10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

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 1-14236

FelCor Lodging Trust Incorporated

(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization) 75-2541756
(I.R.S. Employer
Identification No.)

545 E. John Carpenter Freeway, Suite 1300, Irving, Texas
(Address of principal executive offices) 75062
(Zip Code)

(972) 444-4900
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) 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 (2) has been subject to such filing requirements for the past 90 days. R Yes £ No

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). R Yes £ No

     The number of shares of Common Stock, par value $.01 per share, of FelCor Lodging Trust Incorporated outstanding on August 1, 2005, was 60,135,804.

FELCOR LODGING TRUST INCORPORATED

INDEX

		Page
	PART I. — FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Consolidated Balance Sheets June 30, 2005 and December 31, 2004 (unaudited)		3
	Consolidated Statements of Operations – For the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)		4
	Consolidated Statements of Comprehensive Income (Loss) – For the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)		5
	Consolidated Statements of Cash Flows – For the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
	General		18
	Financial Comparison		18
	Results of Operations		19
	Non-GAAP Financial Measures		22
	Hotel Portfolio Composition		28
	Hotel Operating Statistics		29
	Liquidity and Capital Resources		31
	Inflation		34
	Seasonality		34
	Disclosure Regarding Forward-Looking Statements		34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35
Item 4.	Controls and Procedures		36
	PART II. – OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders		37
Item 6.	Exhibits		38
SIGNATURE			39
Construction Lease Agreement
Guaranty Agreement
Form of Promissory Note
Mortgage, Assignment of Rents & Leases, Security Agreement
Certification of CEO Pursuant to Section 302
Certification of Principal Financial Officer Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of Principal Financial Officer Pursuant to Section 906

2

PART I. — FINANCIAL INFORMATION

Item 1. Financial Statements

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)

	June 30,			December 31,
	2005			2004
ASSETS
Investment in hotels, net of accumulated depreciation of $994,414 at June 30, 2005 and $948,631 at December 31, 2004	$	2,892,951		$	2,955,766
Investment in unconsolidated entities		106,380			110,843
Hotels held for sale		31,860			255
Cash and cash equivalents		124,945			119,310
Restricted cash		29,634			34,736
Accounts receivable, net of allowance for doubtful accounts of $639 at June 30, 2005 and $905 at December 31, 2004		59,132			51,845
Deferred expenses, net of accumulated amortization of $16,324 at June 30, 2005 and $14,935 at December 31, 2004		16,364			18,804
Condominium development project		6,480			1,613
Other assets		27,090			24,486
Total assets	$	3,294,836		$	3,317,658
LIABILITIES AND STOCKHOLDERS’ EQUITY
Debt, net of discount of $3,949 at June 30, 2005 and $4,529 at December 31, 2004	$	1,743,420		$	1,767,122
Distributions payable		9,362			8,867
Accrued expenses and other liabilities		145,843			124,922
Minority interest in FelCor LP, 2,788 units issued and outstanding at June 30, 2005 and December 31, 2004		38,497			39,659
Minority interest in other partnerships		48,442			46,765
Total liabilities and minority interest		1,985,564			1,987,335
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 20,000 shares authorized:
Series A Cumulative Convertible Preferred Stock, 12,880 shares issued and outstanding at June 30, 2005 and December 31, 2004		309,362			309,362
Series B Cumulative Redeemable Preferred Stock, 14 and 68 shares issued and outstanding at June 30, 2005 and December 31, 2004, respectively		34,395			169,395
Series C Cumulative Redeemable Preferred Stock, 54 shares issued and outstanding at June 30, 2005		135,000			—
Common stock, $.01 par value, 200,000 shares authorized and 69,441 and 69,436 shares issued, including shares in treasury, at June 30, 2005 and December 31, 2004, respectively		694			694
Additional paid-in capital		2,086,742			2,085,189
Accumulated other comprehensive income		15,534			15,780
Accumulated deficit		(1,088,904	)		(1,066,143	)
Less: Common stock in treasury, at cost, of 9,277 and 9,619 shares at June 30, 2005 and December 31, 2004, respectively		(183,551	)		(183,954	)
Total stockholders’ equity		1,309,272			1,330,323
Total liabilities and stockholders’ equity	$	3,294,836		$	3,317,658

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

3

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2005 and 2004
(unaudited, in thousands, except for per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Revenues:
Hotel operating revenue	$	325,553		$	302,445		$	620,481		$	582,440
Retail space rental and other revenue		120			180			276			425
Total revenues		325,673			302,625			620,757			582,865
Expenses:
Hotel departmental expenses		111,103			106,805			212,836			206,259
Other property operating costs		89,903			84,240			177,841			167,230
Management and franchise fees		16,887			15,863			31,687			30,179
Taxes, insurance and lease expense		32,524			29,628			63,341			59,543
Corporate expenses		4,728			4,380			9,269			7,742
Depreciation		30,485			28,027			60,093			56,503
Asset disposition costs		—			—			650			—
Total operating expenses		285,630			268,943			555,717			527,456
Operating income		40,043			33,682			65,040			55,409
Interest expense, net		(33,471	)		(39,203	)		(66,170	)		(79,797	)
Charge-off of deferred financing costs		—			(3,944	)		—			(4,174	)
Loss on early extinguishment of debt		—			(28,246	)		—			(28,246	)
Impairment		(732	)		—			(732	)		—
Gain on swap termination		—			1,005			—			1,005
Income (loss) before equity in income of unconsolidated entities, minority interests and gain on sales of assets		5,840			(36,706	)		(1,862	)		(55,803	)
Equity in income from unconsolidated entities		3,837			2,691			4,968			3,673
Gain on sale of assets		389			—			389			—
Minority interests		111			1,617			975			2,764
Income (loss) from continuing operations		10,177			(32,398	)		4,470			(49,366	)
Discontinued operations		174			725			(2,133	)		(3,006	)
Net income (loss)		10,351			(31,673	)		2,337			(52,372	)
Preferred dividends		(9,809	)		(8,970	)		(19,900	)		(15,696	)
Issuance costs of redeemed preferred stock		(5,198	)		—			(5,198	)		—
Net loss applicable to common stockholders	$	(4,656	)	$	(40,643	)	$	(22,761	)	$	(68,068	)
Basic and diluted loss per common share data:
Net loss from continuing operations	$	(0.08	)	$	(0.70	)	$	(0.35	)	$	(1.10	)
Net loss	$	(0.08	)	$	(0.69	)	$	(0.38	)	$	(1.15	)
Weighted average common shares outstanding		59,404			58,950			59,363			58,952

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

4

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Three and Six Months Ended June 30, 2005 and 2004
(unaudited, in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Net income (loss)	$	10,351		$	(31,673	)	$	2,337		$	(52,372	)
Unrealized gain (loss) on swaps		(880	)					747
Foreign currency translation adjustment		(749	)		(509	)		(993	)		(970	)
Comprehensive income (loss)	$	8,722		$	(32,182	)	$	2,091		$	(53,342	)

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

5

FELCOR LODGING TRUST INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2005 and 2004
(unaudited, in thousands)

	Six Months Ended June 30,
	2005			2004
Cash flows from operating activities:
Net income (loss)	$	2,337		$	(52,372	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		61,282			61,065
Loss (gain) on sale of assets		(175	)		941
Amortization of deferred financing fees		1,670			2,370
Accretion of debt, net of discount		579			310
Amortization of unearned compensation		1,363			1,101
Equity in income from unconsolidated entities		(4,968	)		(3,673	)
Distributions of income from unconsolidated entities		240			403
Impairment loss		1,291			—
Bad debt reserve		266			273
Charge-off of deferred financing costs		—			4,174
Loss on early extinguishment of debt		—			28,246
Minority interests		(1,075	)		(3,728	)
Changes in assets and liabilities:
Accounts receivable		(7,887	)		(13,512	)
Restricted cash — operations		(997	)		(9,611	)
Other assets		(4,122	)		3,629
Accrued expenses and other liabilities		22,771			172
Net cash flow provided by operating activities		72,575			19,788
Cash flows (used in) provided by investing activities:
Acquisition of hotel		—			(27,759	)
Acquisition of interest in venture		(1,197	)		—
Cash from consolidation of venture		3,204			—
Improvements and additions to hotels		(49,949	)		(34,005	)
Additions to condominium project		(3,588	)		—
Proceeds from sale of assets		8,926			40,863
Increase in restricted cash — investing		5,524			3,055
Capital contributions to unconsolidated entities		(700	)		—
Distributions of capital from unconsolidated entities		4,431			2,726
Net cash flow used in investing activities		(33,349	)		(15,120	)
Cash flows (used in) provided by financing activities:
Proceeds from borrowings		—			344,490
Repayment of borrowings		(10,649	)		(537,606	)
Payment of deferred financing fees		—			(2,221	)
Contributions from minority interest holders		1,028			—
Net proceeds from sale of preferred stock		130,468			104,461
Redemption of preferred stock		(135,000	)		—
Distributions paid to minority interest holders		—			(4,000	)
Distributions paid to preferred stockholders		(19,405	)		(13,351	)
Net cash flow used in financing activities		(33,558	)		(108,227	)
Effect of exchange rate changes on cash		(33	)		(1,007	)
Net change in cash and cash equivalents		5,635			(104,566	)
Cash and cash equivalents at beginning of periods		119,310			231,885
Cash and cash equivalents at end of periods	$	124,945		$	127,319
Supplemental cash flow information — Interest paid	$	64,756		$	89,538

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

6

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

     In 1994, FelCor Lodging Trust Incorporated, or FelCor, went public as a real estate investment trust, or REIT, with six hotels and a market capitalization of $120 million. We are now one of the nation’s largest public lodging REITs, based on total assets and number of hotels owned, holding ownership interests in 140 hotels at June 30, 2005. We are the owner of the largest number of Embassy Suites Hotels^®, and Doubletree Guest Suites^® hotels in North America. Our portfolio includes 69 full service, all suite hotels.

     FelCor is the sole general partner of, and the owner of an approximately 95% limited partnership interest in, FelCor Lodging Limited Partnership, or FelCor LP. All of our operations are conducted solely through FelCor LP, or its subsidiaries.

     At June 30, 2005, we had ownership interests in 140 hotels. We owned a 100% real estate interest in 108 hotels, a 90% or greater interest in entities owning seven hotels, a 60% interest in an entity owning two hotels, a 75% interest in an entity owning one hotel, a 51% interest in an entity owning three hotels and 50% interests in unconsolidated entities that own 19 hotels. As a result of our ownership interests in the operating lessees of 135 of these hotels, we reflect their operating revenues and expenses in our consolidated statements of operations. The operations of 133 of the 135 consolidated hotels were included in continuing operations at June 30, 2005. The remaining two hotels were subject to firm sale contracts at June 30, 2005 (one of which was sold in July 2005), and their operations were included in discontinued operations. The operating revenues and expenses of the remaining five hotels are unconsolidated.

     At June 30, 2005, we had an aggregate of 60,163,904 shares of FelCor common stock and 2,788,135 units of FelCor LP limited partnership interest outstanding.

     The following table reflects the distribution, by brand, of the 133 hotels included in our consolidated continuing operations at June 30, 2005:

Brand	Hotels		Rooms
Embassy Suites Hotels		55		13,925
Doubletree® and Doubletree Guest Suites		10		2,206
Holiday Inn® — branded		36		12,221
Crowne Plaza® and Crowne Plaza Suites®		12		4,025
Sheraton® and Sheraton Suites®		10		3,269
Other brands		10		2,482
Total hotels		133

     The hotels shown in the above table are located in the United States (31 states) and Canada (two hotels), with concentrations in Texas (26 hotels), California (19 hotels), Florida (16 hotels) and Georgia (14 hotels). Approximately 56% of our hotel room revenues were generated from hotels in these four states during the six months ended June 30, 2005.

     At June 30, 2005, of the 133 consolidated hotels included in continuing operations, (i) subsidiaries of Hilton Hotels Corporation, or Hilton, managed 65, (ii) subsidiaries of InterContinental Hotels Group, or IHG, managed 51 (iii) subsidiaries of Starwood Hotels & Resorts Worldwide, Inc., or Starwood, managed 11, and (iv) other independent management companies managed six.

     Certain reclassifications have been made to prior period financial information to conform to the current period’s presentation with no effect on previously reported net loss or stockholders’ equity.

7

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization ¾ (continued)

     The financial information for the three and six months ended June 30, 2005 and 2004, is unaudited. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The accompanying financial statements for the three and six months ended June 30, 2005 and 2004, include adjustments based on management’s estimates (consisting of normal and recurring accruals), which we consider necessary for a fair presentation of the results for the periods. The financial information should be read in conjunction with the consolidated financial statements for the year ended December 31, 2004, included in our Annual Report on Form 10-K for the year ended December 31, 2004 (“Form 10-K”). Operating results for the three and six months ended June 30, 2005, are not necessarily indicative of the results that may be expected for the entire year.

2. Foreign Currency Translation

     Results of operations for our Canadian hotels are maintained in Canadian dollars and translated using the average exchange rates during the period. Assets and liabilities are translated to U.S. dollars using the exchange rates in effect at the balance sheet date. Resulting translation adjustments are reflected in accumulated other comprehensive income included in stockholders’ equity.

3. Investment in Unconsolidated Entities

     We owned 50% interests in joint venture entities that owned 19 hotels at June 30, 2005, and 20 hotels at December 31, 2004. We also owned a 50% interest in entities that own real estate in Myrtle Beach, South Carolina, provide condominium management services, and lease four hotels. We account for our investments in these unconsolidated entities under the equity method. We do not have any majority-owned subsidiaries that are not consolidated in our financial statements. We make adjustments to our equity in income from unconsolidated entities related to the difference between our basis in investment in unconsolidated entities compared to the historical basis of the assets recorded by the joint ventures.

     Summarized unaudited combined financial information for 100% of these unconsolidated entities is as follows (in thousands):

	June 30,		December 31,
	2005		2004
Balance sheet information:
Investment in hotels, net of accumulated depreciation	$	260,282	$	282,028
Total assets	$	286,835	$	313,104
Debt	$	207,678	$	218,292
Total liabilities	$	211,147	$	237,597
Equity	$	75,688	$	75,507

     Debt of our unconsolidated entities at June 30, 2005, consisted of $207.7 million of non-recourse mortgage debt.

8

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Investment in Unconsolidated Entities – (continued)

     Summarized combined statement of operations information for 100% of our unconsolidated entities is as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
Total revenues	$	21,039	$	18,093	$	37,268	$	32,411
Net income	$	7,531	$	6,076	$	10,419	$	8,782

     In May 2005, but effective as of February 28, 2005, we acquired for $1.2 million an additional 25% interest in a joint venture in which we had previously owned a 50% interest. This joint venture owns a single hotel and has been included in our consolidated financial statements for the second quarter.

4. Debt

     Debt at June 30, 2005 and December 31, 2004, consisted of the following (in thousands):

						Balance Outstanding
	Encumbered	Interest Rate at			Maturity	June 30,		December 31,
	Hotels	June 30, 2005			Date	2005		2004
Promissory note	none		5.14	(a)	June 2016	$	650	$	650
Senior unsecured term notes	none		7.63		October 2007		122,892		122,426
Senior unsecured term notes	none		9.00		June 2011		298,535		298,409
Senior unsecured term notes	none		7.79	(b)	June 2011		290,000		290,000
Total unsecured debt			8.27				712,077		711,485
Mortgage debt	9 hotels		6.52		July 2009 - 2014		105,189		105,951
Mortgage debt	6 hotels		4.74	(c)	August 2007		85,511		86,412
Mortgage debt	10 hotels		5.13	(c)	May 2006		142,905		144,669
Mortgage debt	15 hotels		7.24		Nov. 2007		125,779		127,316
Mortgage debt	7 hotels		7.32		April 2009		128,966		130,458
Mortgage debt	6 hotels		7.55		June 2009		67,306		67,959
Mortgage debt	8 hotels		8.70		May 2010		174,066		175,504
Mortgage debt	7 hotels		8.73		May 2010		134,660		135,690
Mortgage debt	1 hotel		5.81	(a)	August 2008		15,500		15,500
Mortgage debt	1 hotel		7.23		October 2005		10,189		10,521
Mortgage debt	3 hotels(d)		7.48		April 2011		25,022		49,476
Mortgage debt	1 hotel		7.91		December 2007		10,585		—
Other	1 hotel		9.17		August 2011		5,665		6,181
Total secured debt(e)	75 hotels		7.25				1,031,343		1,055,637
Total(e)			7.66	%		$	1,743,420	$	1,767,122

(a)	Variable interest rate based on LIBOR. The six month LIBOR was 3.53% at June 30, 2005.
(b)	Variable interest rate based on LIBOR, however $100 million of these notes were matched with interest rate swap agreements that effectively converted the variable interest rate to a fixed rate of 7.8%.
(c)	Variable interest rate based on LIBOR. This debt may be extended at our option for up to two, one-year periods, subject to meeting certain conditions.
(d)	$24 million of this debt was extinguished in July 2005 upon the surrender of two hotels to their non-recourse mortgage holder. The remainder of this debt is expected to be extinguished in the third quarter, upon the surrender of the remaining hotel to its non-recourse mortgage holder.
(e)	Interest rates are calculated based on the weighted average outstanding debt at June 30, 2005.

9

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Debt ¾ (continued)

     We reported interest expense net of interest income of $0.8 million and $0.6 million and capitalized interest of $0.4 million and $0.2 million for the three months ended June 30, 2005 and 2004, respectively. For the six months ended June 30, 2005 and 2004, respectively, we reported interest expense net of interest income of $1.4 million and $1.3 million and capitalized interest of $1.0 million and $0.2 million.

     At June 30, 2005, we had aggregate mortgage indebtedness of approximately $1.0 billion that was secured by 75 of our consolidated hotels with an aggregate book value of approximately $1.8 billion. Substantially all of this debt is recourse solely to the specific assets securing the debt, except in the case of fraud, misapplication of funds and other customary recourse carve-out provisions. Loans secured by 36 hotels provide for lock-box arrangements. With respect to loans secured by 18 of these hotels, if the debt service coverage ratios fall below certain levels and certain other conditions are met, the lender is entitled to apply the revenues from the hotels securing the loan to satisfy current requirements for debt service, taxes, insurance and other reserves, and to hold the balance of the revenues, if any, until debt service coverage ratios again reach specified levels. Three of these 18 hotels, which at June 30, 2005, we were in the process of surrendering to their non-recourse mortgage holders, are currently below the prescribed debt service coverage ratios and are subject to these lock-box requirements. In July 2005, two of these hotels were surrendered and we currently expect the final hotel to be surrendered by the end of the third quarter. These three hotels which were owned by a consolidated joint venture, have an aggregate fair market value below the outstanding debt balance of $25 million at June 30, 2005, are generally located in depressed markets and are expected to generate negative cash flow for the foreseeable future.

     With respect to loans secured by the remaining 18 hotels, the owner is permitted to retain 115% of budgeted hotel operating expenses before the remaining revenues would become subject to a lock-box arrangement if a specified debt service coverage ratio was not met. The lender is entitled to apply the remaining revenues to satisfy current requirements for debt service, taxes, insurance and other reserves with any excess cash returned to the owner. The mortgage loans secured by 16 of these 18 hotels also provide that, so long as the debt service coverage ratios remain below a second, even lower minimum level, the lender may retain any excess cash (after deduction for the 115% of budgeted operating expenses, debt service, tax, insurance and other reserve requirements) and, if the debt service coverage ratio remains below this lower minimum level for 12 consecutive months, apply any accumulated excess cash to the prepayment of the principal amount of the debt. If the debt service coverage ratio exceeds the lower minimum level for three consecutive months, any then accumulated excess cash will be returned to the owner. Ten of these 18 hotels, which accounted for 6% of our total revenues in 2004, fell below the applicable debt service coverage ratio in 2004 and are currently subject to the lock-box provisions. None of the hotels are currently below the second, even lower minimum debt service coverage ratio that would permit the lender to retain excess cash after deduction for the 115% of budgeted operating expenses, debt service, tax, insurance and other reserve requirements.

     In July 2005, we made the initial draw of $3.8 million on our $69.8 million recourse construction loan, for the development of a 184-unit condominium project in Myrtle Beach, South Carolina. The interest on this facility is currently based on LIBOR plus 225 basis points and will be capitalized as part of the cost of the project. The interest rate may be reduced to LIBOR plus 200 basis points when the project is 55% complete and upon satisfaction of certain other requirements. The facility matures in the fourth quarter of 2007 .

5. Derivatives

     In the normal course of business, we are exposed to the effect of interest rate changes. We limit these risks by following established risk management policies and procedures, including the use of derivatives. It is our objective to use interest rate hedges to manage our fixed and floating interest rate position and not to engage in speculation on interest rates. We manage interest rate risk based on the varying circumstances of anticipated

10

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Derivatives – (continued)

borrowings and existing floating and fixed rate debt. We will generally seek to pursue interest rate risk mitigation strategies that will result in the least amount of reported earnings volatility under GAAP while still meeting strategic economic objectives and maintaining adequate liquidity and flexibility. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract.

     To determine the fair values of our derivative instruments, we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

     At June 30, 2005, we had three interest rate swaps with an aggregate notional amount of $100 million, maturing in December 2007. These interest rate swaps are designated as cash flow hedges and are marked to market through other comprehensive income. The estimated unrealized net gain on these interest rate swap agreements was approximately $0.9 million at June 30, 2005, and represents the amount we would receive if the agreements were terminated, based on current market rates. The interest rate received on these interest rate swaps is 4.25% plus LIBOR and the interest rate paid is 7.80%. These swaps were 100% effective through June 30, 2005.

     The amounts paid or received by us under the terms of the interest rate swap agreements are accrued as interest rates change, and we recognize them as an adjustment to interest expense, which will have a corresponding effect on our future cash flows. The interest rate swaps increased interest expense by $0.2 million and by $0.4 million during the three and six months ended June 30, 2005, respectively.

     Our interest rate swaps have monthly to semi-annual settlement dates. Agreements such as these contain a credit risk in that the counterparties may be unable to fulfill the terms of the agreement. We minimize that risk by evaluating the creditworthiness of our counterparties, who are limited to major banks and financial institutions, and we do not anticipate nonperformance by the counterparties. The Standard & Poor’s credit ratings for each of the financial institutions that are counterparties to our interest rate swap agreements are AA- or better.

