	9,769,249
CMBS	San Diego Del Mar	Doubletree	23,284,953	1,896,074	1,628,247	—	8,268		19,752,364	23,284,953
CMBS	Phoenix Chandler	Hampton Inn	7,773,222	737,860	213,707	—	3,107		6,818,548	7,773,222
CMBS	Sedona	Hampton Inn	6,028,695	1,469,150	152,093	—	—		4,407,451	6,028,695
CMBS	Denver SW Lakewood	Hampton Inn	11,273,212	745,794	471,465	—	600,356		9,455,597	11,273,212
CMBS	Ft. Lauderdale/Cypress	Hampton Inn	10,045,221	931,111	712,839	12,627	8,642		8,380,002	10,045,221
CMBS	Minneapolis Minnetonka	Hampton Inn	9,872,521	959,038	274,303	—	698,277		7,940,904	9,872,521
CMBS	Hattiesburg	Hampton Inn	11,259,326	467,529	559,715	—	8,152		10,223,930	11,259,326
CMBS	Lincoln Airport I-80	Hampton Inn	8,407,611	609,820	190,586	13,636	698,320		6,895,250	8,407,611
CMBS	Oklahoma City Airport	Hampton Inn	10,230,938	847,150	736,519	13,845	13,337		8,620,088	10,230,938
CMBS	Tulsa	Hampton Inn	11,001,578	589,738	370,253	—	1,047,440		8,994,147	11,001,578
CMBS	Laredo	Hampton Inn	9,300,920	532,909	354,727	—	7,439		8,405,845	9,300,920
CMBS	Crystal Lake	Holiday Inn	19,784,530	2,852,273	1,727,477	—	(3,027	)	15,207,807	19,784,530
CMBS	Louisville Southwest	Holiday Inn	12,741,593	881,392	1,172,623	11,866	25,338		10,650,374	12,741,593
CMBS	Phoenix Chandler	Homewood Suites	8,205,405	905,563	536,048	—	—		6,763,794	8,205,405
CMBS	Sacramento/Cal Expo	Residence Inn	18,481,558	1,919,923	1,617,702	—	1,201,158		13,742,775	18,481,558
CMBS	Wilmington/Newark	Residence Inn	12,293,398	—	392,365	13,481	9,477		11,878,075	12,293,398
CMBS	Orlando International Drive	Residence Inn	15,968,213	1,434,506	1,617,897	—	5,255		12,910,555	15,968,213
CMBS	Ann Arbor	Residence Inn	10,974,675	921,516	868,776	—	—		9,184,383	10,974,675
CMBS	Fishkill	Residence Inn	15,215,711	2,093,959	477,646	—	1,670,850		10,973,257	15,215,711
CMBS	Warwick	Residence Inn	10,147,626	1,745,317	543,968	11,021	3,032		7,844,288	10,147,626
CMBS	Ft. Worth River Plaza	Residence Inn	13,075,233	1,928,207	720,221	—	6,398		10,420,407	13,075,233
CMBS	Tyler	Residence Inn	12,071,622	788,783	657,806	—	103,007		10,522,027	12,071,622
CMBS	Miami Airport West	TownePlace Suites	8,518,695	831,129	380,010	—	—		7,307,556	8,518,695
CMBS	Miami Lakes	TownePlace Suites	8,470,964	780,479	374,080	—	—		7,316,405	8,470,964
CMBS	Ft. Worth Southwest	TownePlace Suites	8,532,580	835,181	447,378	—	37,091		7,212,930	8,532,580
	Total CMBS Properties		302,729,251	28,667,879	17,354,370	80,873	6,151,917		250,474,213	302,729,251