     We had fair value hedges with a notional amount of $400 million that we terminated in 2004. These fair value hedges decreased interest by $1.4 million and $4.2 million during the three and six months ended June 30, 2004. In June 2004, we unwound six interest rate swap agreements with an aggregate notional amount of $175 million that were matched with the $175 million notes due 2004 that were redeemed. A $1 million gain was recorded, offsetting the loss on the redemption of the debt. Also in June 2004, five additional swaps with an aggregate notional amount of $125 million, that were matched to the $125 million senior unsecured notes due 2007, were unwound at a cost of $2.3 million. The $2.3 million cost decreased the value of these notes and is being amortized to interest expense over the life of the debt. In July 2004, the remaining four interest rate swap agreements having a notional value of $100 million were unwound at a cost of $1.3 million. The $1.3 million cost decreased the mortgage debt due November 2007 and is being amortized to interest expense over the life of this debt.

     To fulfill requirements under the $150 million secured loan facility executed in April 2003, we purchased 6% interest rate caps with a notional amount of $142.9 million. We concurrently sold interest rate caps with identical terms. In July 2004, we purchased 6.5% interest rate caps on LIBOR with a notional amount of $86 million to fulfill requirements under an $86 million cross-collateralized floating rate CMBS loan and concurrently sold interest rate caps with identical terms. These interest rate cap agreements have not been designated as hedges. The fair value of both the purchased and sold interest rate caps were insignificant at June 30, 2005, and resulted in no net earnings impact.

11

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Preferred Stock

     On April 8, 2005, we completed the issuance of 5.4 million depositary shares, each representing 1/100 of a share of our 8% Series C Cumulative Redeemable Preferred Stock, with gross proceeds of $135 million. The gross proceeds were used to redeem a like number of shares of our 9% Series B preferred stock. The redemption of the Series B preferred shares resulted in a reduction in income available to common shareholders of $5.2 million representing the original issuance cost of the Series B preferred shares redeemed.

7. Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs

     Hotel operating revenue from continuing operations was comprised of the following (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
Room revenue	$	262,294	$	241,785	$	500,837	$	466,622
Food and beverage revenue		47,154		45,021		88,810		85,194
Other operating departments		16,105		15,639		30,834		30,624
Total hotel operating revenue	$	325,553	$	302,445	$	620,481	$	582,440

     For the first six months of both 2005 and 2004, over 99% of our revenue was comprised of hotel operating revenues, which included room revenue, food and beverage revenue, and revenue from other hotel operating departments (such as telephone, parking and business centers). These revenues are recorded net of any sales or occupancy taxes collected from our guests. All rebates or discounts are recorded, when allowed, as a reduction in revenue, and there are no material contingent obligations with respect to rebates or discounts offered by us. All revenues are recorded on an accrual basis, as earned. Appropriate allowances are made for doubtful accounts and are recorded as a bad debt expense. The remaining 1% of our revenue was from retail space rental revenue and other sources.

12

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs – (continued)

     Hotel departmental expenses from continuing operations were comprised of the following:

	Three Months Ended June 30,
	2005				2004
			% of Total				% of Total
			Hotel				Hotel
	Dollars in		Operating		Dollars in		Operating
	Thousands		Revenue		Thousands		Revenue
Room	$	67,105		20.6	$	63,661		21.0
Food and beverage		35,856		11.0		35,275		11.7
Other operating departments		8,142		2.5		7,869		2.6
Total hotel departmental expenses	$	111,103		34.1	$	106,805		35.3

	Six Months Ended June 30,
	2005				2004
			% of Total				% of Total
			Hotel				Hotel
	Dollars in		Operating		Dollars in		Operating
	Thousands		Revenue		Thousands		Revenue
Room	$	128,721		20.7	$	123,352		21.2
Food and beverage		68,748		11.1		67,676		11.6
Other operating departments		15,367		2.5		15,231		2.6
Total hotel departmental expenses	$	212,836		34.3	$	206,259		35.4

     Other property operating costs from continuing operations were comprised of the following:

	Three Months Ended June 30,
	2005				2004
			% of Total				% of Total
			Hotel				Hotel
	Dollars in		Operating		Dollars in		Operating
	Thousands		Revenue		Thousands		Revenue
Hotel general and administrative expense	$	29,406		9.0	$	27,874		9.2
Marketing		27,553		8.5		25,946		8.6
Repair and maintenance		17,518		5.4		16,314		5.4
Energy		15,426		4.7		14,106		4.7
Total other property operating costs	$	89,903		27.6	$	84,240		27.9

	Six Months Ended June 30,
	2005				2004
			% of Total				% of Total
			Hotel				Hotel
	Dollars in		Operating		Dollars in		Operating
	Thousands		Revenue		Thousands		Revenue
Hotel general and administrative expense	$	57,893		9.3	$	54,982		9.5
Marketing		53,859		8.7		50,874		8.7
Repair and maintenance		34,495		5.6		32,666		5.6
Energy		31,594		5.1		28,708		4.9
Total other property operating costs	$	177,841		28.7	$	167,230		28.7

13

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Hotel Operating Revenue, Departmental Expenses and Other Property Operating Costs – (continued)

     Included in hotel departmental expenses and other property operating costs are hotel employee compensation and benefit expenses of $100.6 million and $97.1 million for the three months ended June 30, 2005 and 2004, respectively and $196.6 million and $190.0 million for the six months ended June 30, 2005 and 2004, respectively.

8. Taxes, Insurance and Lease Expense

     Taxes, insurance and lease expense from continuing operations is comprised of the following (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
Operating lease expense (a)	$	17,952	$	16,555	$	32,946	$	30,871
Real estate and other taxes		10,844		10,043		23,348		22,045
Property insurance, general liability insurance and other		3,728		3,030		7,047		6,627
Total taxes, insurance and lease expense	$	32,524	$	29,628	$	63,341	$	59,543

(a) Includes hotel lease expense of $15.6 million and $14.2 million associated with 14 hotels and 15 hotels owned by unconsolidated entities for the three months ended June 30, 2005 and 2004, respectively, and $28.1 million and $26.1 million for the six months ended June 30, 2005 and 2004, respectively. Included in lease expense are $9.3 million and $7.3 million in percentage rent for the three months ended June 30, 2005 and 2004, respectively, and $14.7 million and $12.2 million in percentage rent for the six months ended June 30, 2005 and 2004, respectively.

9. Impairment

     Our hotels are comprised of operations and cash flows that can clearly be distinguished, both operationally and for financial reporting purposes. Accordingly, we consider our hotels to be components as defined by Statement of Financial Accounting Standards 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFAS 144, for purposes of determining impairment charges and reporting discontinued operations. We recorded impairment charges under the provisions of the SFAS 144 of $0.6 million during the first quarter with respect to assets held for sale and included in discontinued operations at June 30, 2005. The impairment charges included in discontinued operations provide for estimated selling costs, including termination fees related to our management and franchise agreements. We recorded $0.7 million of impairment charges in June 2005, with respect to one of our non-strategic hotels included in continuing operations. In July 2005, we accepted a non-binding contract for sale of this hotel and reduced its carrying value to the purchase contract amount.

     We continue to review and evaluate our hotel portfolio on an ongoing basis and may identify additional non-strategic hotels for sale based upon various factors. If we decide to sell additional hotels, or if our estimates of market value for hotels currently designated as non-strategic decline, we could incur future impairment charges.

14

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Discontinued Operations

     Included in discontinued operations are the results of operations of nine hotels sold or otherwise disposed of in 2005, two hotels designated as held for sale at June 30, 2005, and 18 hotels disposed of in 2004. Condensed financial information for the hotels included in discontinued operations is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Operating revenue	$	6,166		$	32,811		$	14,240		$	68,186
Operating expenses		5,710			31,114			15,118			70,154
Operating income (loss)		456			1,697			(878	)		(1,968	)
Direct interest costs		(40	)		(534	)		(581	)		(1,060	)
Impairment loss		—			—			(559	)		—
Loss on sale of assets		(234	)		(1,214	)		(214	)		(941	)
Minority interest		(8	)		776			99			963
Income (loss) from discontinued operations	$	174		$	725		$	(2,133	)	$	(3,006	)

     In January 2005, we sold the Holiday Inn Salt Lake City, Utah, and, in April 2005, the Whispering Woods Conference Center in Olive Branch, Mississippi. The Moline, Illinois, Holiday Inn and Holiday Inn Select were sold in May 2005 for aggregate gross proceeds of $13 million. In the second quarter of 2005, we surrendered five limited service hotels, owned by a consolidated joint venture, to their non-recourse mortgage holder. The book value of these hotels approximated the book value of the debt extinguished, therefore no gain or loss was recorded.

     During 2004, we sold 17 hotels for gross proceeds of $157 million. Also in 2004, we terminated a hotel lease and incurred $4.9 million in lease termination charges upon the return of the asset to the lessor.

15

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Earnings (Loss) Per Share

      The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share data):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Numerator:
Income (loss) from continuing operations	$	10,177		$	(32,398	)	$	4,470		$	(49,366	)
Less: Preferred dividends		(9,809	)		(8,970	)		(19,900	)		(15,696	)
Issuance costs of redeemed preferred stock		(5,198	)		—			(5,198	)		—
Loss from continuing operations applicable to common stockholders		(4,830	)		(41,368	)		(20,628	)		(65,062	)
Discontinued operations		174			725			(2,133	)		(3,006	)
Net loss applicable to common stockholders	$	(4,656	)	$	(40,643	)	$	(22,761	)	$	(68,068	)
Denominator:
Denominator for basic earnings per share		59,404			58,950			59,363			58,952
Denominator for diluted earnings per share — adjusted weighted average shares and assumed conversions		59,404			58,950			59,363			58,952
Earnings (loss) per share data:
Basic:
Loss from continuing operations	$	(0.08	)	$	(0.70	)	$	(0.35	)	$	(1.10	)
Discontinued operations		0.00			0.01			(0.03	)		(0.05	)
Net loss		(0.08	)	$	(0.69	)	$	(0.38	)	$	(1.15	)
Diluted:
Loss from continuing operations	$	(0.08	)	$	(0.70	)	$	(0.35	)	$	(1.10	)
Discontinued operations		0.00			0.01			(0.03	)		(0.05	)
Net loss	$	(0.08	)	$	(0.69	)	$	(0.38	)	$	(1.15	)

     Securities that could potentially dilute basic earnings per share in the future and that were not included in the computation of diluted earnings per share, because they would have been antidilutive for the periods presented, are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
Restricted shares granted but not vested		673		382		593		255
Series A convertible preferred shares		9,985		8,202		9,985		8,202

     Series A preferred dividends that would be excluded from net loss applicable to common stockholders, if these Series A preferred shares were dilutive, were $6.3 million and $5.2 million for the three months ended June 30, 2005 and 2004, respectively, and $12.6 million and $8.1 million for the six months ended June 30, 2005 and 2004, respectively.

16

FELCOR LODGING TRUST INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Stock Based Compensation Plans

     We apply Accounting Principles Board Opinion 25, or APB 25, and related interpretations in accounting for our stock based compensation plans for stock based compensation issued prior to January 1, 2003. In 1995, Statement of Financial Accounting Standards 123, “Accounting for Stock-Based Compensation,” or SFAS 123 was issued, which, if fully adopted by us, would have changed the methods we apply in recognizing the cost of the plans. As permitted under the transition provisions of Statement of Financial Accounting Standards 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” we began recognizing compensation expense in accordance with SFAS 123 for all new awards issued after December 31, 2002. Had the compensation cost for our stock-based compensation plans been determined in accordance with SFAS 123 prior to January 1, 2003, our net income or loss and net income or loss per common share for the periods presented would approximate the pro forma amounts below (in thousands, except per share data):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Income (loss) from continuing operations, as reported	$	10,177		$	(32,398	)	$	4,470		$	(49,366	)
Add stock based compensation included in the net income or loss, as reported		746			519			1,352			1,022
Less stock based compensation expense that would have been included in the determination of net income or loss if the fair value method had been applied to all awards		(749	)		(597	)		(1,357	)		(1,107	)
Income (loss) from continuing operations, pro forma	$	10,174		$	(32,476	)	$	4,465		$	(49,451	)
Basic and diluted net loss per common share:
As reported	$	(0.08	)	$	(0.70	)	$	(0.35	)	$	(1.10	)
Pro forma	$	(0.08	)	$	(0.70	)	$	(0.35	)	$	(1.11	)

     The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts.

13. Subsequent Events

     At June 30, 2005, we were in the process of surrendering three limited service hotels, owned by a consolidated joint venture, to their non-recourse mortgage holders. Two of these hotels were surrendered to their non-recourse mortgage holder in July 2005, and the final hotel is expected to be transferred in the third quarter 2005. Upon the transfer of the remaining hotel the full $25 million of consolidated debt associated with these hotels will be extinguished.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

     In the second quarter of 2005, revenue per available room, or RevPAR, increased 9.6% for our consolidated hotels in continuing operations and our average daily room rate, or ADR, comprised 59% of the increase in RevPAR. The significant role that ADR played in the increase in revenue contributed to a 130 basis point improvement in hotel operating margin, compared to the same period in 2004. We currently expect that ADR will continue to be a major portion of our RevPAR increases for the intermediate-term, which should continue to improve our hotel operating margins. The second quarter of 2005 represents the fifth consecutive quarter that we have experienced year over year ADR growth.

     We continue to invest in our core hotels to maintain their competitive position and to take advantage of the current phase of the lodging cycle. During the first six months of 2005, we spent $56 million on capital improvements and replacements (including our pro rata share of capital for unconsolidated ventures), and anticipate capital expenditures of approximately $100 million for the full year.

     During 2005, through July, we have sold or otherwise disposed of 10 hotels for gross proceeds of $16.4 million and have one hotel under a firm sale contract for $38 million, which is expected to close in the third quarter of 2005. During the third quarter, we expect to complete the process of surrendering the last one of eight limited service hotels, owned by a consolidated joint venture, to its non-recourse mortgage holder. These eight hotels had an aggregate fair market value below their outstanding debt balance, are generally located in depressed markets and are expected to generate negative cash flow for the foreseeable future.

     After disposing of the previously mentioned hotels, we will have 13 hotels remaining that we are currently marketing for sale. We estimate that the gross proceeds from the disposition of these hotels will be approximately $107 million and we intend to complete the sale of these hotels by mid-2006.

     We continue to review and evaluate our hotel portfolio on an ongoing basis and may identify additional non-strategic hotels for sale based upon various factors. If we decide to sell additional hotels or if our estimates of market value for hotels, currently designated as non-strategic, decline, we could incur future impairment charges.

Financial Comparison (in thousands of dollars, except RevPAR and hotel operating margin)

	Three Months Ended								Six Months Ended
	June 30,								June 30,
							% Change								% Change
	2005			2004			2004-2005		2005			2004			2004-2005
RevPAR		76.83			70.12			9.6		73.23			67.69			8.2
Hotel operating profit(1)		75,136			65,909			14.0		134,776			119,229			13.0
Hotel operating margin(1)		23.1	%		21.8	%		6.0		21.7	%		20.5	%		5.9
Income (loss) from continuing operations(2)		10,177			(32,398	)		131.4		4,470			(49,366	)		109.1
Funds From Operations (“FFO”)(1) (3)		28,062			(9,489	)		395.7		41,856			(5,927	)		806.2
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)(1)(4)		79,938			40,527			97.2		140,101			94,755			47.9

(1) Included in the Financial Comparison are non-GAAP financial measures, including FFO, EBITDA, hotel operating profit and hotel operating margin. Further discussions of the use, limitations and importance of, and detailed reconciliations to the most comparable GAAP measure, of these non-GAAP financial measures are found elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

18

(2) Included in the income (loss) from continuing operations are the following amounts (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2005		2004			2005		2004
Charge off of deferred debt costs	$	—	$	3,944		$	—	$	4,174
Early extinguishment of debt		—		28,246			—		28,246
Asset disposition costs		—		—			650		—
Gain on swap termination		—		(1,005	)		—		(1,005	)
Impairment		732		—			732		—

(3) In accordance with the guidance provided by the Securities and Exchange Commission, or SEC, on non-GAAP financial measures, FFO has not been adjusted to add back the following items included in net income (loss) (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2005		2004			2005		2004
Charge-off of deferred debt costs	$	—	$	3,944		$	—	$	4,174
Early extinguishment of debt		—		28,246			—		28,246
Issuance costs of redeemed preferred stock		5,198		—			5,198		—
Gain on swap termination		—		(1,005	)		—		(1,005	)
Impairment loss		732		—			1,291		—
Asset disposition costs		—		—			1,300		4,900

(4) Consistent with SEC guidance on non-GAAP financial measures, EBITDA has not been adjusted for the following amounts included in net income (loss) (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Charge-off of deferred debt costs	$	—		$	3,944		$	—		$	4,174
Early extinguishment of debt		—			28,246			—			28,246
Issuance costs of redeemed preferred stock		5,198			—			5,198			—
Gain on swap termination		—			(1,005	)		—			(1,005	)
Impairment loss		732			—			1,291			—
Loss (gain) on sale of assets		(155	)		1,214			(175	)		941
Asset disposition costs		—			—			1,300			4,900

Results of Operations

Comparison of the Three Months Ended June 30, 2005 and 2004

     For the three months ended June 30, 2005, we recorded a loss applicable to common shareholders of $5 million, or $0.08 per share, compared to a loss of $41 million, or $0.69 per share, for the three months ended June 30, 2004.

     Total revenue increased 7.6% to $326 million, compared to the prior year quarter. Hotel operating revenues from continuing operations made up more than 99% of the total revenues for both the second quarters of 2005 and 2004. Hotel operating revenues from continuing operations were $326 million for the second quarter 2005, an increase of $23 million, or 7.6%, compared to the same period in 2004. The increase in revenues was primarily related to a 9.6% increase in our hotel portfolio’s RevPAR, compared to the same period in 2004. The increase in RevPAR was driven by increases in ADR of 5.7% and occupancy of 3.7%. The increase in ADR amounted to 59% of the improvement in RevPAR, as the trend of improving rates, that began in 2004 continued into the second quarter 2005 and contributed to a 130 basis point improvement in hotel operating margins (hotel operating profit as a percentage of hotel revenue).

     Operating expenses for the quarter increased by $17 million or 6%, compared to the prior year quarter. Operating income for the second quarter of 2005 increased by $6 million or 19% over the prior year period. The improvement in operating income was driven largely by increased revenue and improvements in operating margins, which resulted principally from increased ADR. The increase in operating expenses came principally from increases in hotel departmental expenses of $4 million; other property operating expenses of $6 million;

19

management and franchise fees of $1 million; taxes, insurance and lease expense of $3 million; and depreciation expense of $2 million. With the exception of hotel departmental expenses, which decreased as a percentage of total revenue, all of these expenses remained constant to the prior year as a percent of total revenue. The increase in hotel departmental expenses resulted largely from increases in occupancy, with the majority of the increase in labor related costs. The increase in other property operating expenses resulted from increased hotel occupancy, with increases in labor costs, utilities, maintenance, and marketing expenses. Management and franchise fees increased as a function of the increase in revenue. Taxes, insurance and lease expenses increased principally due to increased lease expense, which is a function of revenue, and increased property taxes, largely from reductions recorded in the prior year related to two hotels. Depreciation expense increased as a result of the increased depreciation related to 2004 capital expenditures of $96 million.

     Net interest expense included in continuing operations decreased $6 million or 15% compared to the second quarter in 2004. This reduction is principally related to a $240 million reduction in our average outstanding debt, largely resulting from the early retirement of a portion of our senior notes in 2004.

     At June 30, 2005, we had 133 hotels included in our consolidated continuing operations, of which 13 were non-strategic hotels identified for sale and three were in the process of being surrendered to their non-recourse mortgage holders. The 13 non-strategic hotels included in continuing operations represented 10% of the rooms in our hotel portfolio, but only 4% of our calendar year 2004 consolidated hotel operating profit.

     We recorded an impairment charge of $0.7 million in the second quarter of 2005, related to one of our non-strategic hotels included in continuing operations. In July 2005, we accepted a non-binding contract for sale of this hotel and reduced its carrying value to the purchase contract amount. It is our policy to classify a hotel as “held for sale” once we have a contract with a non-refundable deposit. In the second quarter of 2004, we recorded $31 million in charges related to the early retirement of a portion of our senior notes.

     Equity in income from unconsolidated entities increased by 43% to $4 million in the second quarter of 2005, compared to the same period last year. The increase is attributed to the increased RevPAR for these hotels and an improvement in their operating margins.

     Minority interest declined by $2 million, principally because of smaller losses being allocated to FelCor Lodging Limited Partnership as a result of the improved operations in the quarter, compared to the same period in 2004.

     Income from continuing operations was $10 million for the second quarter 2005, compared to a loss of $32 million in the same period in 2004.

     Discontinued operations for the quarter represent the operating income, direct interest costs and gains or losses on sale of nine hotels disposed of during the first six months of 2005, two hotels that were designated as held for sale at June 30, 2005, and 18 hotels disposed of in 2004.

     Net income for the second quarter 2005 was $10 million, compared to a net loss in the same period of 2004 of $32 million.

     Preferred dividends increased by $1 million. This results from a full quarter of preferred dividends on the Series A preferred stock issued in April 2004, partially offset by savings from the issuance of 5.4 million depositary shares representing Series C preferred stock and the redemption of a corresponding number of shares of Series B preferred stock during the second quarter 2005.

     In accordance with the Emerging Issues Task Force Topic D-42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock,” we have subtracted $5 million of the issuance costs of our redeemed Series B preferred stock from net income to determine net loss applicable to common stockholders for the calculation of net loss per share.

20

Comparison of the Six Months Ended June 30, 2005 and 2004

     For the six months ended June 30, 2005, we recorded a loss applicable to common shareholders of $23 million, or $0.38 per share, compared to a loss of $68 million, or $1.15 per share, for the six months ended June 30, 2004.

     Total revenue increased 6.5% to $621 million, compared to the prior year quarter. Hotel operating revenues from continuing operations made up more than 99% of the total revenues for both the six months ended 2005 and 2004 and were $620 million for the six month period ending June 30, 2005, reflecting an increase of $38 million, or 6.5%, compared to the same period in 2004. The increase in revenues was primarily related to an 8.2% increase in our hotel portfolio’s RevPAR, compared to the same period in 2004. The increase in RevPAR was driven by increases in ADR of 5.7% and occupancy of 2.3%. The increase in ADR amounted to 70% of the improvement in RevPAR, as the trend of improving rates, that began in 2004 continued through the second quarter 2005 and contributed to a 120 basis point improvement in hotel operating margins (hotel operating profit as a percentage of hotel revenue).

     Operating expenses for the six months increased by $28 million or 5%, compared to the prior year period. Operating income for the six month period in 2005 increased by $10 million, or 17%, over the prior year period. The improvement in operating income was driven largely by increased revenue and improvements in operating margins, which resulted principally from increased ADR. The increase in operating expenses came principally from increases in hotel departmental expenses of $7 million; other property operating expenses of $11 million; taxes, insurance and lease expense of $4 million; and depreciation expense of $4 million. With the exception of hotel departmental expenses, which decreased as a percentage of total revenue, all of these expenses remained constant to the prior year as a percent of total revenue. The increase in hotel departmental expenses resulted largely from increases in occupancy, with the majority of the increase in labor related costs. The increase in other property operating expenses resulted from increased hotel occupancy, with increases in labor costs, utilities, maintenance, and marketing expenses. Taxes, insurance and lease expenses increased principally due to increased lease expense, which is a function of revenue, and increased property taxes, largely from reductions recorded in the prior year related to two hotels. Depreciation expense increased as a result of the increased depreciation related to 2004 capital expenditures of $96 million.

     Net interest expense included in continuing operations decreased $14 million, or 17%, compared to the same period in 2004. This reduction is principally related to a $260 million reduction in our average outstanding debt, largely resulting from the early retirement of a portion of our senior notes in 2004 and a 34 basis point reduction in our average interest rate.

     At June 30, 2005, we had 133 hotels included in our consolidated continuing operations, of which 13 were non-strategic hotels identified for sale and three were in the process of being surrendered to their non-recourse mortgage holders. The 13 non-strategic hotels included in continuing operations represented 10% of the rooms in our hotel portfolio, but only 4% of our calendar year 2004 consolidated hotel operating profit.

     We recorded an impairment charge of $0.7 million in the second quarter of 2005, related to one of our non-strategic hotels included in continuing operations. In July 2005, we accepted a non-binding contract for sale of this hotel and reduced its carrying value to the purchase contract amount. It is our policy to classify a hotel as “held for sale” once we have a contract with a non-refundable deposit. In the same six month period of 2004, we recorded $31 million in charges related to the early retirement of a portion of our senior notes and cancellation of our line of credit.

     Equity in income from unconsolidated entities increased by 35% to $5 million in the six month period ended June 30, 2005, compared to the same period last year. The increase is attributed to the increased RevPAR for these hotels and an improvement in their operating margins.

21

     Minority interest declined by $2 million, principally because of smaller losses being allocated to FelCor Lodging Limited Partnership as a result of the improved operations in the six month period, compared to the same period in 2004.

     Income from continuing operations was $5 million for the six month period of 2005, compared to a loss of $49 million in the same period in 2004.

     Discontinued operations for the period represent the operating income, direct interest costs and gains or losses on sale of nine hotels disposed of during the first six months of 2005, two hotels that were designated as held for sale at June 30, 2005, and 18 hotels disposed of in 2004.

     Net income for the six months ended June 30, 2005 was $2 million, compared to a net loss in the same period of 2004 of $52 million.

     Preferred dividends increased by $4 million. This results from a full six months of preferred dividends on the Series A preferred stock issued in April 2004, partially offset by savings from the issuance of 5.4 million depositary shares representing Series C preferred stock and the redemption of a corresponding number of shares of Series B preferred stock during the second quarter 2005.

     In accordance with the Emerging Issues Task Force Topic D-42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock,” we have subtracted $5 million of the issuance costs of our redeemed Series B preferred stock from net income to determine net loss applicable to common stockholders for the calculation of net loss per share.

Non-GAAP Financial Measures

     We refer in this quarterly report on Form 10-Q to certain “non-GAAP financial measures.” These measures, including FFO, EBITDA, hotel operating profit and hotel operating margin, are measures of our financial performance that are not calculated and presented in accordance with generally accepted accounting principles (“GAAP”). The following tables reconcile each of these non-GAAP measures to the most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and of the limitations upon such measures.

     The following tables detail our computation of FFO and EBITDA (in thousands):

Reconciliation of Net Income (Loss) to FFO
(in thousands, except per share data)

	Three Months Ended June 30,
	2005								2004
						Per Share								Per Share
	Dollars			Shares		Amount			Dollars			Shares		Amount
Net income (loss)	$	10,351							$	(31,673	)
Preferred dividends		(9,809	)							(8,970	)
Issuance costs of redeemed preferred stock		(5,198	)							—
Net loss applicable to common stockholders		(4,656	)		59,404	$	(0.08	)		(40,643	)		58,950	$	(0.69	)
Depreciation from continuing operations		30,485					0.51			28,027					0.47
Depreciation from unconsolidated entities and discontinued operations		2,604					0.04			3,991					0.07
Loss (gain) on sale of assets		(155	)				(0.00	)		1,214					0.02
Minority interest in FelCor LP		(216	)		2,788		(0.02	)		(2,078	)		3,033		(0.02	)
Conversion of options and unvested restricted stock		—			339		—			—
FFO	$	28,062			62,531	$	0.45		$	(9,489	)		61,983	$	(0.15	)

22

Reconciliation of Net Income (Loss) to FFO
(in thousands, except per share data)

	Six Months Ended June 30,
	2005								2004
						Per Share								Per Share
	Dollars			Shares		Amount			Dollars			Shares		Amount
Net income (loss)	$	2,337							$	(52,372	)
Preferred dividends		(19,900	)							(15,696	)
Issuance costs of redeemed preferred stock		(5,198	)							—
Net loss applicable to common stockholders		(22,761	)		59,363	$	(0.38	)		(68,068	)		58,952	$	(1.15	)
Depreciation from continuing operations		60,093					1.01			56,503					0.96
Depreciation from unconsolidated entities and discontinued operations		5,758					0.10			8,182					0.14
Loss (gain) on sale of assets		(175	)				0.00			941					0.02
Minority interest in FelCor LP		(1,059	)		2,788		(0.06	)		(3,485	)		3,033		(0.07	)
Conversion of options and unvested restricted stock		—			319					—					—
FFO	$	41,856			62,470	$	0.67		$	(5,927	)		61,985	$	(0.10	)

Consistent with SEC guidance on non-GAAP financial measures, FFO has not been adjusted for the following amounts included in net income or loss (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2005		2004			2005		2004
Charge-off of deferred debt costs	$	—	$	3,944		$	—	$	4,174
Asset disposition costs		—		—			1,300		4,900
Issuance costs of redeemed preferred stock		5,198		—			5,198		—
Loss on early extinguishment of debt		—		28,246			—		28,246
Impairment loss		732		—			1,291		—
Gain on swap termination		—		(1,005	)		—		(1,005	)

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Reconciliation of Net Income (Loss) to EBITDA
(in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Net income (loss)	$	10,351		$	(31,673	)	$	2,337		$	(52,372	)
Depreciation from continuing operations		30,485			28,027			60,093			56,503
Depreciation from unconsolidated entities and discontinued operations		2,604			3,991			5,758			8,182
Minority interest in FelCor LP		(216	)		(2,078	)		(1,059	)		(3,485	)
Interest expense		34,273			39,798			67,614			81,114
Interest expense from unconsolidated entities and discontinued operations		1,687			1,943			4,007			3,791
Amortization expense		755			519			1,352			1,022
EBITDA	$	79,939		$	40,527		$	140,102		$	94,755

Consistent with SEC guidance on non-GAAP financial measures, EBITDA has not been adjusted for the following amounts included in net income or loss (in thousands):

	Three Months Ended						Six Months
	June 30,						Ended June 30,
	2005			2004			2005			2004
Charge-off of deferred debt costs	$	—		$	3,944		$	—		$	4,174
Asset disposition costs		—			—			1,300			4,900
(Gain) loss on sale of assets		(155	)		1,214			(175	)		941
Early extinguishment of debt		—			28,246			—			28,246
Impairment		732			—			1,291			—
Gain on swap termination		—			(1,005	)		—			(1,005	)

     The following tables detail our computation of hotel operating profit, hotel operating margin, hotel operating expenses and the reconciliation of hotel operating expenses to total operating expenses with respect to our hotels included in continuing operations at June 30, 2005.

Hotel Operating Profit
(dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Total revenue	$	325,673		$	302,625		$	620,757		$	582,865
Retail space rental and other revenue		(120	)		(180	)		(276	)		(425	)
Hotel revenue		325,553			302,445			620,481			582,440
Hotel operating expenses		(250,417	)		(236,536	)		(485,705	)		(463,211	)
Hotel operating profit	$	75,136		$	65,909		$	134,776		$	119,229
Hotel operating margin		23.1	%		21.8	%		21.7	%		20.5	%

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Hotel Operating Expense Composition
(dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Hotel departmental expenses:
Room	$	67,105		$	63,661		$	128,721		$	123,352
Food and beverage		35,856			35,275			68,748			67,676
Other operating departments		8,142			7,869			15,367			15,231
Other property related costs:
Administrative and general		29,406			27,874			57,893			54,982
Marketing and advertising		27,553			25,946			53,859			50,874
Repairs and maintenance		17,518			16,314			34,495			32,666
Energy		15,426			14,106			31,594			28,708
Taxes, insurance and lease expense		32,524			29,628			63,341			59,543
Total other property related costs		122,427			113,868			241,182			226,773
Management and franchise fees		16,887			15,863			31,687			30,179
Hotel operating expenses	$	250,417		$	236,536		$	485,705		$	463,211
Reconciliation of total operating expenses to hotel operating expenses:
Total operating expenses	$	285,630		$	268,943		$	555,717		$	527,456
Corporate expenses		(4,728	)		(4,380	)		(9,269	)		(7,742	)
Depreciation		(30,485	)		(28,027	)		(60,093	)		(56,503	)
Asset disposition costs		—			—			(650	)		—
Hotel operating expenses	$	250,417		$	236,536		$	485,705		$	463,211

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     The following tables reconcile net income or loss to hotel operating profit and the ratio of operating income to total revenue to hotel operating margin.

Reconciliation of Net Income (Loss) to Hotel Operating Profit
(in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Net income (loss)	$	10,351		$	(31,673	)	$	2,337		$	(52,372	)
Discontinued operations		(174	)		(725	)		2,133			3,006
Equity in income from unconsolidated entities		(3,837	)		(2,691	)		(4,968	)		(3,673	)
Minority interests		(111	)		(1,617	)		(975	)		(2,764	)
Interest expense, net		33,471			39,203			66,170			79,797
Charge-off of deferred financing costs		—			3,944			—			4,174
Impairment		732			—			732			—
Asset disposition costs		—			—			650			—
Loss on early extinguishment of debt		—			28,246			—			28,246
Gain on swap termination		—			(1,005	)		—			(1,005	)
Corporate expenses		4,728			4,380			9,269			7,742
Depreciation		30,485			28,027			60,093			56,503
Retail space rental and other revenue		(120	)		(180	)		(276	)		(425	)
Gain on sale of assets		(389	)		—			(389	)		—
Hotel operating profit	$	75,136		$	65,909		$	134,776		$	119,229

Reconciliation of Ratio of Operating Income to Total Revenue to Hotel Operating Margin

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Ratio of operating income to total revenue		12.3			11.1			10.5			9.5
Less:
Retail space and rental and other revenue		—			—			—			—
Plus:
Corporate expenses		1.4			1.4			1.4			1.3
Depreciation		9.4			9.3			9.7			9.7
Asset disposition costs		—			—			0.1			—
Hotel operating margin		23.1	%		21.8	%		21.7	%		20.5	%

     Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminish predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company’s operations. These supplemental measures, including FFO, EBITDA, hotel operating profit and hotel operating margin, are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a hotel REIT’s performance and should be considered along with, but not as an alternative to, net income as a measure of our operating performance.

FFO and EBITDA

     The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT,”) defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships

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and joint ventures are calculated to reflect FFO on the same basis. We compute FFO in accordance with standards established by NAREIT. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do.

     EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.

Hotel Operating Profit and Operating Margin

     Hotel operating profit and operating margin are commonly used measures of performance in the hotel industry and give investors a more complete understanding of the operating results over which our individual hotels and operating managers have direct control. We believe that hotel operating profit and operating margin is useful to investors by providing greater transparency with respect to two significant measures used by us in our financial and operational decision-making. Additionally, these measures facilitate comparisons with other hotel REITs and hotel owners. We present hotel operating profit and hotel operating margin by eliminating corporate-level expenses, depreciation and expenses related to our capital structure. We eliminate corporate-level costs and expenses because we believe property-level results provide investors with supplemental information with respect to the ongoing operating performance of our hotels and the effectiveness of management in running our business on a property-level basis. We eliminate depreciation and amortization, even though they are property-level expenses, because we do not believe that these non-cash expenses, which are based on historical cost accounting for real estate assets and implicitly assume that the value of real estate assets diminish predictably over time, accurately reflect and adjustment in the value of our assets.

Use and Limitations of Non-GAAP Measures

     Our management and Board of Directors use FFO and EBITDA to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. We use hotel operating profit and hotel operating margin in evaluating hotel-level performance and the operating efficiency of our hotel managers.

     The use of these non-GAAP financial measures has certain limitations. FFO, EBITDA, hotel operating profit and hotel operating margin, as presented by us, may not be comparable to FFO, EBITDA, hotel operating profit and hotel operating margin as calculated by other real estate companies. These measures do not reflect certain expenses that we incurred and will incur, such as depreciation, interest and capital expenditures. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

     These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. Neither should FFO, FFO per share or EBITDA be considered as measures of our liquidity or indicative of funds available for our cash needs, including our ability to make cash distributions or service our debt. FFO per share does not measure, and should not be used as a measure of, amounts that accrue directly to the benefit of shareholders. FFO, EBITDA, hotel operating profit and hotel operating margin reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. Management strongly encourages investors to review our financial information in its entirety and not to rely on any single financial measure.

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Hotel Portfolio Composition

     The following tables set forth, as of June 30, 2005, for 130 of our 133 hotels included in our consolidated portfolio of continuing operations, distribution by brand, by our top metropolitan markets, by selected states, by type of location, and by market segment. Three limited service hotels, which we were in the process of surrendering to their mortgage holders, have been excluded.

					% of			% of 2004 Hotel
Brand	Hotels		Rooms		Total Rooms			Operating Profit
Embassy Suites Hotel		55		13,925		37	%		52	%
Holiday Inn-branded		36		12,221		32			22
Sheraton-branded		10		3,269		9			10
Doubletree-branded		10		2,206		6			6
Crowne Plaza		12		4,025		11			5
Other		7		1,811		5			5

					% of			% of 2004 Hotel
Top Markets	Hotels		Rooms		Total Rooms			Operating Profit
Atlanta		10		3,061		8	%		9	%
Dallas		12		3,586		10			5
Los Angeles Area		6		1,435		4			5
Orlando		6		2,219		6			5
Boca Raton/Ft. Lauderdale		4		1,118		3			4
New Orleans		2		746		2			4
Minneapolis		4		955		3			4
Philadelphia		3		1,174		3			3
San Diego		1		600		2			3
Phoenix		3		798		2			3
San Antonio		4		1,189		3			3
Northern New Jersery		3		759		2			3
Chicago		4		1,239		3			3
San Francisco Bay Area		8		2,690		7			3
Houston		4		1,403		4			3
Washington DC		1		437		1			3

					% of			% of 2004 Hotel
Top Four States	Hotels		Rooms		Total Rooms			Operating Profit
California		19		5,536		15	%		16	%
Texas		26		7,515		20			14
Florida		16		5,343		14			12
Georgia		12		3,415		9			9

					% of			% of 2004 Hotel
Location	Hotels		Rooms		Total Rooms			Operating Profit
Suburban		58		14,743		39	%		39	%
Urban		31		10,069		27			27
Airport		26		8,183		22			22
Resort		13		4,044		11			12
Interstate		2		418		1			0

					% of			% of 2004 Hotel
Segment	Hotels		Rooms		Total Rooms			Operating Profit
Upscale all-suite		68		16,791		45	%		59	%
Full service		37		12,385		33			23
Upscale		23		7,843		21			17
Limited service		2		438		1			1

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Hotel Operating Statistics

     The following tables set forth historical occupancy, ADR and RevPAR at June 30, 2005 and 2004, and the percentage changes therein between the periods presented, for 130 of our 133 hotels included in our consolidated portfolio of continuing operations. Three limited service hotels, which we were in the process of surrendering to their mortgage holders, have been excluded.

Operating Statistics by Brand

	Occupancy (%)
	Three Months Ended June 30,							Six Months Ended June 30,
	2005		2004		%Variance			2005		2004		% Variance
Embassy Suites Hotels		76.5		72.6		5.3			73.7		71.2		3.6
Holiday Inn-branded hotels		70.6		69.1		2.2			66.8		65.7		1.7
Sheraton-branded hotels		67.3		66.0		2.0			64.5		65.0		(0.8	)
Doubletree-branded hotels		72.2		70.1		3.1			68.7		69.4		(1.0	)
Crowne Plaza hotels		70.1		65.2		7.6			66.8		63.4		5.3
Other hotels		61.6		64.5		(4.5	)		59.2		59.4		(0.3	)
Total hotels		72.1		69.5		3.7			68.9		67.4		2.3

	ADR ($)
	Three Months Ended June 30,						Six Months Ended June 30,
	2005		2004		% Variance		2005		2004		% Variance
Embassy Suites Hotels		121.15		117.39		3.2		123.54		118.31		4.4
Holiday Inn-branded hotels		88.75		83.31		6.5		86.75		82.28		5.4
Sheraton-branded hotels		111.02		96.82		14.7		109.48		97.19		12.6
Doubletree-branded hotels		110.96		105.10		5.6		112.28		104.45		7.5
Crowne Plaza hotels		101.57		96.44		5.3		97.22		92.79		4.8
Other hotels		102.73		95.57		7.5		97.32		91.44		6.4
Total hotels		106.57		100.83		5.7		106.27		100.50		5.7

	RevPAR ($)
	Three Months Ended June 30,						Six Months Ended June 30,
	2005		2004		% Variance		2005		2004		% Variance
Embassy Suites Hotels		92.63		85.23		8.7		91.08		84.22		8.1
Holiday Inn-branded hotels		62.65		57.56		8.8		57.95		54.07		7.2
Sheraton-branded hotels		74.70		63.89		16.9		70.62		63.22		11.7
Doubletree-branded hotels		80.13		73.65		8.8		77.09		72.44		6.4
Crowne Plaza hotels		71.24		62.85		13.3		64.92		58.84		10.3
Other hotels		63.29		61.64		2.7		57.63		54.32		6.1
Total hotels		76.83		70.12		9.6		73.23		67.69		8.2

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Operating Statistics for Our Top Markets

	Occupancy (%)
	Three Months Ended June 30,							Six Months Ended June 30,
	2005		2004		% Variance			2005		2004		% Variance
Atlanta		71.0		67.5		5.2			70.9		67.5		4.9
Dallas		51.4		53.5		(3.9	)		52.3		52.9		(1.1	)
Los Angeles Area		75.4		71.9		5.0			73.4		72.4		1.3
Orlando		75.3		79.3		(5.0	)		77.6		77.6		0.0
Boca Raton/Ft. Lauderdale		80.3		77.0		4.3			85.2		82.0		4.0
New Orleans		73.5		75.5		(2.7	)		73.7		70.8		4.0
Minneapolis		75.5		69.4		8.8			70.5		66.0		6.8
Philadelphia		81.4		72.8		11.7			71.1		64.5		10.2
San Diego		84.0		83.3		0.9			82.8		84.8		(2.4	)
Phoenix		74.9		71.8		4.3			78.1		76.5		2.1
San Antonio		81.7		72.7		12.4			75.6		71.0		6.5
Northern New Jersey		77.1		71.1		8.4			71.1		68.0		4.6
Chicago		80.9		76.4		5.8			71.2		69.3		2.8
San Francisco Bay Area		72.9		67.5		8.0			67.6		64.6		4.6
Houston		73.1		72.0		1.5			71.2		72.8		(2.3	)
Washington DC		83.0		78.5		5.8			75.1		74.4		1.0

	ADR ($)
	Three Months Ended June 30,							Six Months Ended June 30,
	2005		2004		% Variance			2005		2004		% Variance
Atlanta		91.09		86.04		5.9			91.12		87.53		4.1
Dallas		94.11		90.60		3.9			94.84		90.74		4.5
Los Angeles Area		117.32		111.17		5.5			115.94		109.28		6.1
Orlando		83.64		75.20		11.2			89.44		79.41		12.6
Boca Raton/Ft. Lauderdale		120.37		107.17		12.3			141.19		124.07		13.8
New Orleans		135.87		144.35		(5.9	)		141.58		145.94		(3.0	)
Minneapolis		123.75		123.37		0.3			123.30		121.97		1.1
Philadelphia		124.08		110.20		12.6			114.94		104.08		10.4
San Diego		138.43		124.69		11.0			130.74		119.72		9.2
Phoenix		111.95		101.45		10.3			129.83		120.55		7.7
San Antonio		91.24		87.15		4.7			88.85		86.08		3.2
Northern New Jersey		139.54		136.78		2.0			136.97		135.52		1.1
Chicago		120.46		108.45		11.1			110.18		102.09		7.9
San Francisco Bay Area		114.74		114.24		0.4			112.88		111.28		1.4
Houston		72.65		67.98		6.9			71.37		71.11		0.4
Washington DC		147.80		127.60		15.8			147.86		126.82		16.6

	RevPAR ($)
	Three Months Ended June 30,							Six Months Ended June 30,
	2005		2004		% Variance			2005		2004		% Variance
Atlanta		64.67		58.04		11.4			64.57		59.11		9.2
Dallas		48.38		48.46		(0.2	)		49.63		48.03		3.3
Los Angeles Area		88.51		79.88		10.8			85.08		79.12		7.5
Orlando		63.02		59.65		5.7			69.45		61.64		12.7
Boca Raton/Ft. Lauderdale		96.71		82.54		17.2			120.33		101.72		18.3
New Orleans		99.82		109.04		(8.5	)		104.36		103.39		0.9
Minneapolis		93.43		85.62		9.1			86.93		80.52		8.0
Philadelphia		100.97		80.25		25.8			81.71		67.13		21.7
San Diego		116.35		103.87		12.0			108.23		101.58		6.6
Phoenix		83.87		72.86		15.1			101.46		92.24		10.0
San Antonio		74.58		63.39		17.6			67.20		61.13		9.9
Northern New Jersey		107.52		97.21		10.6			97.42		92.19		5.7
Chicago		97.45		82.91		17.5			78.48		70.77		10.9
San Francisco Bay Area		83.64		77.10		8.5			76.31		71.91		6.1
Houston		53.07		48.93		8.5			50.80		51.78		(1.9	)
Washington DC		122.75		100.11		22.6			111.10		94.36		17.7

30

Liquidity and Capital Resources

     Our principal source of cash to meet our cash requirements, including distributions to stockholders and repayments of indebtedness, is from the results of operations of our hotels. For the six months ended June 30, 2005, net cash flow provided by operating activities, consisting primarily of hotel operations, was $73 million. At June 30, 2005, we had cash and cash equivalents of approximately $125 million. Included in cash and cash equivalents is approximately $35 million utilized to meet our hotel minimum working capital requirements.