		Depreciation 7/10/03 through 9/30/03					Net Book Value as of 9/30/03
	Property Name	Land	FF&E (Including Autos)		Buildings (Including Renovations)		Land	FF&E (Including Autos)	Buildings (Including Renovations)	Total
CMBS	Flint	—	(5,208	)	(49,149	)	963,479	155,108	8,596,305	9,714,892
CMBS	San Diego Del Mar	—	(52,894	)	(112,338	)	1,896,074	1,575,353	19,648,294	23,119,721
CMBS	Phoenix Chandler	—	(6,942	)	(38,781	)	737,860	206,765	6,782,875	7,727,499
CMBS	Sedona	—	(4,941	)	(25,056	)	1,469,150	147,152	4,382,395	5,998,698
CMBS	Denver SW Lakewood	—	(15,316	)	(57,167	)	745,794	456,149	9,998,786	11,200,728
CMBS	Ft. Lauderdale/Cypress	—	(23,567	)	(47,689	)	931,111	701,899	8,340,955	9,973,965
CMBS	Minneapolis Minnetonka	—	(8,911	)	(49,113	)	959,038	265,392	8,590,068	9,814,498
CMBS	Hattiesburg	—	(18,183	)	(58,169	)	467,529	541,532	10,173,913	11,182,975
CMBS	Lincoln Airport I-80	—	(6,634	)	(43,169	)	609,820	197,588	7,550,401	8,357,808
CMBS	Oklahoma City Airport	—	(24,376	)	(49,080	)	847,150	725,988	8,584,344	10,157,482
CMBS	Tulsa	—	(12,028	)	(57,086	)	589,738	358,225	9,984,502	10,932,465
CMBS	Laredo	—	(11,523	)	(47,829	)	532,909	343,204	8,365,455	9,241,568
CMBS	Crystal Lake	—	(56,118	)	(86,438	)	2,852,273	1,671,359	15,118,342	19,641,974
CMBS	Louisville Southwest	—	(38,479	)	(60,691	)	881,392	1,146,010	10,615,021	12,642,424
CMBS	Phoenix Chandler	—	(17,414	)	(38,452	)	905,563	518,634	6,725,343	8,149,540
CMBS	Sacramento/Cal Expo	—	(52,552	)	(84,955	)	1,919,923	1,565,150	14,858,978	18,344,051
CMBS	Wilmington/Newark	—	(13,184	)	(67,580	)	—	392,662	11,819,972	12,212,634
CMBS	Orlando International Drive	—	(52,558	)	(73,425	)	1,434,506	1,565,339	12,842,385	15,842,230
CMBS	Ann Arbor	—	(28,222	)	(52,213	)	921,516	840,554	9,132,171	10,894,240
CMBS	Fishkill	—	(15,516	)	(71,881	)	2,093,959	462,130	12,572,226	15,128,314
CMBS	Warwick	—	(18,029	)	(44,611	)	1,745,317	536,960	7,802,708	10,084,986
CMBS	Ft. Worth River Plaza	—	(23,397	)	(59,276	)	1,928,207	696,824	10,367,530	12,992,561
CMBS	Tyler	—	(21,369	)	(60,403	)	788,783	636,437	10,564,631	11,989,851
CMBS	Miami Airport West	—	(12,345	)	(41,543	)	831,129	367,665	7,266,013	8,464,807
CMBS	Miami Lakes	—	(12,152	)	(41,593	)	780,479	361,928	7,274,811	8,417,218
CMBS	Ft. Worth Southwest	—	(14,533	)	(41,216	)	835,181	432,845	7,208,805	8,476,831
	Total CMBS Properties	—	(566,389	)	(1,458,902	)	28,667,879	16,868,854	255,167,228	300,703,960

EX-12.1

Exhibit 12.1

RFS Partnership, L.P.
Computation of Ratio of Earnings to Fixed Charges

	1999		2000		2001		2001 Supplemental		2002		2002 Supplemental		2003		2003 Supplemental
	(Note A)		(Note A)		(Note A)		(Note B)		(Note A)		(Note B)		(Note A)		(Note B)
Ratio of Earnings to Fixed Charges:
Earnings
Net income	38,610		34,008		(14,886	)	25,876		(4,432	)	5,690		(17,100	)	3,538
Add fixed charges	21,936		24,652		26,042		26,042		27,101		27,101		27,689		27,101
Add amortization of capitalized interest	100		115		115		115		115		115		115		115
Deduct capitalized interest	(1,100	)	(600	)	—		—		—		—		—		—
Total Earnings	59,546		58,175		11,271		52,033		22,784		32,906		10,704		30,754
Fixed Charges
Interest expensed, including amortization of debt costs	20,836		24,052		26,042		26,042		27,101		27,101		27,689		27,101
Capitalized interest	1,100		600		—		—		—		—		—		—
Total Fixed Charges	21,936		24,652		26,042		26,042		27,101		27,101		27,689		27,101
Ratio of Earnings to Fixed Charges:	2.7	x	2.4	x	0.4	x	2.0	x	0.8	x	1.2	x	0.4	x	1.1	x

A.For the purpose of computing the ratio of earnings to fixed charges, earnings consist of net income plus fixed charges, plus the amortization of capitalized interest and less capitalized interest. Fixed charges consist of interest, whether expensed or capitalized, and amortization of loan costs. For the years ended December 31, 2003, 2002 and 2001, the ratio of earnings to fixed charges was less than 1:1 and earnings were insufficient to cover fixed charges by $17.0 million, $4.3 million and $14.8 million, respectively.