     We currently expect that our cash flow provided by operating activities for 2005 will be approximately $126 million to $129 million. Our cash flow forecasts assume a full year RevPAR increase of 7.5% to 8% and hotel operating margin improvement over our prior year same-store margin is expected to be at least as strong for the second half of the year as it was for the first half. For 2005, our current operating plan contemplates preferred dividend payments of $39 million, capital expenditures of approximately $100 million ($50 million has been spent through June 30, 2005), $21 million in normal recurring principal payments and proceeds of approximately $83 million from the sale of non-strategic hotels ($16 million was received through July 31, 2005).

     We are required to reinvest the proceeds from the further sale of IHG managed hotels in other hotels to be managed by IHG or pay substantial termination fees. As of August 1, 2005, we had an unsatisfied reinvestment obligation of $32 million from the sale of IHG managed hotels. If we do not fulfill this reinvestment obligation within 12 months of the date of sale, we will be required to pay liquidated damages to IHG aggregating $8 million. Additionally, until the earlier of either our satisfaction of the reinvestment requirement, or the payment of liquidated damages, we are required to pay monthly termination fees of $108,000 (based on the hotels we have sold through August 1, 2005), which payments will be offset against any liquidated damages payable with respect to these properties. In addition, nine of the 13 remaining hotels previously identified for sale are managed by IHG and subject to the reinvestment obligation in the event they are sold. We will incur additional reinvestment obligations of approximately $62 million if these hotels are sold at currently estimated prices or, if the proceeds of sale are not so reinvested, we will incur approximately $17 million in additional liquidated damages and termination fees for which we would be liable to IHG.

     At June 30, 2005, approximately 25% of our outstanding debt had variable interest rates based on LIBOR. Variable interest rates have recently been increasing and, based on our debt outstanding at June 30, 2005, a one percent change in LIBOR would impact our annual interest expense by $4.3 million.

     On April 8, 2005, we completed the issuance of 5.4 million depositary shares representing our 8% Series C preferred stock, realizing gross proceeds of $135 million. The gross proceeds were used to redeem a like number of depositary shares representing our 9% Series B preferred stock. Following the redemption, we had approximately $34 million of our Series B preferred stock remaining outstanding.

     At June 30, 2005, we had aggregate mortgage indebtedness of approximately $1.0 billion that was secured by 75 of our consolidated hotels with an aggregate book value of approximately $1.8 billion. Substantially all of this debt is recourse solely to the specific assets securing the debt, except in the case of fraud, misapplication of funds and other customary recourse carve-out provisions. Loans secured by 36 hotels provide for lock-box arrangements. With respect to loans secured by 18 of these hotels, if the debt service coverage ratios fall below certain levels and certain other conditions are met, the lender is entitled to apply the revenues from the hotels securing the loan to satisfy current requirements for debt service, taxes, insurance and other reserves, and to hold the balance of the revenues, if any, until debt service coverage ratios again reach specified levels. Three of these 18 hotels, which at June 30, 2005, we were in the process of surrendering to their non-recourse mortgage holders, are currently below the prescribed debt service coverage ratios and are subject to these lock-box requirements. In July 2005, two of these hotels were surrendered and we currently expect the final hotel to be surrendered by the end of the quarter. These three hotels were owned by a consolidated joint venture, have an aggregate fair market value below the outstanding debt balance of $25 million at June 30, 2005, are generally located in depressed markets and are expected to generate negative cash flow for the foreseeable future.

31

     With respect to loans secured by the remaining 18 hotels, the owner is permitted to retain 115% of budgeted hotel operating expenses before the remaining revenues would become subject to a lock-box arrangement if a specified debt service coverage ratio was not met. The lender is entitled to apply the remaining revenues to satisfy current requirements for debt service, taxes, insurance and other reserves, with any excess cash returned to the owner. The mortgage loans secured by 16 of these 18 hotels also provide that, so long as the debt service coverage ratios remain below a second, even lower minimum level, the lender may retain any excess cash (after deduction for the 115% of budgeted operating expenses, debt service, tax, insurance and other reserve requirements) and, if the debt service coverage ratio remains below this lower minimum level for 12 consecutive months, apply any accumulated excess cash to the prepayment of the principal amount of the debt. If the debt service coverage ratio exceeds the lower minimum level for three consecutive months, any then accumulated excess cash will be returned to the owner. Ten of these 18 hotels, which accounted for 6% of our total revenues in 2004, fell below the applicable debt service coverage ratio in 2004 and are currently subject to the lock-box provisions. None of the hotels are currently below the second, even lower minimum debt service coverage ratio that would permit the lender to retain excess cash after deduction for the 115% of budgeted operating expenses, debt service, tax, insurance and other reserve requirements.

     In July 2005, we made the initial draw of $3.8 million on our $69.8 million recourse construction loan, for the development of a 184-unit condominium project in Myrtle Beach, South Carolina. The interest on this facility is based on LIBOR plus 225 basis points and will be capitalized as part of the cost of the project. The interest rate may be reduced to LIBOR plus 200 basis points when the project is 55% complete and upon the satisfaction of certain other requirements. The facility matures in the fourth quarter of 2007 .

     If actual operating results fail to meet our current expectations, as reflected in our current public guidance, or if interest rates increase more than currently expected, we may be unable to continue to satisfy the incurrence test under the indentures governing our senior unsecured notes. In such an event, we may be prohibited from, among other things, incurring any additional indebtedness or paying dividends on our preferred or common stock, except to the extent necessary to satisfy the REIT qualification requirement that we distribute currently at least 90% of our taxable income. In the event of our failure of this incurrence test, based upon our current estimates of taxable income for 2005, we would be unable to distribute the full amount of dividends accruing under our outstanding preferred stock in 2005 and, accordingly, could pay no dividends on our common stock. However, based on our operating results to date and our current estimates for the remainder of 2005, we do not anticipate a violation of this incurrence test.

     We currently anticipate that we will continue to meet our financial covenant and incurrence tests under the RevPAR guidance provided by us at our second quarter earnings conference call on August 3, 2005. For the third quarter of 2005, we currently anticipate that our portfolio RevPAR will be 7% to 8% above the comparable period of the prior year. The RevPAR increase for July 2005 was approximately 8%, compared to the same period in 2004. We currently anticipate that full year 2005 hotel portfolio RevPAR will increase approximately 7.5% to 8%. For 2005 we expect to make capital expenditures of approximately $100 million ($50 million has been spent through June 30, 2005), and at August 1, 2005, we were under a firm contract to sell one hotel for $38 million. We estimate that our net loss applicable to common stockholders for 2005 will be in the range of $63 to $60 million, or $1.06 to $1.01 per share.

     We currently maintain receivables from Delta Airlines of approximately $1.5 million, substantially all of which are less than 60 days old and are being paid in the ordinary course of business. If Delta’s recently reported operating losses and challenges were to result in its bankruptcy, a loss of its outstanding receivables could have a material adverse effect upon FelCor’s current estimates of third quarter and full year net income.

     FFO and EBITDA are non-GAAP financial measures, as previously discussed under the caption “Non-GAAP Financial Measures” elsewhere in this Quarterly Report on Form 10-Q, and reference is made to that discussion. Following is our reconciliation of estimated FFO, FFO per share and EBITDA to the corresponding GAAP financial measure.

32

Reconciliation of Estimated Net Loss to Estimated FFO and EBITDA
(in million, except per share data)

	Third Quarter 2005 Guidance												Full Year 2005 Guidance(b)
	Low Guidance						High Guidance						Low Guidance						High Guidance
				Per Share						Per Share						Per Share						Per Share
	Dollars			Amount(a)			Dollars			Amount(a)			Dollars			Amount (a)			Dollars			Amount (a)
Net income (loss)	$	1					$	2					$	(13	)				$	(11	)
Preferred dividends		(10	)					(10	)					(39	)					(39	)
Issuance costs of redeemed preferred stock		—						—						(5	)					(5	)
Net income (loss) applicable to common stockholders		(9	)	$	(0.15	)		(8	)	$	(0.19	)		(57	)	$	(0.96	)		(55	)	$	(0.93	)
Depreciation		33						33						133						133
Minority interest in FelCor LP		—						—						(2	)					(2	)
Issuance costs of redeemed preferred stock		—						—						5						5
FFO	$	24		$	0.38		$	25		$	0.40		$	79		$	1.26		$	81		$	1.29
Net income (loss)		1						2						(13	)				$	(11	)
Depreciation		33						33						133						133
Minority interest in FelCor LP		—						—						(2	)					(2	)
Interest expense		34						34						137						137
Interest expense from unconsolidated entities		2						2						8						8
Amortization expense		1						1						3						3
EBITDA	$	71					$	72					$	266					$	268

(a)	Weighted average shares are 59.4 million. Adding minority interest and unvested restricted stock of 3.3 million shares to weighted average shares, provides the weighted average shares of 62.7 million used to compute FFO per share.
(b)	Included in full year net loss, FFO and EBITDA guidance are the following estimated amounts (in millions, except per share amounts):

				Per Share
	Dollar			Amount
Asset disposition costs	$	(1	)	$	(0.02	)
Impairment		(1	)		(0.02	)

33

Inflation

     Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, require us to reduce room rates in the near term and may limit our ability to raise room rates in the future. We are also subject to the risk that inflation will cause increases in hotel operating expenses disproportionately to revenues.

Seasonality

     The lodging business is seasonal in nature. Generally, hotel revenues are greater in the second and third calendar quarters than in the first and fourth calendar quarters, although this may not be true for hotels in major tourist destinations. Revenues for hotels in tourist areas generally are substantially greater during tourist season than other times of the year. Seasonal variations in revenue at our hotels can be expected to cause quarterly fluctuations in our revenues. Quarterly earnings also may be adversely affected by events beyond our control, such as extreme weather conditions, economic factors and other considerations affecting travel. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenues, we may utilize cash on hand or borrowings to satisfy our obligations or make distributions to our equity holders.

Disclosure Regarding Forward-Looking Statements

     This Quarterly Report on Form 10-Q and the documents incorporated by reference in this Quarterly Report on Form 10-Q include forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks”, or other variations of these terms (including their use in the negative), or by discussions of strategies, plans or intentions. A number of factors could cause actual results to differ materially from those anticipated by these forward-looking statements. Among these factors are:

• general economic and lodging industry conditions, including the anticipated continuation of the current recovery in the economy, the realization of anticipated job growth, the impact of the United States’ military involvement in the Middle East and elsewhere, future acts of terrorism, and the impact on the travel industry of high fuel costs and increased security precautions, the impact that the bankruptcy of one or more major air carriers may have on our revenues and receivables;

• our overall debt levels and our ability to obtain new financing and service debt;

• our inability to retain earnings;

• our liquidity and capital expenditures;

• our growth strategy and acquisition activities;

• our inability to sell the hotels held for sale at anticipated prices; and

• competitive conditions in the lodging industry.

     In addition, these forward-looking statements are necessarily dependent upon assumptions and estimates that may prove to be incorrect. Accordingly, while we believe that the plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these plans, intentions or expectations will be achieved. The forward-looking statements included in this report, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, are expressly qualified in their entirety by the risk factors and cautionary statements discussed in our filings under the Securities Act of 1933 and the Securities Exchange Act of 1934. We undertake no obligation to update any forward-looking statements to reflect future events or circumstances.

34

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk

     At June 30, 2005, approximately 75% of our consolidated debt had fixed interest rates, after considering interest rate swaps. Currently, market rates of interest are below the rates we are obligated to pay on our fixed-rate debt.

     The following table provides information about our financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For debt obligations, the table presents scheduled maturities and weighted average interest rates, by maturity dates. For interest rate swaps, the table presents the notional amount and weighted average interest rate, by contractual maturity date. The fair value of our fixed rate debt indicates the estimated principal amount of debt having the same debt service requirements that could have been borrowed at the date presented, at then current market interest rates. The fair value of our interest rate swaps indicates the estimated amount that would have been received or paid by us had the swaps been terminated at the date presented.

Expected Maturity Date
at June 30, 2005
(dollars in thousands)

																						Fair
	2005			2006			2007			2008			2009			Thereafter			Total			Value
Liabilities
Fixed rate:
Debt	$	18,484		$	17,779		$	271,368		$	16,328		$	201,629		$	687,216		$	1,212,804		$	1,204,728
Average interest rate		7.48	%		7.79	%		7.48	%		7.94	%		7.40	%		8.53	%		8.07	%
Floating rate:
Debt		2,728			143,018			2,015			17,618			78,537			290,650			534,566			534,566
Average interest rate		5.00	%		5.12	%		4.74	%		5.68	%		4.74	%		7.79	%		6.53	%
Total debt	$	21,212		$	160,797		$	273,383		$	33,946		$	280,166		$	977,866		$	1,747,370
Net discount																				(3,950	)
Total debt																			$	1,743,420
Interest rate derivatives
Interest rate swaps
Variable to fixed		—			—		$	100,000			—			—			—		$	100,000		$	894
Average pay rate		—			—			7.80	%		—			—			—			7.80	%
Average receive rate		—			—			7.79	%		—			—			—			7.79	%

     Swap contracts, such as described above, contain a credit risk, in that the counterparties may be unable to fulfill the terms of the agreement. We minimize that risk by evaluating the creditworthiness of our counterparties, who are limited to major banks and financial institutions, and we do not anticipate nonperformance by the counterparties. The Standard & Poor’s credit ratings for each of the financial institutions that are counterparties to our interest rate swap agreements are AA- or better.

35

Item 4. Controls and Procedures

     (a) Evaluation of disclosure controls and procedures.

     Under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and principal financial officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were effective, such that the information relating to us required to be disclosed in our reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

     (b) Changes in internal control over financial reporting.

     There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934) during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

36

PART II. — OTHER INFORMATION

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

     FelCor held its 2005 Annual Meeting of Stockholders on May 17, 2005 (the “Annual Meeting”). At the Annual Meeting, the stockholders of FelCor elected Thomas J. Corcoran, Jr., Donald J. McNamara, Michael D. Rose and David C. Kloeppel to serve as Class II Directors until the Annual Meeting of Stockholders to be held in 2008.

     The total number of shares entitled to vote at the 2005 Annual Meeting was 59,816,504 shares of Common Stock. A total of 47,204,750 shares of Common Stock were represented in person or by proxy at the Annual Meeting. The following table sets forth, with respect to each of the directors elected, the number of votes cast for, and the number of votes withheld, with respect to his election:

Nominee	Votes For		Votes Withheld
Thomas J. Corcoran, Jr.		46,118,346		1,086,404
Donald J. McNamara		31,944,307		15,260,443
Michael D. Rose		46,258,309		946,441
David C. Kloeppel		46,443,072		761,678

     At the 2005 Annual Meeting, the stockholders of FelCor also approved our 2005 Restricted Stock and Stock Option Plan (the “Plan”) covering an aggregate of 1 million shares of Common Stock. A total of 35,316,275 shares were voted in favor of the adoption of the Plan, while an aggregate of 3,276,373 shares were voted against, or abstained from voting on, the Plan. Broker non-votes with respect to 8,612,102 shares were not counted as votes either for or against the Plan and were disregarded in determining the number of shares entitled to vote on the Plan.

     In addition, at the 2005 Annual Meeting, the stockholders of FelCor ratified the selection of PricewaterhouseCoopers LLP as our independent auditor. There were 45,697,666 votes cast for ratification, 1,479,989 votes against and 27,095 shares abstained from voting.

37

Item 6. Exhibits.

     The following exhibits are furnished in accordance with the provisions of Item 601 of Regulation S-K:

Exhibit Number	Description of Exhibit
10.34.1	Construction Loan Agreement, dated April 27, 2005, among Grande Palms, L.L.C. and Bank of America, N.A., as Administrative Agent, and the other financial institutions party thereto, and Bank of America Securities, as Lead Arranger, for a maximum principal loan amount of $69.8 million.
10.34.2	Guaranty Agreement, dated April 27, 2005, by FelCor Lodging Limited Partnership in favor of Bank of America, N.A. on behalf of the lenders.
10.34.3	Form of Promissory Note, each dated April 27, 2005, made by Grande Palms, L.L.C., each separately payable to the order of Bank of America, N.A. ($25 million), Bank of Montreal ($20 million) and The Bank of Nova Scotia ($24.8 million).
10.34.4	Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated April 27, 2005, made by Grande Palms, L.L.C. for the benefit of Bank of America, N.A., as Administrative Agent under the Construction Loan Agreement referenced in Exhibit 10.34.1.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2	Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

38

SIGNATURE

     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.

Dated: August 4, 2005

FELCOR LODGING TRUST INCORPORATED
By:	/s/ Lester C. Johnson
	Lester C. Johnson Senior Vice President and Principal Accounting Officer

39

INDEX TO EXHIBITS

Exhibit Number	Description of Exhibit
10.34.1	Construction Loan Agreement, dated April 27, 2005, among Grande Palms, L.L.C. and Bank of America, N.A., as Administrative Agent, and the other financial institutions party thereto, and Bank of America Securities, as Lead Arranger, for a maximum principal loan amount of $69.8 million.
10.34.2	Guaranty Agreement, dated April 27, 2005, by FelCor Lodging Limited Partnership in favor of Bank of America, N.A. on behalf of the lenders.
10.34.3	Form of Promissory Note, each dated April 27, 2005, made by Grande Palms, L.L.C., each separately payable to the order of Bank of America, N.A. ($25 million), Bank of Montreal ($20 million) and The Bank of Nova Scotia ($24.8 million).
10.34.4	Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated April 27, 2005, made by Grande Palms, L.L.C. for the benefit of Bank of America, N.A., as Administrative Agent under the Construction Loan Agreement referenced in Exhibit 10.34.1.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2	Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

EX-10.34.1

                                                                 EXHIBIT 10.34.1

                THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT
           TO THE FEDERAL ARBITRATION ACT AND/OR Section 15-48-10 OF
               THE SOUTH CAROLINA CODE OF LAWS (1976), AS AMENDED
================================================================================

                           Construction Loan Agreement

                                      among

Grande Palms, L.L.C., a single purpose, single asset limited liability company,

                                       and

                             Bank of America, N.A.,
                            as Administrative Agent,

                                       and

                        The Other Financial Institutions
                                  Party Hereto,

                                      and

                Banc of America Securities LLC, as Lead Arranger

                           Dated as of April 27, 2005

                             [BANK OF AMERICA LOGO]

================================================================================



                           CONSTRUCTION LOAN AGREEMENT

                                  (Syndication)

      THIS CONSTRUCTION LOAN AGREEMENT ("Agreement") is made by and among each
lender from time to time a party hereto (individually, a "Lender" and
collectively, the "Lenders"), and Bank of America, N.A., a national banking
association as Administrative Agent (the "Administrative Agent"); and Grande
Palms, L.L.C., a Delaware single purpose, single asset limited liability company
("Borrower"), who agree as follows:

                               ARTICLE 1- THE LOAN

      1.1 General Information and Exhibits. This Agreement includes the Exhibits
listed below, all of which Exhibits are attached hereto and made a part hereof
for all purposes. Borrower and Lenders agree that if any Exhibit to be attached
to this Agreement contains blanks, the same shall be completed correctly and in
accordance with this Agreement prior to or at the time of the execution and
delivery thereof.

      Exhibit "A" - Legal Description of the Land

      Exhibit "B" - Basic Information

      Exhibit "C" - Certain Conditions Precedent to the Loan Closing

      Exhibit "C-1" - Certain Conditions Precedent to the Funding

      Exhibit "D" - Budget

      Exhibit "E" - Minimum Unit Release Prices

      Exhibit "F" - Advances

      Exhibit "F-I" - Draw Request

      Exhibit "G" - Survey Requirements

      Exhibit "H" - [Reserved]

      Exhibit "I" - List of Required Bonds

      Exhibit "J" - Assignment and Assumption

      Exhibit "K" - Form of Promissory Note

      Exhibit "L" - Schedule of Lenders

      Exhibit "M" - Form of Guaranty

The Exhibits contain other terms, provisions and conditions applicable to the
Loan. Capitalized terms used in this Agreement shall have the meanings assigned
to them in the Basic Information set forth in Exhibit "B" (the "Basic
Information"). This Agreement and the other Loan Documents, which must be in
form, detail and substance satisfactory to Lenders, evidence the agreements of
Borrower and Lenders with respect to the Loan. Borrower shall comply with all of
the Loan Documents.

      1.2 Purpose. The proceeds of the Loan shall be used by Borrower to pay (i)
the cost of the construction of the Improvements on the Land and (ii) other
fees, costs and expenses relating to the Property if and to the extent that such
costs are specifically provided for in the Loan Allocation column in the Budget.
The maximum principal Loan amount shall be $69,800,000.00 (the "Loan Amount"),
the proceeds of which shall be used to develop the Project, which amount shall
be evidenced by the Note. The Loan Amount shall be reduced, if the actual

                                       2



 costs of construction are below the Loan allocations set forth in the Budget
 (as hereinafter defined), by an amount equal to the difference between the cost
 of construction set forth in the Budget and the actual cost of construction.
 The Note shall be in the maximum principal amount of $69,800,000.00.

      1.3 Commitment to Lend. Borrower agrees to borrow the Loan from Lenders,
and each Lender severally agrees to make advances of its Pro Rata Share of the
Loan proceeds to Borrower in amounts at any one time outstanding not to exceed
such Lender's Pro Rata Share of the Loan and (except for Administrative Agent
with respect to Administrative Agent Advances), on the terms and subject to the
conditions set forth in this Agreement and Exhibit "C", Exhibit "C-1" and
Exhibit "F" attached to this Agreement. Lender's commitment to lend shall expire
and terminate (a) automatically if the Loan is prepaid in full; and (b)
automatically upon the occurrence of a Default. The Loan is not revolving. Any
amount repaid may not be reborrowed.

      1.4 Budget. Loan funds are allocated to payment of the costs of the
Project shown in the "Loan Allocation" column of the Budget attached to this
Agreement as Exhibit "D". Borrower shall not amend the Budget, or otherwise
reallocate Loan funds from one Budget line item to another, in an amount in
excess of $500,000.00 per occurrence subject to an aggregate total of
$5,000,000.00 without the prior written approval of Administrative Agent, which
approval shall not be unreasonably withheld or delayed. The Budget has been
prepared by Borrower, and Borrower represents to Administrative Agent and
Lenders that the Budget constitutes Borrower's good faith estimate of all costs
incident to the Loan and the Project through the stated maturity date of the
Loan (collectively, the "Aggregate Cost") after taking into account the
requirements of this Agreement, including "hard" and "soft" costs, fees and
expenses. Unless approved by Administrative Agent, which approval shall not be
unreasonably withheld or delayed, no advance shall be made (a) for any cost not
set forth in the Budget, (b) from any line item in the Budget that, when added
to all prior advances from that line item, would exceed the lesser of (i) the
actual cost incurred by Borrower for such line item, or (ii) the sum shown in
the "Loan Allocation" column in the Budget for such line item (subject to
Borrower's ability to reallocate such items as set forth in Section 1.4 herein),
(c) from any contingency line item in excess of the amount of such line item, or
(d) [Reserved]. Except for Borrower's ability to reallocate items as set forth
in Section 1.4 herein, advances from any line item in the Budget for purposes
other than those for which amounts are initially allocated to such line item, or
changes in the relative amounts allocated to particular line items in the Budget
may only be made with Administrative Agent's approval, which shall not be
unreasonably withheld or delayed.

      1.5 Borrower's Equity and Borrower's Deposit. Prior to the Closing Date
and at all times during the term of the Loan, Administrative Agent must be
satisfied that the actual Aggregate Cost does not exceed the total amount of the
Loan plus the amounts of all equity investments in the Project made by Borrower
for which funds are readily available. Administrative Agent reserves the right
to require, at Borrower's expense, a construction cost takeoff by a consultant
designated by Administrative Agent to assist in making such determination. If at
any time Administrative Agent determines that the sum of: (1) any unadvanced
portion of the Loan to which Borrower is entitled, plus (ii) the portions of the
Aggregate Cost that are to be paid by Borrower from other funds that, to
Administrative Agent's satisfaction, are available, set aside and committed, is
or will be insufficient to pay the actual

                                       3



unpaid Aggregate Cost, Borrower shall, within seven (7) days after written
notice from Administrative Agent, (i) cause Guarantor to sign an acknowledgment,
in form satisfactory to Administrative Agent, that the Guaranty shall cover such
shortages, or (ii) deposit with Agent equity funds in cash with Administrative
Agent the amount of the deficiency ("Borrower's Deposit") in an interest-bearing
account of Administrative Agent's selection with interest earned thereon to be
part of Borrower's Deposit, or shall submit evidence to Administrative Agent of
equity investments previously made, in amounts sufficient, in Administrative
Agent's opinion, to equal any such shortage and Administrative Agent may refuse
to make any additional advances under the Loan Documents until such Guarantor's
acknowledgment or additional equity funds have been received. Any such
Borrower's Deposit is hereby pledged to Administrative Agent and Lenders as
additional security for the Loan, and Borrower hereby grants and conveys to
Administrative Agent for the ratable benefit of Administrative Agent and Lenders
a security interest in all funds so deposited with Administrative Agent, as
additional security for the Loan. Administrative Agent may advance all or a
portion of the Borrower's Deposit prior to the Loan proceeds. Administrative
Agent may (but shall have no obligation to) apply all or any part of Borrower's
Deposit against the unpaid Indebtedness in such order as Administrative Agent
determines.

      1.6 Evidence of Debt.

      1.6.1 Amounts of the Loan made by each Lender shall be evidenced by one or
more accounts or records maintained by such Lender and by the Administrative
Agent in the ordinary course of business The accounts or records maintained by
the Administrative Agent and each Lender shall be conclusive absent manifest
error of the amount of the Loan made by the Lenders to the Borrower and the
interest and payments thereon. Any failure to so record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the Borrower
hereunder to pay any amount owing with respect to the Loans. In the event of any
conflict between the accounts and records maintained by any Lender and the
accounts and records of the Administrative Agent in respect of such matters, the
accounts and records of Administrative Agent shall control in the absence of
manifest error.

      1.7 Interest Rate.

      1.7.1 Initial Interest Rate. Initially, the Principal Debt from day to day
outstanding which is not past due, shall bear interest at a fluctuating rate of
interest equal to the Eurodollar Daily Rate plus two hundred twenty-five (225)
basis points per annum.

      1.7.2 Reduction of Interest Rate. Upon the achievement of all of the
following, the unpaid principal balance of the Loan shall bear interest at a
fluctuating rate of interest equal to the Eurodollar Daily Rate plus two hundred
(200) basis points per annum:

            (i) the Improvements shall be fifty-five percent (55%) complete, as
            evidenced by AIA certification from the Project architect; and

            (ii) no monetary Default has occurred and no Default has occurred
            and is continuing under the Loan.

                                       4



      1.7.3 General Interest Rate Provisions.

      (a) The "Eurodollar Daily Rate" shall mean a fluctuating rate of interest
equal to the one month rate of interest (rounded upwards, if necessary to the
nearest 1/100 of 1%).appearing on Telerate Page 3750 ("Telerate Page 3750" means
the British Bankers Association Libor Rates (determined at 11:00 a.m. London,
England time) that are published by Bridge Information Systems, Inc.) or any
successor page as the one month, two month or three month London interbank
offered rate for deposits in U.S. Dollars at approximately 11:00 a.m. (London
time) on the second preceding Business Day, as adjusted from time to time in
Administrative Agent's sole discretion for then applicable reserve requirements,
deposit insurance assessment rates and other regulatory costs. If for any reason
such rate is not available, the term "Eurodollar Daily Rate" shall mean the
fluctuating rate of interest equal to the one month, two month or three month
rate of interest (rounded upwards, if necessary to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the one month, two month, or three
month London interbank offered rate for deposits in U.S. Dollars at
approximately 11:00 a.m. (London time) on the second preceding Business Day, as
adjusted from time to time in Administrative Agent's sole discretion for then
applicable reserve requirements, deposit insurance assessment rates and other
regulatory costs; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates.

      (b) If Administrative Agent determines that no adequate basis exists for
determining the Eurodollar Daily Rate or that any applicable law or regulation
or compliance therewith by Administrative Agent prohibits or restricts or makes
impossible the charging of interest based on the Eurodollar Daily Rate and
Administrative Agent so notifies Borrower, then until Administrative Agent
notifies Borrower that the circumstances giving rise to such suspension no
longer exist, interest shall accrue and be payable on the unpaid principal
balance of the Loan from the date Administrative Agent so notifies Borrower
until the Maturity Date of the Loan (whether by acceleration, declaration,
extension or otherwise) at a fluctuating rate of interest equal to the Prime
Rate of Administrative Agent plus or minus such amount as may be necessary to
approximate the rate per annum last assessed pursuant to this Section. The term
"Prime Rate" means, on any day, the rate of interest per annum then most
recently established by Administrative Agent as its "prime rate". Any such rate
is a general reference rate of interest, may not be related to any other rate,
and may not be the lowest or best rate actually charged by Administrative Agent
to any customer or a favored rate and may not correspond with future increases
or decreases in interest rates charged by other lenders or market rates in
general, and that Administrative Agent may make various business or other loans
at rates of interest having no relationship to such rate. Each time the Prime
Rate changes, the per annum rate of interest on the Loan shall change
immediately and contemporaneously with such change in the Prime 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
(including the first day but excluding the last day). Administrative Agent shall
determine each interest rate applicable to the Principal Debt in accordance with
this Agreement and its determination thereof shall be conclusive in the absence
of manifest error. The books and records of Administrative Agent shall be prima
facie evidence of all sums owing to Lenders from time to time under this Loan,
but the failure to record any such information shall not limit or affect the
obligations of Borrower under the Loan Documents.

                                       5



      (d) [Reserved].

      (e) Past Due Rate. Accrued and unpaid interest on past due amounts
(including interest on past due interest) shall be due and payable on demand, at
a rate per annum (the "Past Due Rate") equal to four percent (4%) per annum in
excess of the interest rate in effect at the time of payment default. Provided,
there is no Default and in accordance with the Budget, Lender shall pay itself
interest from the Loan Proceeds when due and payable.

      1.8 Prepayment. Borrower may prepay the principal balance of this Loan, in
full at any time or in part from time to time without premium or penalty.
Notwithstanding the foregoing, if Borrower at any time enters into an interest
rate protection agreement whereby Borrower has purchased an interest protection
product from Administrative Agent (an "Interest Rate Protection Agreement") and
the Interest Rate Protection Agreement is in effect, Borrower shall pay to the
Administrative Agent a prepayment fee calculated in accordance with the
prepayment fee described in the Interest Rate Protection Agreement.

      1.9 [Reserved].

      1.10 Late Charge. If Borrower shall fail to make any payment due hereunder
or under the terms of any Note (other than payments of interest to be funded by
Lender to itself in accordance with the Budget as an Advance under the Loan)
within fifteen (15) days after the date such payment is due, Borrower shall pay
to the applicable Lender or Lenders on demand a late charge equal to four
percent (4%) of such payment. Such fifteen (15) day period shall not be
construed as in any way extending the due date of any payment. The "late charge"
is imposed for the purpose of defraying the expenses of a Lender incident to
handling such defaulting payment. This charge shall be in addition to, and not
in lieu of, any other remedy Lenders may have and is in addition to any fees and
charges of any agents or attorneys which Administrative Agent or Lenders may
employ upon the occurrence of a Default, whether authorized herein or by law.

      1.11 Taxes.

      (a) Any and all payments by Borrower to or for the account of
Administrative Agent or any Lender under any Loan Document shall be made free
and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the case of
Administrative Agent and any Lender, taxes imposed on or measured by its net
income, and franchise taxes imposed on it (in lieu of net income taxes), by the
jurisdiction (or any political subdivision thereof) under the Laws of which
Administrative Agent or such Lender, as the case may be, is organized or
maintains a lending office (all such non-excluded taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges, and
liabilities being hereinafter referred to as "Taxes"). If Borrower shall be
required by any Laws to deduct any Taxes from or in respect of any sum payable
under any Loan Document to Administrative Agent or any Lender, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section), Administrative Agent and such Lender receives an amount equal to
the sum it would have received had no such deductions been made, (ii) Borrower
shall make such deductions, (iii)

                                        6



 Borrower shall pay the full amount deducted to the relevant taxation authority
 or other authority in accordance with applicable Laws, and (iv) within 30 days
 after the date of such payment, Borrower shall furnish to Administrative Agent
 (which shall forward the same to such Lender) evidence of payment thereof.

      (b) In addition, Borrower agrees to pay any and all present or future
stamp, court or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under any Loan
Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Loan Document (hereinafter
referred to as "Other Taxes").

      (c) [Reserved].

      (d) Borrower agrees to indemnify Administrative Agent and each Lender for
the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable under this Section)
paid by Administrative Agent and such Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto, in
each case whether or not such Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Tribunal. Payment under this subsection (d)
shall be made within 30 days after the date the Lender or the Administrative
Agent makes a demand therefor.

      (e) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this Section
shall survive the termination of the Commitments and the payment in full of all
the other Obligations.

      1.12 Payment Schedule and Maturity Date.

      (a) The principal of the Loan shall be due and payable in the form of
Release Fees as described more particularly in paragraph (b) below. The entire
principal balance of the Loan then unpaid and all accrued interest then unpaid
shall be due and payable in full on the Maturity Date. Accrued unpaid interest
shall be due and payable on the 15th day of the calendar month for the previous
calendar month after the date of this Agreement, and Administrative Agent shall
pay Lenders interest each month as an advance on the Loan, until all principal
and accrued interest owing on this Loan shall have been fully paid and
satisfied.

      (b) Administrative Agent will release each condominium Unit from the lien
of its mortgage upon (i) satisfaction of all requirements set forth in the
Mortgage; (ii) payment, in each case, to Administrative Agent of a release fee
("Release Fee") equal to the greater of (a) 100% of the net sales proceeds of
the applicable Unit, or (b) 92% of the gross sales price of the applicable Unit,
subject to the minimum release price for each Unit set forth on Exhibit "E"
attached hereto and incorporated herein by reference; (iii) receipt by Lender of
fully executed copies of the sales contract and closing statement for each Unit
to be so released; and (iv) receipt by Lender of appropriate releases to be
executed. In all cases, such Release Fees shall be remitted to Administrative
Agent at the closing of the sale of the Unit.

                                       7



      1.13 Advances and Payments.

      (a) Following receipt of a Draw Request, Administrative Agent shall
promptly provide each Lender with a copy of the Draw Request Form in the form of
Exhibit 7-l", the related AIA Document G-702 and G-703, with written
certification by Borrower's Architect thereon and, if available, the related
written certification of the Construction Consultant. Administrative Agent shall
notify one designated person at each Lender telephonically (with confirmation by
facsimile) or by facsimile (with confirmation by telephone) not later than 1:00
p.m. Administrative Agent's Time one (1) Business Day prior to the advance
Funding Date for all advances of its Pro Rata Share of the Amount Administrative
Agent has determined shall be advanced in connection therewith ("Advance
Amount"). In the case of an advance of the Loan, each Lender shall make the
funds for its Pro Rata Share of the Advance Amount available to Administrative
Agent not later than 1:00 p.m. Administrative Agent's Time on the Funding Date
thereof. After Administrative Agent's receipt of the Advance Amount from
Lenders, Administrative Agent shall make proceeds of the Loan in an amount equal
to the Advance Amount (or, if less, such portion of the Advance Amount that
shall have been paid to Administrative Agent by Lenders in accordance with the
terms hereof) available to Borrowers on the applicable Funding Date by advancing
such funds to Borrowers in accordance with the provisions of Exhibit "F".

      (b) All payments by Borrower shall be made without condition or deduction
for any counterclaim, defense, recoupment or setoff. Except as otherwise
expressly provided herein, all payments by Borrower hereunder shall be made to
Administrative Agent not later than 12:00 p.m. Administrative Agent's Time on
the date specified herein. Administrative Agent shall promptly distribute to
each Lender, such funds as it may be entitled to receive hereunder, (1) on or
before 3:00 p.m. Administrative Agent's Time on the day Administrative Agent
receives such funds, if Administrative Agent has received such funds on or
before 12:00 p.m. (Administrative Agent's Time), or (ii) on or before 12:00 p.m.
Administrative Agent's Time on the Business Day following the day Administrative
Agent receives such funds, if Agent receives such funds after 12:00 p.m.
Administrative Agent's Time.

      (c) Except as otherwise provided herein, all payments by Borrower or any
Lender shall be made to Administrative Agent at Administrative Agent's Office
not later than the time for such type of payment specified in this Agreement.
All payments received after such time shall be deemed received on the next
succeeding Business Day. All payments shall be made in immediately available
funds in lawful money of the United States of America.

      (d) Upon satisfaction of any applicable terms and conditions set forth
herein, Administrative Agent shall promptly make any amounts received in
accordance with the prior subsection available in like funds received as
follows: (1) if payable to Borrower, in accordance with Exhibit "F", except as
otherwise specified herein, and (ii) if payable to any Lender, by wire transfer
to such Lender at the address specified in the Schedule of Lenders.

      (e) Unless Borrower or any Lender has notified Administrative Agent prior
to the date any payment is required to be made by it to Administrative Agent,
that Borrower or such Lender, as the case may be, will not make such payment,
Administrative Agent may assume that Borrower or such Lender, as the case may
be, has timely made such payment and may (but shall

                                        8



not be required to do so) in reliance thereon, make available a corresponding
amount to the person or entity entitled thereto. If and to the extent that such
payment was not in fact made to Administrative Agent in immediately available
funds, then:

            (i) if Borrower failed to make such payment, each Lender shall
forthwith on demand repay to Administrative Agent the portion of such assumed
payment that was made available to such Lender in immediately available funds,
together with interest thereon in respect of each day from and including the
date such amount was made available by Administrative Agent to such Lender to
the date such amount is repaid to Administrative Agent in immediately available
funds at the Federal Funds Rate from time to time in effect; and

            (ii) if any Lender failed to make such payment, such Lender or, if
applicable, Electing Lender or Lenders shall forthwith on demand pay to
Administrative Agent the amount thereof in immediately available funds, together
with interest thereon for the period from the date amount was made available by
Administrative Agent to Borrower to the date such amount is recovered by
Administrative Agent (the "Compensation Period") at a rate per annum equal to
the interest rate applicable to such amount under the Loan. If such Lender pays
such amount to Administrative Agent, then such amount shall constitute such
Lender's Pro Rata Share, included in the applicable Loan advance. Nothing herein
shall be deemed to relieve any Lender from its obligation to fulfill its
Commitment or to prejudice any rights, which Administrative Agent or Borrower
may have against any Lender as a result of any default by such Lender hereunder.

      A notice of the Administrative Agent to any Lender with respect to any
amount owing under this subsection shall be conclusive, absent manifest error.

      (f) If any Lender makes available to the Administrative Agent funds for
any Loan advance to be made by such Lender as provided in the foregoing
provisions of this Section, and the funds are not advanced to Borrower or
otherwise used to satisfy any Obligations of Lender hereunder, the
Administrative Agent shall return such funds (in like funds as received from
such Lender) to such Lender, with interest.

      (g) Nothing herein shall be deemed to obligate any Lender to obtain the
funds for any Loan advance in any particular place or manner or to constitute a
representation by any Lender that it has obtained or will obtain the funds for
any Loan advance in any particular place or manner.

      (h) All Loan disbursements shall be made only in accordance with the Loan
allocations in the Budget, the Cost Breakdown and the requirements for Loan
disbursements contained in the Loan Documents. Furthermore, disbursements under
the Note shall not commence until Borrower has met the pre-sales requirement
described herein in Section 1.13(i) and the Loan has been syndicated in the
manner described in Article 6 below. In addition, all construction-related
disbursements shall be subject to the approval, which may not be unreasonably
withheld or delayed, of Administrative Agent's construction consultant. The
Administrative Agent shall not be obligated to disburse any undrawn interest or
any cost savings realized on any line item in the Budget under a different line
item in the Budget; subject, however, to Borrower's ability to reallocate such
amounts as permitted under Section 1.4.

                                       9



      (i) The form of contract for the purchase and sale of a Unit (a "Sales
Contract") has been received by and is acceptable to Administrative Agent. If a
Sales Contract materially differs from the form approved by Administrative
Agent, then such Sales Contract shall be subject to Administrative Agent's
approval in its sole discretion. All Sales Contracts shall require a
non-refundable deposit (a "Deposit") to be held by Administrative Agent in the
amount of 10% of the gross sales price for the applicable Unit. No Sales
Contract shall contain any contingencies (other than as approved by
Administrative Agent) which would make the contract non-binding on the
purchaser. Funding shall be limited to no more than fifty percent (50%) of the
Appraised Value of the Land ("Initial Funding"; and such funding shall be
initially advanced only by Administrative Agent) until such time as Borrower has
submitted to Administrative Agent copies of executed, valid and binding Sales
Contracts in form and substance acceptable to Administrative Agent in the
aggregate gross amount of $76,000,000.00 at which time Borrower may borrow up to
one hundred percent (100%) of the Loan proceeds in accordance with the terms of
the Loan Documents (and the Initial Funding shall then be shared pro rata among
the Lenders). Multiple Unit purchasers shall be allowed only with the specific
permission of the Administrative Agent.

      1.14 Administrative Agent Advances.

      (a) Administrative Agent is authorized, from time to time, in
Administrative Agent's sole discretion to make, authorize or determine advances
of the Loan, or otherwise expend funds, on behalf of Lenders ("Administrative
Agent Advances"), (1) to pay any costs, fees and expenses as described in
Section 6.10 herein, (ii) when the applicable conditions precedent set forth in
Exhibit "C," Exhibit "C-1" and Exhibit "F" have been satisfied to the extent
required by Administrative Agent, and (iii) when Administrative Agent deems
necessary or desirable to preserve or protect the Loan collateral or any portion
thereof (including those with respect to property taxes, insurance premiums,
completion of construction, operation, management, improvements, maintenance,
repair, sale and disposition) (A) subject to Section 5.5, after the occurrence
of a Default, and (B) subject to Section 5.10, after acquisition of all or a
portion of the Loan collateral by foreclosure or otherwise. Notwithstanding the
foregoing, Administrative Agent Advances after the Initial Funding which are
equal to or greater than $5,000,000.00 shall require the approval of the
Required Lenders, which shall not be unreasonably withheld.