B.The supplemental ratio of earnings to fixed charges is computed the same as described in footnote (A) except that income from continuing operations is adjusted to add back the RFS-CNL Transaction costs of $20.6 million in 2003, debt extinguishments and swap termination costs of $10.1 million in 2002 and the Hilton lease termination expense, net of deferred income taxes in 2001.

EX-21.1

EXHIBIT 21.1

RFS PARTNERSHIP, L.P. AND SUBSIDIARIES

SUBSIDIARIES OF THE REGISTRANT

The following is a list of the subsidiaries of the registrant and the state of incorporation for each:

Name of Subsidiaries	State of Incorporation
CNL Rose SPE Tenant Corp.	Delaware
RFS Partnership, LP	Tennessee
RFS 2002 Financing, Inc.	Tennessee
RFS Financing 2002, LLC	Tennessee
RFS Financing Corp.	Tennessee
RFS Financing Partnership II, LP	Tennessee
RFS Financing Partnership, LP	Tennessee
RFS Leasing II, Inc.	Tennessee
RFS Leasing III, Inc.	Tennessee
RFS Leasing IV, Inc.	Tennessee
RFS Leasing V, Inc.	Tennessee
RFS Leasing VI, Inc.	Tennessee
RFS Leasing VII, Inc.	Tennessee
RFS MMM 1 1998	Virginia
RFS MMM 1 2000	Virginia
RFS MMM 2 1998	Virginia
RFS MMM 2 2000	Virginia
RFS SPE 1 1998 LLC	Virginia
RFS SPE 1 2000 LLC	Virginia
RFS SPE 2 1998 LLC	Virginia
RFS SPE 2 2000 LLC	Virginia
RFS TRS Holdings, Inc.	Tennessee
RFS Wharf Property Corporation	Tennessee
Ridge Lake General Partner, Inc. (DISABLED 01/23/04)	Tennessee
Rose Mezzanine SPE, GP	Delaware
Rose Mezzanine SPE, LP	Delaware
Rose SPE 1 GP, LLC	Delaware
Rose SPE 1, LP	Delaware
Wharf Associates	California

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Rule 13a – 14(a),

as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF RFS PARTNERSHIP, L.P.

PURSUANT TO RULE 13a-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas J. Hutchison, III, the Chief Executive Officer of RFS Partnership, L.P. (the “registrant”), certify that:

1.I have reviewed this annual report on Form 10-K of the registrant;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the board of directors of CNL Hospitality Properties, Inc., the ultimate corporate parent of the registrant:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Thomas J. Hutchison, III
Date: March 30, 2004	Name: Thomas J. Hutchison, III
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer

Pursuant to Rule 13a – 14(a),

as Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
OF RFS PARTNERSHIP, L.P.

PURSUANT TO RULE 13a-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, C. Brian Strickland, the Executive Vice President and Principal Financial Officer of RFS Partnership, L.P. (the “registrant”), certify that:

1.I have reviewed this annual report on Form 10-K of the registrant;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the board of directors of CNL Hospitality Properties, Inc., the ultimate corporate parent of the registrant:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ C. Brian Strickland
Date: March 30, 2004	Name: C. Brian Strickland
	Executive Vice President
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that (1) this Annual Report of RFS Partnership, L.P. (the “Operating Partnership”) on Form 10-K for the period ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition of the Operating Partnership as of December 31, 2003 and December 31, 2002 and its results of operations for the year ended December 31, 2003.

	/s/ Thomas J. Hutchison, III
Date: March 30, 2004	Name: Thomas J. Hutchison, III
	Title:  Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification of Principal Financial Officer

Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that (1) this Annual Report of RFS Partnership, L.P. (the “Operating Partnership”) on Form 10-K for the period ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition of the Operating Partnership as of December 31, 2003 and December 31, 2002 and its results of operations for the year ended December 31, 2003.

	/s/ C. Brian Strickland
Date: March 30, 2004	Name: C. Brian Strickland
	Title:  Executive Vice President
	(Principal Financial Officer)

F-1