      (b) Administrative Agent Advances shall constitute obligatory advances of
Lenders under this Agreement, shall be repayable on demand and secured by the
Loan collateral, and shall bear interest at the rate applicable to such amount
under the Loan. Administrative Agent shall notify each Lender in writing of each
Administrative Agent Advance. Upon receipt of notice from Administrative Agent
of its making of an Administrative Agent Advance, other than the Initial
Funding, each Lender shall make the amount of such Lender's Pro Rata Share of
the outstanding principal amount of the Administrative Agent Advance available
to Administrative Agent, in same day funds, to such account of Administrative
Agent as Administrative Agent may designate, (i) on or before 3:00 p.m.
(Administrative Agent's Time) on the day Administrative Agent provides Lenders
with notice of the making of such Administrative Agent Advance if Administrative
Agent provides such notice on or before 12:00 p.m. (Administrative Agent's
Time), or (ii) on or before 12:00 p.m. on the Business Day immediately following
the day Administrative Agent provides Lenders with notice of the making of such
advance if Administrative Agent provides notice after 12:00 p.m. (Administrative
Agent's Time).

                                       10



      1.15 Defaulting Lender.

      (a) Notice and Cure of Lender Default; Election Period; Electing Lenders.
Administrative Agent shall promptly notify (such notice being referred to as the
"Default Notice") Borrower (for Loan advances) and each non-Defaulting Lender if
any Lender is a Defaulting Lender. Each non-Defaulting Lender shall have the
right, but in no event or under any circumstance the obligation, to fund such
Defaulting Lender Amount, provided that, within five (5) Business Days after the
date of the Default Notice (the "Election Period"), such non- Defaulting Lender
or Lenders (each such Lender, an "Electing Lender") irrevocably commit(s) by
notice in writing (an "Election Notice") to Administrative Agent, the other
Lenders and Borrower to fund the Defaulting Lender Amount and to assume the
Defaulting Lender's obligations with respect to the advancing of the entire
undisbursed portion of the Defaulting Lender's principal obligations under this
Agreement (such entire undisbursed portion of the Defaulting Lender's principal
obligations under this Agreement, including its portion of the Payment Amount
that is the subject of the default, is hereinafter referred to as the
"Defaulting Lender Obligation"). If Administrative Agent receives more than one
Election Notice within the Election Period, then the commitment to fund the
Defaulting Lender Amount and the Defaulting Lender Obligation shall be
apportioned pro rata among the Electing Lenders in the proportion that the
amount of each such Electing Lender's Commitment bears to the total Commitments
of all Electing Lenders. If the Defaulting Lender fails to pay the Defaulting
Lender Payment Amount within the Election Period, the Electing Lender or
Lenders, as applicable, shall be automatically obligated to fund the Defaulting
Lender Amount and Defaulting Lender Obligation (and Defaulting Lender shall no
longer be entitled to fund such Defaulting Lender Amount and Defaulting Lender
Obligation) within three (3) Business Days after such notice to Administrative
Agent for reimbursement to Administrative Agent or payment to Borrower as
applicable. Notwithstanding anything to the contrary contained herein, if
Administrative Agent has funded the Defaulting Lender Amount, Administrative
Agent shall be entitled to reimbursement for its portion of the Defaulting
Lender Payment Amount pursuant to Section 5.11. Further, if no Electing Lender
commits in writing to fund timely the Defaulting Lender Obligation hereunder,
Borrower may fund any such amounts and request a refund of such amounts upon the
replacement of a Defaulting Lender as set forth in Section 1.17 hereinbelow.

      (b) Removal of Rights; Indemnity. Administrative Agent shall not be
obligated to transfer to a Defaulting Lender any payments made by or on behalf
of Borrower to Administrative Agent for the Defaulting Lender's benefit; nor
shall a Defaulting Lender be entitled to the sharing of any payments hereunder
or under any Note until all Defaulting Lender Payment Amounts are paid in full.
Administrative Agent shall hold all such payments received or retained by it for
the account of such Defaulting Lender; Amounts payable to a Defaulting Lender
shall be paid by Administrative Agent to reimburse Administrative Agent and any
Electing Lender pro rata for all Funds Defaulting Lender Payment Amounts. Solely
for the purposes of voting or consenting to matters with respect to the Loan
Documents, a Defaulting Lender shall be deemed not to be a "Lender" and such
Defaulting Lender's Commitment shall be deemed to be zero. A Defaulting Lender
shall have no right to participate in any discussions among and/or decisions by
Lenders hereunder and/or under the other Loan Documents. Further, any Defaulting
Lender shall be bound by any amendment to, or waiver of, any provision of, or
any action taken or omitted to be taken by Administrative Agent and/or the
non-Defaulting Lenders under, any Loan Document which is made subsequent to the
Defaulting Lender's

                                       11



becoming a Defaulting Lender. This Section shall remain effective with respect
to a Defaulting Lender until such time as the Defaulting Lender shall no longer
be in default of any of its obligations under this Agreement by curing such
default by payment of all Defaulting Lender Payment Amounts (i) within the
Election Period, or (ii) after the Election Period with the consent of the
non-Defaulting Lenders. Such Defaulting Lender nonetheless shall be bound by any
amendment to or waiver of any provision of, or any action taken or omitted to be
taken by Administrative Agent and/or the non-Defaulting Lenders under any Loan
Document which is made subsequent to that Lender's becoming a Defaulting Lender
and prior to such cure or waiver. The operation of this subsection or the
subsection above alone shall not be construed to increase or otherwise affect
the Commitment of any non-Defaulting Lender, or relieve or excuse the
performance by Borrower of their duties and obligations hereunder or under any
of the other Loan Documents. Furthermore, nothing contained in this Section
shall release or in any way limit a Defaulting Lender's obligations as a Lender
hereunder and/or under any other of the Loan Documents. Further, a Defaulting
Lender shall indemnify and hold harmless Administrative Agent and each of the
non-Defaulting Lenders from any claim, loss, or costs incurred by Administrative
Agent and/or the non-Defaulting Lenders as a result of a Defaulting Lender's
failure to comply with the requirements of this Agreement, including, without
limitation, any and all additional losses, damages, costs and expenses
(including, without limitation, attorneys' fees) incurred by Administrative
Agent and any non-Defaulting Lender as a result of and/or in connection with (i)
a non-Defaulting Lender's acting as an Electing Lender, (ii) any enforcement
action brought by Administrative Agent against a Defaulting Lender, and (iii)
any action brought against Administrative Agent and/or Lenders. The
indemnification provided above shall survive any termination of this Agreement.

      (c) Commitment Adjustments. In connection with the adjustment of the
amounts of the Loan Commitments of the Defaulting Lender and Electing Lender(s)
upon the expiration of the Election Period as aforesaid, Borrower,
Administrative Agent and Lenders shall execute such modifications to the Loan
Documents as shall, in the reasonable judgment of Administrative Agent, be
necessary or desirable in connection with the adjustment of the amounts of
Commitments in accordance with the foregoing provisions of this Section. For the
purpose of voting or consenting to matters with respect to the Loan Documents
such modifications shall also reflect the removal of voting rights of the
Defaulting Lender and increase in voting rights of Electing Lenders to the
extent an Electing Lender has funded the Defaulting Lender Amount and assumed
the Defaulting Lender Obligation. In connection with such adjustments,
Defaulting Lenders shall execute and deliver an Assignment and Assumption
covering that Lender's Commitment and otherwise comply with Section 6.5. If a
Defaulting Lender refuses to execute and deliver such Assignment and Assumption
or otherwise comply with Section 6.5, such Defaulting Lender hereby appoints
Administrative Agent to do so on such Lender's behalf. Administrative Agent
shall distribute an amended Schedule of Lenders, which shall thereafter be
incorporated into this Agreement, to reflect such adjustments. However, all such
Defaulting Lender Amounts and Defaulting Lender Obligation funded by
Administrative Agent or Electing Lenders shall continue to be Defaulting Lender
Amounts of the Defaulting Lender pursuant to its obligations under this
Agreement.

      (d) No Election. In the event that no Lender elects to commit to fund the
Defaulting Lender Amount and Defaulting Lender Obligations within the Election
Period, Administrative Agent shall, upon the expiration of the Election Period,
so notify Borrower and each Lender.

                                       12



      1.16 Several Obligations; No Liability, No Release. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Administrative Agent in its capacity as such, and not by
or in favor of Lenders, any and all obligations on the part of Administrative
Agent (if any) to make any advances of the Loan or reimbursements for other
Payment Amounts shall constitute the several (and not joint) obligations of the
respective Lenders on a ratable basis, according to their respective Pro Rata
Shares. Except as may be specifically provided in this Agreement, no Lenders
shall have any liability for the acts of any other Lenders. No Lenders shall be
responsible to Borrower or any other person for any failure by any other Lenders
to fulfill its obligations to make advances of the Loan or reimbursements for
other Payment Amounts, nor to take any other action on its behalf hereunder or
in connection with the financing contemplated herein. The failure of any Lender
to pay to Administrative Agent its Pro Rata Share of a Payment Amount shall not
relieve any other Lender of any obligation hereunder to pay to Administrative
Agent its Pro Rata Share of such Payment Amounts as and when required herein,
but no Lender shall be responsible for the failure of any other Lender to so
fund its Pro Rata Share of the Payment Amount. In furtherance of the foregoing,
Lenders shall comply with their obligation to pay Administrative Agent their Pro
Rata Share of such Payment Amounts regardless of (i) the occurrence of any
Default hereunder or under any Loan Document; (ii) [reserved]; (iii) any failure
of consideration, absence of consideration, misrepresentation, fraud, or any
other event, failure, deficiency, breach or irregularity of any nature
whatsoever in the Loan Documents; (iv) any bankruptcy, insolvency or other like
event with regard to any Borrower or Guarantor. The obligation of Lenders to pay
to such Payment Amounts are in all regards independent of any claims between
Administrative Agent and any Lender.

      1.17 Removal and/or Replacement of Lenders. If any Lender is a Defaulting
Lender or under any other circumstances set forth in the Loan Documents
providing that Borrower shall have the right to remove and/or replace a Lender
as a party to this Agreement, Borrower may, upon notice to such Lender and the
Administrative Agent, remove such Lender by causing such Lender to assign its
Commitment to one or more other lenders or Eligible Assignees acceptable to
Borrower and the Administrative Agent. Any removed or replaced Lender shall be
entitled to: (x) subject to the provisions of Section 1.14 through 1.15
providing for payment of all Defaulting Lender Payment Amounts to Administrative
Agent and/or Electing Lenders, as applicable, prior to payment of amounts due to
a Defaulting Lender, payment in full of all principal, interest and fees owing
to such Lender through the date of termination or assignment, (y) appropriate
assurances and indemnities (which may include letters of credit) as such Lender
may reasonably require with respect to its participation interest in any Letters
of Credit then outstanding and (z) a release of such Lender from its obligations
under the Loan Documents. Any Lender being replaced shall execute and deliver an
Assignment and Assumption covering that Lender's Commitment and otherwise comply
with Section 6.5. If a Lender being replaced refuses to execute and deliver such
Assignment and Assumption or otherwise comply with Section 6.5, such Lender
hereby appoints Administrative Agent to do so on such Lender's behalf.
Administrative Agent shall distribute an amended Schedule of Lenders, which
shall thereafter be incorporated into this Agreement, to reflect adjustments to
Lenders and their Commitments. Notwithstanding anything to the contrary in this
Agreement, Borrower shall retain all rights and remedies available at law or in
equity against any Defaulting Lender, whether or not such Defaulting Lender is
replaced with another Lender hereunder.

                                       13



                 ARTICLE 2- ADDITIONAL COVENANTS AND AGREEMENTS

      2.1 Construction of the Improvements. Borrower shall begin site work for
the Improvements no later than April 29, 2005 and must begin construction of the
Improvements no later than June 30, 2005. Thereafter, Borrower shall prosecute
the construction of the Improvements with diligence and continuity, in a good
and workmanlike manner, and in accordance with sound building and engineering
practices, all applicable laws and governmental requirements, the Plans and the
Loan Documents. Borrower shall not permit cessation of work for a period in
excess of thirty (30) days, except for Excusable Delays. Borrower shall achieve
substantial completion of construction of the Improvements free and clear of all
liens (except Permitted Encumbrances and liens created by the Loan Documents),
and shall obtain a certificate of occupancy and all other permits, licenses and
approvals from all applicable governmental authorities required for the
occupancy, use and operation of the Improvements, in each case reasonably
satisfactory to Administrative Agent, on or before the Completion Date. Borrower
shall promptly correct (a) any material defect in the Improvements, (b) any
material departure from the Plans not approved by Administrative Agent, or any
material departure from governmental requirements, or (c) any material
encroachment by any Improvements or structure on any building setback line,
easement, property line or restricted area. The Improvements shall be
substantially completed, as determined by the issuance of a certificate of
occupancy, on or before the Completion Date.

      2.2 Plans and Changes. No construction shall be undertaken on the Land
except as shown in the Plans. Borrower assumes full responsibility for the
compliance of the Plans and the Property with all laws, governmental
requirements and sound building and engineering practices. Except as otherwise
provided herein, no plans or specifications, or any changes thereto, shall be
included as part of the Plans until approved by Administrative Agent,
Construction Consultant, all applicable governmental authorities, and all other
parties required under the Loan Documents. Without Administrative Agent's prior
written consent, which shall not be unreasonably withheld or delayed, Borrower
shall not change or modify the Plans, agree to any change order, or allow any
extras to any contractor or any subcontractor, except that Borrower may make
Permitted Changes if: (a) Borrower notifies Administrative Agent in writing of
the change or extra with appropriate supporting documentation and information;
(b) Borrower obtains the approval of the applicable contractor, Borrower's
architect and all sureties, if required; (c) the structural integrity, quality
and standard of workmanship of the Improvements is not impaired by such change
or extra; (d) no substantial change in architectural appearance is effected by
such change or extra; (e) no default in any obligation to any person or
violation of any law or governmental requirement would result from such change
or extra; (f) if applicable, Borrower complies with Section 1.5 of this
Agreement to cover any excess cost resulting from the change or extra; (g)
completion of the Improvements by the Completion Date will not be affected; and
(h) [Reserved]. Administrative Agent shall not be obligated to review a proposed
change unless it has received all documents necessary to review such change,
including the change order, cost estimates, plans and specifications.

      2.3 Contracts. Without Administrative Agent's prior written approval
(which shall not be unreasonably withheld or delayed) as to parties, terms, and
all other matters, Borrower shall not (a) enter into any material contract
(hereinafter defined) for the performance of any work or the supplying of any
labor, materials or services for the design or construction of the

                                       14



Improvements, (b) enter into any management, leasing, maintenance or other
similar contract pertaining to the Property not described in clause (a) that is
not unconditionally terminable by Borrower or any successor owner without
penalty or payment on not more than thirty (30) days notice to the other party
thereunder, or (c) materially modify or amend, or terminate (other than as a
result of default by the contractor) any material contracts. Borrower shall not
default in any material respect under any contract, Borrower shall not permit
any contract to terminate by reason of any failure of Borrower to perform
thereunder, and Borrower shall promptly notify Administrative Agent of any
default in any material respect thereunder. Borrower will deliver to
Administrative Agent, upon request of Administrative Agent, the names and
addresses of all persons or entities known to Borrower with whom each contractor
has contracted or intends to contract for the construction of the Improvements
or for the furnishing of labor or materials therefor. With respect to contracts
for the performance of any work or the supplying of any labor, materials or
services, a "material" contract is one which exceeds $500,000.00 in total price.

      2.4 Assignment of Contracts and Plans. As additional security for the
Obligations, Borrower hereby transfers and assigns to Administrative Agent for
the ratable benefit of Administrative Agent and Lenders all of Borrower's right,
title and interest, but not its liability, in, under, and to all construction,
architectural and design contracts, and the Plans, and agrees that all of the
same are covered by the security agreement provisions of the Mortgage. Borrower
agrees to deliver to Administrative Agent from time to time upon Administrative
Agent's request such consents to the foregoing assignment from parties
contracting with Borrower as Administrative Agent reasonably may require.
Neither this assignment nor any action by Administrative Agent or Lenders shall
constitute an assumption by Administrative Agent or Lenders of any obligation
under any contract or with respect to the Plans, Borrower hereby agrees to
perform all of its obligations under any contract, and Borrower shall continue
to be liable for all obligations of Borrower with respect thereto.
Administrative Agent shall have the right at any time following written notice
to Borrower (but shall have no obligation) to take in its name or in the name of
Borrower such action as Administrative Agent may determine to be necessary to
cure any default in any material respect of Borrower under any contract or with
respect to the Plans or to protect the rights of Borrower, Administrative Agent
or Lenders with respect thereto. Borrower irrevocably constitutes and appoints
Administrative Agent as Borrower's attorney-in-fact, which power of attorney is
coupled with an interest and irrevocable, to enforce in Borrower's name or in
Administrative Agent's and Lender's name, following written notice to Borrower
of the occurrence, and during the continuance, of a Default, all rights of
Borrower under any contract or with respect to the Plans. Administrative Agent
shall incur no liability if any action so taken by it or on its behalf shall
prove to be inadequate or invalid, absent gross negligence or reckless or
willful conduct on the part of Administrative Agent or any Lender. Borrower
indemnifies and holds Administrative Agent and Lenders harmless against and from
any loss, cost, liability or expense (including, but not limited to,
consultants' fees and expenses and attorneys' fees and expenses) incurred in
connection with Borrower's failure to perform such contracts or any action taken
by Administrative Agent or Lenders with respect to such contracts, absent gross
negligence or reckless or willful conduct on the part of Administrative Agent or
any Lender. Administrative Agent on behalf of the Lenders may use the Plans for
any purpose relating to the Improvements. Borrower represents and warrants to
Administrative Agent and Lenders that the copy of any contract furnished or to
be furnished to Administrative Agent is and shall be a true and complete copy
thereof, that the copies of the

                                       15


Plans delivered to Administrative Agent are and shall be true and complete
copies of the Plans, that there have been no material modifications thereof
which are not fully set forth in the copies delivered, and that Borrower's
interest therein is not subject to any claim, setoff, or encumbrance.

      2.5 Storage of Materials. Borrower shall cause all materials supplied for
the construction of the Improvements, but not yet affixed to or incorporated
into the Improvements or the Land, to be stored on the Land with adequate
safeguards to prevent loss, theft, damage or commingling with materials for
other projects. Without Administrative Agent's approval, which shall not be
unreasonably withheld or delayed, Borrower shall not purchase or order materials
for delivery more than ninety (90) days prior to the scheduled incorporation of
such materials into the Improvements.

      2.6 Construction Consultant. Borrower shall engage a licensed supervising
architect, reasonably acceptable to Administrative Agent, who shall make and
certify to Administrative Agent the results of regular periodic inspections of
the construction through completion of the Improvements, including, but not
limited to compliance with the Plans and the percentage of Loan funds requested
to be drawn in relation to the percentage of work completed as conditions to
Loan advances. In addition, Administrative Agent may retain the services of a
Construction Consultant, whose duties may include, among others, reviewing the
Plans and any proposed changes to the Plans, performing construction cost
analyses, observing work in place and reviewing Draw Requests. The duties of
Construction Consultant run solely to Administrative Agent for the ratable
benefit of Lenders, and Construction Consultant shall have no obligations or
responsibilities whatsoever to Borrower, Borrower's architect, engineer,
contractor or any of their agents or employees. Unless prohibited by applicable
law, all fees, costs, and expenses of Construction Consultant shall be paid by
Borrower. Borrower shall cooperate with Construction Consultant and will furnish
to Construction Consultant such information and other material as Construction
Consultant reasonably considers necessary or useful in performing its duties.

      2.7 Inspection. Administrative Agent and its agents, including
Construction Consultant, may enter upon the Property to inspect the Property,
the Project and any materials at any reasonable time, unless Administrative
Agent deems such inspection is of an emergency nature, in which event Borrower
shall provide Administrative Agent with immediate access to the Property.
Borrower will furnish to Administrative Agent and its agents, including
Construction Consultant, for inspection and copying, all Plans, shop drawings,
specifications, books and records, and other documents and information that
Administrative Agent reasonably may request from time to time.

      2.8 Notice to Lenders. Borrower shall promptly within five (5) days after
it obtains knowledge of the occurrence of any of the following events, notify
each Lender in writing thereof, specifying in each case the action Borrower has
taken or will take with respect thereto: (a) any violation in any material
respect of any law or governmental requirement; (b) any litigation, arbitration
or governmental investigation or proceeding instituted or threatened against
Borrower or the Property, and any material development therein; (c) any actual
or threatened condemnation of any portion of the Property, any negotiations with
respect to any such taking, or any loss of or substantial damage to the
Property; (d) any labor controversy pending or threatened in writing against
Borrower or any contractor, and any material development in any labor
controversy; (e) any notice received by Borrower with respect to the
cancellation, alteration

                                       16


or non-renewal of any insurance coverage maintained with respect to the
Property; (f) any failure by Borrower or any contractor, subcontractor or
supplier to perform any material obligation under any construction contract, any
event or condition which would permit termination of a construction contract or
suspension of work thereunder, or any notice given by Borrower or any contractor
with respect to any of the foregoing; (g) any material lien filed against the
Property or any stop notice served on Borrower in connection with construction
of the Improvements; or (h) any material required permit, license, certificate
or approval with respect to the Project lapses or ceases to be in full force and
effect.

      2.9 Financial Statements. Borrower shall deliver to Administrative Agent
the Financial Statements and other statements and information at the times and
for the periods described in (a) the Basic Information and (b) any other Loan
Document, and Borrower shall deliver to Administrative Agent from time to time
such additional financial statements and information as Administrative Agent
reasonably may at any time request. Borrower will make all of its books, records
and accounts available to Administrative Agent and its representatives at all
reasonable times at the Property upon request and will permit them to review and
copy the same. Borrower shall promptly notify Administrative Agent of any event
or condition that could reasonably be expected to have a Material Adverse Effect
in the financial condition of Borrower or in the construction progress of the
Improvements. Administrative Agent shall provide a copy of such Financial
Statements to each Lender upon receipt.

      2.10 Other Information. Borrower shall furnish to Administrative Agent
from time to time upon Administrative Agent's request (i) copies of all
subcontracts entered into by contractors or subcontractors and the names and
addresses of all persons or entities with whom Borrower or any contractor has
contracted or intends to contract for the construction of the Improvements or
the furnishing of labor or materials in connection therewith; (ii) copies of all
contracts, bills of sale, statements, receipts or other documents under which
Borrower claims title to any materials, fixtures or articles of personal
property incorporated or to be incorporated into the improvements or subject to
the lien of the Mortgage; (iii) a list of all unpaid bills for labor and
materials with respect to construction of the Improvements and copies of all
invoices therefor; (iv) budgets of Borrower and revisions thereof showing the
estimated costs and expenses to be incurred in connection with the completion of
construction of the Improvements; (v) current or updated detailed Project
schedules or construction schedules; and (vi) such other information relating to
Borrower, Guarantor, the Improvements, the Property, or any indemnitor or other
person or party connected with Borrower, the Loan, the construction of the
Improvements or any security for the Loan as is reasonably requested by
Administrative Agent.

      2.11 Reports and Testing. Borrower shall (a) promptly deliver to
Administrative Agent copies of all reports, studies, inspections and tests made
on the Land, the Improvements or any materials to be incorporated into the
Improvements; (b) make such additional tests on the Land, the Improvements or
any materials to be incorporated into the Improvements as Administrative Agent
reasonably requires. Borrower shall immediately notify Administrative Agent of
any report, study, inspection or test that indicates any adverse condition
likely to have a Material Adverse Effect relating to the Land, the Improvements
or any such materials.

      2.12 Advertising by Lenders. At Administrative Agent's request and at
Borrower's expense, Borrower shall erect and maintain on the Property one or
more advertising signs

                                       17


approved by Administrative Agent indicating that the construction financing for
the Property has been provided by Lenders.

      2.13 Appraisal. Administrative Agent may obtain from time to time, an
appraisal of all or any part of the Property prepared in accordance with written
instructions from Administrative Agent by a third-party appraiser engaged
directly by Administrative Agent. Each such appraiser shall be appointed by
Administrative Agent and shall be reasonably satisfactory to Borrower and
Administrative Agent (including satisfaction of applicable regulatory
requirements). The cost of any such appraisal shall be borne by Borrower
provided that Borrower shall be obligated to pay for appraisals not more than
once every three (3) years unless the Loan is being renewed, extended, modified,
or accelerated or Lender is otherwise required by law, regulation, order or
other directive from any regulatory agency having jurisdiction over Lender to
obtain such appraisal and such cost shall be due and payable by Borrower on
demand and shall be secured by the Loan Documents. Administrative Agent shall
provide a copy of such Appraisal to each Lender upon receipt.

      2.14 Payment of Withholding Taxes. Borrower shall not use, or knowingly
permit any contractor or subcontractor to use, any portion of the proceeds of
any Loan advance to pay the wages of employees unless a portion of the proceeds
or other funds are also used to make timely payment to or deposit with (a) the
United States of all amounts of tax required to be deducted and withheld with
respect to such wages under the Internal Revenue Code, and (b) any state and/or
local Tribunal or agency having jurisdiction of all amounts of tax required to
be deducted and withheld with respect to such wages under any applicable state
and/or local laws.

      2.15 ERISA and Prohibited Transaction Taxes. As of the date hereof and
throughout the term of this Loan Agreement, (a) Borrower is not and will not be
(i) an "employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); or (ii) a "plan"
within the meaning of Section 4975(e) of the Internal Revenue Code, as amended
(the "Code"); (b) the assets of Borrower do not and will not constitute "plan
assets" within the meaning of the United States Department of Labor Regulations
set forth in 29 C.F.R. Section 2510.3-101; (c) Borrower is not and will not be a
"governmental plan" within the meaning of Section 3(32) of ERISA; (d)
transactions by or with Borrower are not and will not be subject to state
statutes applicable to Borrower regulating investments of fiduciaries with
respect to governmental plans; and (e) Borrower shall not engage in any
transaction which would cause any obligation, or action taken or to be taken,
hereunder (or the exercise by Administrative Agent of any of Lender's rights
under this Agreement, any Note or the other Loan Documents) to be a non-exempt
(under a statutory or administrative class exemption) prohibited transaction
under ERISA or Section 4975 of the Code. Borrower further agrees to deliver to
Administrative Agent such certifications or other evidence of compliance with
the provisions of this Section 2.15 as Administrative Agent may from time to
time reasonably request.

      2.16 Agreement to Subordinate Mortgage to Master Deed. Provided that a
certificate of occupancy is issued for the Improvements substantially in
accordance with the approved Plans and no Default has occurred and is continuing
under the Loan, Administrative Agent, on behalf of the Lenders, agrees to
subordinate the Mortgage to the terms of the master deed creating the horizontal
property regime for the Improvements. The master deed and all related regime

                                       18


documents must be in form and substance reasonably acceptable to Administrative
Agent and Borrower agrees to (i) amend its Mortgage as may be reasonably
acceptable to Administrative Agent including, without limitation, to include a
condominium rider reasonably acceptable to Administrative Agent and (ii) execute
an assignment of declarant's rights with respect to such regime documents in
form and content reasonably acceptable to Administrative Agent.

      2.17 Reserved.

      2.18 Agreement to Subordinate Mortgage to Master Declaration/Reciprocal
Easement Agreement. Upon request of Borrower, Administrative Agent, on behalf of
the Lenders, agrees to subordinate the Mortgage to (i) a Master Declaration of
Covenants, Conditions and Restrictions covering approximately 10.498 acres of
land constituted as the Land and the Hilton and land associated with the Hilton;
and (ii) a cooperative use and reciprocal easement agreement between the owner
of the Hilton and the Borrower relative to the Parking Deck (including the
mandatory reconveyance of the Parking Deck to the owner of the Hilton upon
completion of the Project), on terms and conditions acceptable to the
Administrative Agent.

                    ARTICLE 3- REPRESENTATIONS AND WARRANTIES

      To induce Lenders to make the Loan, Borrower hereby represents and
warrants to Administrative Agent and Lenders that except as otherwise disclosed
to Administrative Agent in writing (a) Borrower has complied with any and all
laws and regulations concerning its organization, existence and the transaction
of its business, and has the right and power to own the Grande Palms Tract, and
to develop the Improvements as contemplated in this Agreement and the other Loan
Documents; (b) Borrower is authorized to execute, deliver and perform all of its
obligations under the Loan Documents; (c) the Loan Documents are valid and
binding obligations of Borrower, subject to general principles of equity and
laws affecting creditors' rights generally; (d) Borrower is not in violation of
any law, regulation or ordinance, or any order of any court or Tribunal, and no
provision of the Loan Documents violates in any material respect any applicable
law, any covenants or restrictions affecting the Property, any order of any
court or Tribunal or any contract or agreement binding on Borrower or the
Property; (e) to the extent required by applicable law, Borrower and Guarantor
have filed all necessary tax returns and reports and have paid all taxes and
governmental charges thereby shown to be owing; (f) the Plans are complete in
all material respects, contain all necessary detail and are adequate for
construction of the Improvements, are satisfactory to Borrower, have been
approved by all applicable governmental authorities, have been accepted by each
contractor, and comply with the Loan Documents and all applicable laws,
restrictive covenants, and governmental requirements, rules, and regulations;
(g) the Property is not part of a larger tract of land owned by Borrower or any
of its affiliates or Guarantor, is not otherwise included under any unity of
title or similar covenant with other lands not encumbered by the Mortgage, and
will, as of January 1, 2006, constitute a separate tax lot or lots with a
separate tax assessment or assessments for the Land and Improvements,
independent of those for any other lands or improvements; (h) the Land and
Improvements comply with all laws and governmental requirements, including all
subdivision and platting requirements, without reliance on any adjoining or
neighboring property; (i) the Plans do, and the Improvements when constructed
will, comply with all legal requirements regarding access and facilities for
handicapped or disabled persons; (j) Borrower has not directly or indirectly
conveyed, assigned or otherwise disposed of or transferred (or agreed to do so)
any

                                       19


development rights, air rights or other similar rights, privileges or attributes
with respect to the Property, including those arising under any zoning or land
use ordinance or other law or governmental requirement; (k) the construction
schedule for the Project is realistic and the Completion Date is a reasonable
estimate of the time required to complete the Project; (1) the Financial
Statements delivered to Administrative Agent are true, correct, and complete in
all material respects, and there has been no event or condition that could
reasonably be expected to have a Material Adverse Effect in Borrower's financial
condition from the financial condition of Borrower indicated in such Financial
Statements; (m) all utility services necessary for the development of the Land
and the construction of the Improvements and the operation thereof for their
intended purpose are available at the boundaries of the Land, including electric
and natural gas facilities, telephone service, water supply, storm and sanitary
sewer facilities; (n) except as otherwise provided for in the Loan Documents,
the Borrower has made no contract or arrangement of any kind the performance of
which by the other party thereto would give rise to a lien on the Property; (o)
the current and anticipated use of the Property complies with all applicable
zoning ordinances, regulations and restrictive covenants affecting the Land
without the existence of any variance, non-complying use, nonconforming use or
other special exception, all use restrictions of any Tribunal having
jurisdiction have been satisfied, and no violation of any law or regulation
exists with respect thereto; (p) attached hereto as Exhibit "I" is a list of all
bonds required in connection with completion of the Improvements, and to the
best of Borrower's knowledge, no other bonds or other security are currently
required or will be required prior to completion of the Improvements; (q) prior
to the recordation of the Mortgage, except as disclosed to Administrative Agent
in writing, no work of any kind (including destruction or removal of any
existing improvements, site work, clearing, grading, grubbing, draining or
fencing of the Land) has been or will be commenced or performed on the Land, no
equipment or material has been or will be delivered to or placed upon the Land
for any purpose whatsoever, and no contract (or memorandum or affidavit thereof)
for the supplying of labor, materials, or services for the design or
construction of the Improvements, or the surveying of the Land or Improvements,
nor any affidavit or notice of commencement of construction of the Improvements,
has been or will be *executed or recorded, which could cause a mechanic's or
materialman's lien or similar lien to achieve priority over the Mortgage or the
rights of Administrative Agent and Lenders thereunder.

                         ARTICLE 4- DEFAULT AND REMEDIES

      4.1 Events of Default. The occurrence of any one of the following shall be
a default under this Agreement ("Default"): (a) any of the Indebtedness is not
paid when due, whether on the scheduled due date or upon acceleration, maturity
or otherwise; (b) any covenant, agreement, condition, representation or warranty
in this Agreement (other than covenants to pay the Indebtedness and other than
Defaults expressly listed in this Section) is not fully and timely performed,
observed or kept, and such failure continues for thirty (30) days following
written notice to Borrower (or, if more than 30 days is required to cure such
failure, for a reasonable period of time, not to exceed 90 days, so long as
Borrower promptly commences such cure and diligently pursues it to completion);
(c) the occurrence of a Default under any other Loan Document (taking into
account any applicable notice and cure period set forth in such Loan Document);
(d) construction of the Improvements ceases for more than thirty (30) days
except for delays which will not jeopardize the completion of the Project by the
Completion Date ("Excusable Delays"); (e) the construction of the Improvements,
or any materials for which an

                                       20


advance has been requested, fails to comply in all material respects with the
Plans, the Loan Documents, any laws or governmental requirements, or any
applicable restrictive covenants and such defect has not been cured within
thirty (30) days of Borrower learning of such defect; (f) construction of the
Improvements is abandoned, Administrative Agent determines that construction of
the Improvements in accordance with this Agreement will not be completed on or
before the Completion Date, or Borrower fails to complete construction of the
Improvements (and obtain all applicable permits, licenses, certificates and
approvals) in accordance with this Agreement on or before the Completion Date;
(g) any material required permit, license, certificate or approval with respect
to the Property lapses or ceases to be in full force and effect; (h) [reserved];
(i) a Borrower's Deposit is not made with, or Guarantor's acknowledgment
delivered to, Administrative Agent within seven (7) days after Administrative
Agent's request therefor in accordance with Section 1.5; (j) construction is
enjoined or Borrower, Administrative Agent or a Lender is enjoined or prohibited
from performing any of its respective obligations under any of the Loan
Documents and such injunction is not dismissed within thirty (30) days; (k) the
owner of the Property enters into any lease of part or all of the Property which
does not comply with the Loan Documents; (1) a lien for the performance of work
or the supply of materials which is established against the Property, or any
stop notice served on Borrower, the general contractor, Administrative Agent or
a Lender, remains unsatisfied or unbonded for a period of twenty (20) days after
the date Borrower learns of such filing or service; (m) should Borrower fail to
submit to Administrative Agent copies of executed, valid and binding Sales
Contracts in the aggregate gross amount of $76,000,000.00 within ninety (90)
days of the date of this Agreement; (n) the entry of a judgment against Borrower
or the issuance of any attachment, sequestration, or similar writ levied upon
any of the Property which is not discharged within a period of thirty (30) days;
(o) Administrative Agent determines that an event or condition that could
reasonably be expected to have a Material Adverse Effect has occurred in the
financial condition of Borrower or in the condition of the Property; (p)
[reserved]; (q) the dissolution or insolvency of Borrower or Guarantor; (r)
[reserved]; (s) a default occurs under any other Loan Document which is not
cured within any applicable notice and cure period provided therein; (t) if the
Project is or becomes security for any subordinate financing, or is sold or
transferred, directly or indirectly, voluntarily, by operation of law or
otherwise, without Required Lenders' prior written consent; or (u) if there is
any change in the ownership or control of Borrower (other than indirectly, as a
result of a change in the ownership or control of Guarantor) without
Administrative Agent's prior written approval.

      4.2 Remedies. Upon a Default, Administrative Agent may with the approval
of, and shall at the direction of the Required Lenders, without notice, exercise
any and all rights and remedies afforded by this Agreement, the other Loan
Documents, Law, equity or otherwise, including (a) declaring any and all
Indebtedness immediately due and payable; (b) reducing any claim to judgment;
(c) obtaining appointment of a receiver (to which Borrower hereby consents)
and/or judicial or nonjudicial foreclosure under the Mortgage; or (d) in its own
name on behalf of the Lenders or in the name of Borrower, enter into possession
of the Property, perform all work necessary to complete construction of the
Improvements substantially in accordance with the Plans (as modified as deemed
necessary by Administrative Agent), the Loan Documents, and all applicable Laws,
governmental requirements and restrictive covenants, and continue to employ
Borrower's architect, engineer and any contractor pursuant to the applicable
contracts or otherwise; provided however, upon a Default, Administrative Agent
at its election may (but shall not be obligated to) without the consent of and
shall at the direction of the Required Lenders,

                                       21


without notice, do any one or more of the following: (a) terminate Lenders'
Commitment to lend and any obligation to disburse any Borrower's Deposit
hereunder; or (b) set-off and apply, to the extent thereof and to the maximum
extent permitted by Law, any and all deposits, funds, or assets at any time held
and any and all other indebtedness at any time owing by Administrative Agent or
any Lender to or for the credit or account of Borrower against any Indebtedness.

      Borrower hereby appoints Administrative Agent as Borrower's
attorney-in-fact, which power of attorney is irrevocable and coupled with an
interest, with full power of substitution if Administrative Agent so elects, to
do any of the following in Borrower's name upon the occurrence of a Default, and
Guarantor's failure to pay in full the Indebtedness within ten (10) days
following written notice of such Default to Guarantor: (1) use such sums as are
necessary, including any proceeds of the Loan and any Borrower's Deposit, make
such changes or corrections in the Plans, and employ such architects, engineers,
and contractors as may be required, or as Lenders may otherwise consider
desirable, for the purpose of completing construction of the Improvements
substantially in accordance with the Plans (as modified as deemed necessary by
Administrative Agent or, in the event that such modification exceeds $5,000,000,
with the approval of Required Lenders), the Loan Documents, and all applicable
laws, governmental requirements and restrictive covenants; (ii) execute all
applications and certificates in the name of Borrower which may be required for
completion of construction of the Improvements; (iii) endorse the name of
Borrower on any checks or drafts representing proceeds of any insurance
policies, or other checks or instruments payable to Borrower with respect to the
Property; (iv) do every act with respect to the construction of the Improvements
that Borrower may do; (v) prosecute or defend any action or proceeding incident
to the Property, (vi) pay, settle, or compromise all bills and claims so as to
clear title to the Property; and (vii) take over and use all or any part of the
labor, materials, supplies and equipment contracted for, owned by, or under the
control of Borrower, whether or not previously incorporated into the
Improvements. Any amounts expended by Administrative Agent itself or on behalf
of Lenders to construct or complete the Improvements or in connection with the
exercise of its remedies herein shall be deemed to have been advanced to
Borrower hereunder as a demand obligation owing by Borrower to Administrative
Agent or Lenders as applicable and shall constitute a portion of the
Indebtedness, regardless of whether such amounts exceed any limits for
Indebtedness otherwise set forth herein. Neither Administrative Agent nor
Lenders shall have any liability to Borrower for the sufficiency or adequacy of
any such actions taken by Administrative Agent.

      No delay or omission of Administrative Agent or Lenders to exercise any
right, power or remedy accruing upon the happening of a Default shall impair any
such right, power or remedy or shall be construed to be a waiver of any such
Default or any acquiescence therein. No delay or omission on the part of
Administrative Agent or Lenders to exercise any option for acceleration of the
maturity of the Indebtedness, or for foreclosure of the Mortgage following any
Default as aforesaid, or any other option granted to Administrative Agent and
Lenders hereunder in any one or more instances, or the acceptances by
Administrative Agent or Lenders of any partial payment on account of the
Indebtedness, shall constitute a waiver of any such Default, and each such
option shall remain continuously in full force and effect. No remedy herein
conferred upon or reserved to Administrative Agent and/or Lenders is intended to
be exclusive of any other remedies provided for in any Note or any of the other
Loan Documents, and each and every such remedy shall be cumulative, and shall be
in addition to every other remedy given hereunder, or under any Note or any of
the other Loan Documents, or now or

                                       22


hereafter existing at law or in equity or by statute. Every right, power and
remedy given to Administrative Agent and Lenders by this Agreement, any Note or
any of the other Loan Documents shall be concurrent, and may be pursued
separately, successively or together against Borrower, or the Property or any
part thereof, or any personal property granted as security under the Loan
Documents, and every right, power and remedy given by this Agreement, any Note
or any of the other Loan Documents may be exercised from time to time as often
as may be deemed expedient by the Required Lenders.

      Regardless of how a Lender may treat payments received from the exercise
of remedies under the Loan Documents for the purpose of its own accounting, for
the purpose of computing the Obligations, payments shall be applied provided
herein. No application of payments, unless sufficient to cure any payment
Default, shall prevent acceleration, or continued acceleration, of amounts
payable under the Loan Documents, or prevent the exercise, or continued
exercise, of rights or remedies of Administrative Agent and Lenders hereunder or
thereunder or at Law or in equity.

                         ARTICLE 5- ADMINISTRATIVE AGENT

      5.1 Appointment and Authorization of Administrative Agent.

      (a) Each Lender hereby irrevocably (subject to Section 5.9) appoints,
designates and authorizes Administrative Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere herein or in any other Loan Document,
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall Administrative Agent have or be deemed to
have any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term "agent" herein and in the other Loan Documents with
reference to Administrative Agent is not intended to connote any fiduciary or
other implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship between
independent contracting parties.

      (b) Except as expressly otherwise provided in this Agreement or the other
Loan Documents, Administrative Agent shall have and may use its sole discretion
with respect to exercising or refraining from exercising any discretionary
rights, or taking or refraining from taking any actions which Administrative
Agent is expressly entitled to exercise or take under this Agreement and the
other Loan Documents, including, without limitation, (i) the determination if
and to what extent matters or items subject to Administrative Agent's
satisfaction are acceptable or otherwise within its discretion, (ii) the making
of Administrative Agent Advances, and (iii) the exercise of remedies pursuant
to, but subject to, Article 4 or pursuant to any other Loan Document, and any
action so taken or not taken shall be deemed consented to by Lenders.

                                       23


      5.2 Delegation of Duties. Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel and
other consultant experts concerning all matters pertaining to such duties.
Administrative Agent shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects with reasonable care.

      5.3 Liability of Administrative Agent. No Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of Lenders for any recital,
statement, representation or warranty made by Borrower or any subsidiary or
Affiliate of Borrower, or any officer thereof, contained herein or in any other
Loan Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by Administrative Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of Borrower or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of Borrower, Guarantor, or any of their
Affiliates

      5.4 Reliance by Administrative Agent. Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper person or persons, and upon advice and statements of
legal counsel (including counsel to any party to the Loan Documents),
independent accountants and other experts selected by Administrative Agent.
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders or all Lenders if
required hereunder as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Administrative Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Required
Lenders or all Lenders, if required hereunder, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and participants. Where this Agreement expressly permits or prohibits an action
unless the Required Lenders or all Lenders, if required hereunder, otherwise
determine, the Administrative Agent shall and in all other instances,
Administrative Agent may, but shall not be required to, initiate any
solicitation for the consent or a vote of Lenders. In the absence of written
instructions from the Required Lenders or all Lenders, if required hereunder,
Administrative Agent may take or not take any action, at its discretion, unless
this Agreement specifically requires the consent of the Required Lenders or all
Lenders.

                                       24


      5.5 Notice of Default. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default except in the case of a
payment default, unless Administrative Agent shall have received written notice
from a Lender or Borrower referring to this Agreement and describing such
Default. Administrative Agent will notify Lenders of its receipt of any such
notice. Administrative Agent shall take such action with respect to such Default
as may be requested by the Required Lenders in accordance with Article 4;
provided, however, that unless and until Administrative Agent has received any
such request, Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default as it
shall deem advisable or in the best interest of Lenders.

      5.6 Credit Decision; Disclosure of Information by Administrative Agent.

      (a) Each Lender acknowledges that none of Agent-Related Persons has made
any representation or warranty to it, and that no act by Administrative Agent
hereafter taken, including any consent to and acceptance of any assignment or
review of the affairs of Borrower and Guarantor, shall be deemed to constitute
any representation or warranty by any Agent- Related Person to any Lenders as to
any matter, including whether Agent-Related Persons have disclosed material
information in their possession. Each Lender, represents to Administrative Agent
that it has, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower and
Guarantor, and all applicable bank or other regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to Borrower hereunder. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrower and Guarantor.

      (b) Administrative Agent upon its receipt shall provide each Lender such
notices, reports and other documents expressly required to be furnished to
Lenders by Administrative Agent herein. To the extent not already available to a
Lender, Administrative Agent shall also provide the Lender and/or make available
for the Lender's inspection during reasonable business hours and at the Lender's
expense, upon the Lender's written request therefor: (i) copies of the Loan
Documents; (ii) such information as is then in Administrative Agent's possession
in respect of the current status of principal and interest payments and accruals
in respect of the Loan; (iii) copies of all current financial statements in
respect of Borrower, or Guarantor or other person liable for payment or
performance by Borrower of any obligations under the Loan Documents, then in
Administrative Agent's possession with respect to the Loan; and (iv) other
current factual information then in Administrative Agent's possession with
respect to the Loan and bearing on the continuing creditworthiness of Borrower,
Guarantor, or any of their respective Affiliates; provided that nothing
contained in this section shall impose any liability upon Administrative Agent
for its failure to provide a Lender any of such Loan Documents, information, or
financial statements, unless such failure constitutes willful misconduct or
gross negligence on

                                       25


Administrative Agent's part; and provided, further, that Administrative Agent
shall not be obligated to provide any Lender with any information in violation
of law or any contractual restrictions on the disclosure thereof (provided such
contractual restrictions shall not apply to distributing to a Lender factual and
financial information expressly required to be provided herein). Except as set
forth above, Administrative Agent shall not have any duty or responsibility to
provide any Lenders with any credit or other information concerning the
business, prospects, operations, property, financial and other condition or
creditworthiness of Borrower, Guarantor or any of their respective Affiliates
which may come into the possession of any of Agent-Related Persons.

      5.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, Lenders shall indemnify upon
demand each Agent- Related Person (to the extent not reimbursed by or on behalf
of Borrower and without limiting the obligation of Borrower to do so), pro rata,
and hold harmless each Agent-Related Person from and against any and all
Indemnified Liabilities incurred by it; provided, however, that no Lenders shall
be liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities to the extent determined in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
person's own gross negligence or willful misconduct; provided, however, that no
action taken in accordance with the directions of the Required Lenders shall be
deemed to constitute gross negligence or willful misconduct for purposes of this
Section. Without limitation of the foregoing, to the extent that Administrative
Agent is not reimbursed by or on behalf of Borrower, each Lender shall reimburse
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including attorney fees) incurred by Administrative
Agent as described in Section 6.10. The undertaking in this Section shall
survive the payment of all Obligations hereunder and the resignation or
replacement of Administrative Agent. Notwithstanding the foregoing, a dispute
solely between the Administrative Agent and one or more Lenders shall not be
subject to the indemnification obligations of Lenders set forth herein.

      5.8 Administrative Agent in Individual Capacity. Administrative Agent, in
its individual capacity, and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with any party to the Loan Documents and their respective
Affiliates as though Administrative Agent were not Administrative Agent
hereunder and without notice to or consent of Lenders. Lenders acknowledge that
Borrower and Bank of America, N.A., as Lender, ("Swap Bank") or an Affiliate of
Swap Bank have entered or may enter into Swap Contract. A portion of the Loan
may be funded to honor Borrower's payment obligations to Swap Bank or such
Affiliate under the terms of such agreement, and Lenders shall have no right to
share in any portion of such payments. Lenders acknowledge that, pursuant to
such activities, Bank of America, N.A. or its Affiliates may receive information
regarding any party to the Loan Documents, or their respective Affiliates
(including information that may be subject to confidentiality obligations in
favor of such parties or such parties' Affiliates) and acknowledge that
Administrative Agent shall be under no obligation to provide such information to
them. With respect to its ProRata Share of the Loan, Bank of America, N.A. shall
have the same rights and powers under this Agreement as any other Lenders and
may exercise such rights and powers as though it were not Administrative Agent,
Swap Bank, and the terms "Lender" and "Lenders" include Bank of America, N.A. in
its individual capacity.

                                       26


      5.9 Successor Administrative Agent. Administrative Agent may, and at the
request of the Required Lenders as a result of Administrative Agent's gross
negligence or willful misconduct in performing its duties under this Agreement
shall, resign as Administrative Agent upon 30 days' notice to Lenders. If
Administrative Agent resigns under this Agreement, the Required Lenders shall
appoint from among Lenders a successor administrative agent for Lenders which
successor administrative agent shall be consented to by the Borrower at all
times other than during the existence of Default (which consent of the Borrower
shall not be unreasonably withheld or delayed). If no successor administrative
agent is appointed prior to the effective date of the resignation of
Administrative Agent, Administrative Agent may appoint, after consulting with
Lenders and Borrower, a successor administrative agent from among Lenders. Upon
the acceptance of its appointment as successor administrative agent hereunder,
such successor administrative agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term "Administrative Agent"
shall mean such successor administrative agent, and the retiring Administrative
Agent's appointment, powers and duties as Administrative Agent shall be
terminated. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article and other applicable
Sections of this Agreement shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor administrative agent has accepted appointment as
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective and Lenders
shall perform all of the duties of Administrative Agent hereunder until such
time, if any, as the Required Lenders appoint a successor agent as provided for
above.

      5.10 Releases; Acquisition and Transfers of Collateral.

      (a) Lenders hereby irrevocably authorize Administrative Agent to transfer
or release any lien on, or after foreclosure or other acquisition of title by
Administrative Agent on behalf of the Lenders to transfer or sell, any Loan
collateral (i) upon the termination of the Commitments and payment and
satisfaction in full of all Indebtedness; (ii) constituting a release, transfer
or sale of a lien or property if Borrower will certify to Administrative Agent
that the release, transfer or sale is permitted under this Agreement or the
other Loan Documents (and Administrative Agent may rely conclusively on any such
certificate, without further inquiry); or (iii) if approved by the Required
Lenders.

      (b) If all or any portion of the Loan collateral is acquired by
foreclosure or by deed in lieu of foreclosure, Administrative Agent shall take
title to the collateral in its name or by an Affiliate of Administrative Agent,
but for the benefit of all Lenders in their Pro Rata Shares on the date of the
foreclosure sale or recordation of the deed in lieu of foreclosure (the
"Acquisition Date"). Administrative Agent and all Lenders hereby expressly waive
and relinquish any right of partition with respect to any collateral so
acquired. After any collateral is acquired, Administrative Agent shall appoint
and retain one or more Persons (individually and collectively, "Property
Manager") experienced in the management, leasing, sale and/or dispositions of
similar properties.

      (c) Upon request by Administrative Agent or Borrower at any time, Lenders
will confirm in writing Administrative Agent's authority to sell, transfer or
release any such liens of

                                       27


particular types or items of Loan collateral pursuant to this Section; provided,
however, that (1) Administrative Agent shall not be required to execute any
document necessary to evidence such release, transfer or sale on terms that, in
Administrative Agent's opinion, would expose Administrative Agent to liability
or create any obligation or entail any consequence other than the transfer,
release or sale without recourse, representation or warranty, and (ii) such
transfer, release or sale shall not in any manner discharge, affect or impair
the obligations of Borrower other than those expressly being released.

      (d) [Reserved].

      5.11 Application of Payments. Except as otherwise provided below with
respect to Defaulting Lenders, aggregate principal and interest payments,
payments for Indemnified Liabilities, and/or foreclosure or sale of the
collateral, and net operating income from the collateral during any period it is
owned by Administrative Agent on behalf of the Lenders ("Payments") shall be
apportioned pro rata among Lenders and payments of any fees (other than fees
designated for Administrative Agent's separate account) shall, as applicable, be
apportioned pro rata among Lenders. Notwithstanding anything to the contrary in
this Agreement, all Payments due and payable to Defaulting Lenders shall be due
and payable to and be apportioned pro rata among Administrative Agent and
Electing Lenders. Such apportionment shall be in the proportion that the
Defaulting Lender Payment Amounts paid by them bears to the total Defaulting
Lender Payment Amounts of such Defaulting Lender. Such apportionment shall be
made until the Administrative Agent and Lenders have been paid in full for the
Defaulting Payment Amounts. All pro rata Payments shall be remitted to
Administrative Agent and all such payments not constituting payment of specific
fees, and all proceeds of the Loan collateral received by Administrative Agent,
shall be applied first, to pay any fees, indemnities, or costs and expenses
(including those in Section 5.7) and reimbursements then due to Administrative
Agent from Borrower; second, to pay any fees or costs and expenses then due to
Lenders from Borrower; third, to pay pro rata interest due in respect of the
Indebtedness and Administrative Agent Advances; fourth, .to pay or prepay
principal of the Indebtedness and Administrative Agent Advances; and fifth, pro
rata, to pay any remaining Indebtedness due to Defaulting Lenders.

      5.12 Benefit. The terms and conditions of this Article are inserted for
the sole benefit of Administrative Agent and Lenders; the same may be waived in
whole or in part, with or without terms or conditions, without prejudicing
Administrative Agent's or Lenders' rights to later assert them in whole or in
part.

      5.13 Co-Agents; Lead Managers. None of the Lenders identified on the
facing page or signature pages of this Agreement as a "syndication agent",
"documentation agent", "co-agent" or "lead manager" shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders as such. Without limiting the foregoing, none of
Lenders so identified as a "syndication agent", "documentation agent", "co-
agent" or "lead manager" shall have or be deemed to have any fiduciary
relationship with any Lenders. Each Lender acknowledges that it has not relied,
and will not rely, on any of Lenders so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.

                                       28


      5.14 Required Position for Administrative Agent. The Administrative Agent
in its capacity as a "Lender" shall maintain a Commitment amount equal to or
greater than the next highest Lender's Commitment amount, up to $25,000,000.00.

                     ARTICLE 6- GENERAL TERMS AND CONDITIONS

      6.1 Consents; Borrower's Indemnity. Except where otherwise expressly
provided in the Loan Documents, in any instance where the approval, consent or
the exercise of Administrative Agent or Lender's judgment is required, the
granting or denial of such approval or consent and the exercise of such judgment
shall be (a) within the sole discretion of Administrative Agent or Lenders; (b)
deemed to have been given only by a specific writing intended for the purpose
given and executed by Administrative Agent or Lender's; and (c) free from any
limitation or requirement of reasonableness. Notwithstanding any approvals or
consents by Administrative Agent or Lenders, neither Administrative Agent nor
any Lender has any obligation or responsibility whatsoever for the adequacy,
form or content of the Plans, the Budget, any contract, any change order, any
lease, or any other matter incident to the Property or the construction of the
Improvements. Administrative Agent's or Lender's acceptance of an assignment of
the Plans for the benefit of Administrative Agent and Lenders shall not
constitute approval of the Plans. Any inspection or audit of the Property or the
books and records of Borrower, or the procuring of documents and financial and
other information, by or on behalf of Administrative Agent shall be for
Administrative Agent and Lender's protection only, and shall not constitute an
assumption of responsibility from Borrower or anyone else with regard to the
condition, construction, maintenance or operation of the Property, or relieve
Borrower of any of Borrower's obligations. Borrower has selected all surveyors,
architects, engineers, contractors, materialmen and all other persons or
entities furnishing services or materials to the Project. Neither Administrative
Agent nor any Lender has any duty to supervise or to inspect the Property or the
construction of the Improvements nor any duty of care to Borrower or any other
person to protect against, or inform Borrower or any other person of the
existence of, negligent, faulty, inadequate or defective design or construction
of the Improvements. Neither Administrative Agent nor any Lender shall be liable
or responsible for, and Borrower shall indemnify each Agent-Related Person and
each Lender and their respective Affiliates, directors, officers, agents,
attorneys and employees (collectively, the "Indemnities") from and against: (a)
any claim, action, loss or cost (including attorney's fees and costs) arising
from or relating to (1) any defect in the Property or the Improvements, (ii) the
performance or default of Borrower, Borrower's surveyors, architects, engineers,
contractors, the Construction Consultant, or any other person, (iii) any failure
to construct, complete, protect or insure the Improvements, (iv) the payment of
costs of labor, materials, or services supplied for the construction of the
Improvements, (v) in connection with the protection and preservation of the Loan
collateral (including those with respect to property taxes, insurance premiums,
completion of construction, operation, management, improvements, maintenance,
repair, sale and disposition), or (vi) the performance of any obligation of
Borrower whatsoever; (b) any and all liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments, suits, costs, expenses and
disbursements (including attorney fees and costs) of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against
any such Indemnitee in any way relating to or arising out of or in connection
with (1) the execution, delivery, enforcement, performance or administration of
any Loan Document or any other agreement, letter or instrument delivered in
connection with the transactions contemplated thereby or the consummation of the
transactions

                                       29


contemplated thereby, (ii) any Commitment or Loan, or (iii) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory (including
any investigation of, preparation for, or defense of any pending or threatened
claim, investigation, litigation or proceeding) and regardless of whether any
Indemnitee is a party thereto; (c) any and all claims, demands, actions or
causes of action arising out of or relating to the use of Information (as
defined in Section 6.6) or other materials obtained by third parties through
Borrower's use of internet, Intralinks or other similar information transmission
systems in connection with this Agreement; and (d) any and all liabilities,
losses, costs or expenses (including attorney fees and costs) that any
Indemnitee suffers or incurs as a result of the assertion of any foregoing
claim, demand, action, cause of action or proceeding, or as a result of the
preparation of any defense in connection with any foregoing claim, demand,
action, cause of action or proceeding, in all cases, whether or not an
Indemnitee is a party to such claim, demand, action, cause of action or
proceeding and whether it is defeated, successful or withdrawn, (all the
foregoing, collectively, the "Indemnified Liabilities"); provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements result from the gross negligence or reckless or
willful misconduct of such Indemnitee. Nothing, including any advance or
acceptance of any document or instrument, shall be construed as a representation
or warranty, express or implied, to any party by Administrative Agent or
Lenders. Inspection shall not constitute an acknowledgment or representation by
Administrative Agent, any Lender or the Construction Consultant that there has
been or will be compliance with the Plans, the Loan Documents, or applicable
laws, governmental requirements and restrictive covenants, or that the
construction is free from defective materials or workmanship. Inspection,
whether or not followed by notice of Default, shall not constitute a waiver of
any Default then existing, or a waiver of Administrative Agent and Lender's
right thereafter to insist that the Improvements be constructed in accordance
with the Plans, the Loan Documents, and all applicable laws, governmental
requirements and restrictive covenants. Administrative Agent's failure to
inspect shall not constitute a waiver of any of Administrative Agent or Lender's
rights under the Loan Documents or at law or in equity.

      (a) Participation or Sale of Loan. The Administrative Agent and Banc of
America Securities LLC (the "Lead Arranger") have heretofore entered into a
letter agreement with the Borrower dated as of March 25, 2005, regarding the
syndication of the Loan. Additionally, Borrower acknowledges that portions of
the Loan may be sold, syndicated or participated by the Lead Arranger and
Borrower hereby agrees to fully cooperate with the Lead Arranger and
Administrative Agent with respect to such syndication.

      6.2 Miscellaneous. This Agreement may be executed in multiple
counterparts, all of which are identical, and all of which counterparts together
shall constitute one and the same instrument. A determination that any provision
of this Agreement is unenforceable or invalid shall not affect the
enforceability or validity of any other provision and the determination that the
application of any provision of this Agreement to any person or circumstance is
illegal or unenforceable shall not affect the enforceability or validity of such
provision as it may apply to other persons, entities or circumstances. Time
shall be of the essence with respect to Borrower's obligations under the Loan
Documents. This Agreement, and its validity, enforcement and interpretation,
shall be governed by South Carolina law (without regard to any conflict of laws
principles) and applicable United States federal law.

                                       30


      (a) Quality of Documents. Each document and item required to be submitted
to Administrative Agent pursuant to this Commitment shall be satisfactory in
form and substance to Administrative Agent and its legal counsel.

      6.3 Notices.

      (a) Modes of Delivery; Changes. Except as otherwise provided herein, all
notices, requests, consents, demands and other communications required or which
any party desires to give under this Agreement or any other Loan Document shall
be in writing and, unless otherwise specifically provided in such other Loan
Document, shall be deemed sufficiently given or furnished if delivered by
personal delivery, by courier, by registered or certified United States mail,
postage prepaid, or by facsimile (with, subject to subsection 6.3(b) below, a
confirmatory duplicate copy sent by first class United States mail), addressed
to the party to whom directed at the addresses set forth at the end of this
Agreement or by (subject to subsection 6.3(c) below) sent to the electronic mail
address specified for notices on the Schedule of Lenders (unless changed by
similar notice in writing given by the particular party whose address is to be
changed). Any such notice or communication shall be deemed to have been given
and received either at the time of personal delivery or, in the case of courier
or mail, as of the date of first attempted delivery at the address and in the
manner provided herein, or, in the case of facsimile, or e-mail, upon receipt;
provided, however, that service of a notice required by any applicable statute
shall be considered complete when the requirements of that statute are met.
Notwithstanding the foregoing, no notice of change of address shall be effective
except upon actual receipt. This Section shall not be construed in any way to
affect or impair any waiver of notice or demand provided in any Loan Document or
to require giving of notice or demand to or upon any person in any situation or
for any reason.

      (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents
may be transmitted and/or signed by facsimile. The effectiveness of any such
documents and signatures shall, subject to applicable law, have the same force
and effect as manually-signed originals and shall be binding on all parties to
the Loan Documents. The Administrative Agent may also require that any such
documents and signatures be confirmed by a manually-signed original thereof,
provided, however, that the failure to request or deliver the same shall not
limit the effectiveness of any facsimile document or signature.

      (c) Limited Use of Electronic Mail. Electronic mail and internet and
intranet websites may be used only to distribute routine communications, such as
financial statements and other information, and to distribute Loan Documents for
execution by the parties thereto, and may not be used for any other purpose.

      (d) Reliance by Administrative Agent and Lenders. The Administrative Agent
and the Lenders shall be entitled to rely and act upon any notices (including
telephonic Construction Draw requests) purportedly given by or on behalf of the
Borrower even if (i) such notices were not made in a manner specified herein,
were incomplete or were not preceded or followed by any other form of notice
specified herein, or (ii) the terms thereof, as understood by the recipient,
varied from any confirmation thereof. The Borrower shall indemnify each
Agent-Related Person and each Lender from all losses, costs, expenses and
liabilities resulting from the reliance by such person on each notice
purportedly given by or on behalf of the Borrower. All telephonic

                                       31


notices to and other communications with the Administrative Agent may be
recorded by the Administrative Agent, and each of the parties hereto hereby
consents to such recording. Except with respect to amendments to the Loan
Documents as provided in Section 6.9 below, if a Lender does not notify or
inform Administrative Agent of whether or not it consents to, or approves of or
agrees to any matter of any nature whatsoever with respect to which its consent,
approval or agreement is required under the express provisions of this Agreement
or with respect to which its consent, approval or agreement is otherwise
requested by Administrative Agent, in connection with the Loan or any matter
pertaining to the Loan, within ten (10) Business Days (or such longer period as
may be specified by Administrative Agent) after such consent, approval or
agreement is requested by Administrative Agent, the Lender shall be deemed to
have given its consent, approval or agreement, as the case may be, with respect
to the matter in question.

      6.4 Payments Set Aside.

To the extent that the Borrower makes a payment to the Administrative Agent or
any Lender, or the Administrative Agent or any Lender exercises its right of
set-off, and such payment or the proceeds of such set-off or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the
Administrative Agent or such Lender in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any proceeding under
any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such set-off had not occurred, and (b) each Lender severally agrees to pay to
the Administrative Agent upon demand its applicable share of any amount so
recovered from or repaid by the Administrative Agent, plus interest thereon from
the date of such demand to the date such payment is made at a rate per annum
equal to the Federal Funds Rate from time to time in effect.

      6.5 Successors and Assigns.

      (a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
Administrative Agent and each Lender (and any attempted assignment or transfer
by the Borrower without such consent shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any person
(other than the parties hereto, their respective successors and assigns
permitted hereby, Guarantor and, to the extent expressly contemplated hereby,
the Indemnitees) any legal or equitable right, remedy or claim under or by
reason of this Agreement.

      (b) Any Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and Pro Rata Share of the Loan at the time owing to
it); provided that:

            (i) So long as no Default has occurred and is continuing the
assigning Lender's Commitment after the assignment must be at least $10,000,000
and except in the case of an assignment of the entire remaining amount of the
assigning Lender's Commitment and Pro Rata Share of the Loan at the time owing
to it or in the case of an assignment to a Lender or an

                                       32


Affiliate of a Lender or an Approved Fund with respect to a Lender, the
aggregate amount of the Commitment (which for this purpose includes its Pro Rata
Share of the Loan outstanding) subject to each such assignment, determined as of
the date the Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent, shall not be less than $10,000,000 unless
each of the Administrative Agent and, so long as no Default has occurred and is
continuing, the Borrower otherwise consents (each such consent not to be
unreasonably withheld or delayed),

            (ii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations under
this Agreement with respect to its Pro Rata Share of the Loan and the Commitment
assigned, and

            (iii) the parties to each assignment shall execute and deliver to
the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500.00 plus the cost of any applicable
endorsement of the Title Insurance or new Title Insurance, plus all reasonable
attorneys' fees incurred by Lender (for which amounts Borrower shall not be
liable if such assignment occurs prior to Default).

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to subsection (c) of this Section, from and after the effective date specified
in each Assignment and Assumption, the assignee hereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender hereunder shall, to the extent of the interest assigned
by such Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of this Agreement with respect to Borrower's obligation surviving
termination of this Agreement. Upon request, Administrative Agent shall prepare
and the Borrower, subject to return to Borrower of the original note or notes
being replaced, shall execute and deliver new or replacement Notes ("Replacement
Notes") to the assigning Lender and the assignee Lender evidencing their
respective Pro Rata Shares of the Loan. Any assignment or transfer by a Lender
of rights or obligations under this Agreement that does not comply with this
subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
subsection (d) of this Section.

      (c) The Administrative Agent, acting solely for this purpose as an agent
of the Borrower, shall forward the Assignment and Assumption, and the
Replacement Notes (if any) to the Title Insurer for issuance of an applicable
endorsement to the Title Insurance or new Title Insurance, and shall maintain at
the Administrative Agent's Office a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses of
the Lenders, and the Commitments of, and principal amount of each Lender's Pro
Rata Share of the Loan owing to, each Lender pursuant to the terms hereof from
time to time (the "Register"). The entries in the Register shall be conclusive,
and the Borrower, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the

                                       33


contrary. The Register shall be available for inspection by the Borrower and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.

      (d) Any Lender may, without the consent of, but with prior notice to the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant") in all or a portion of such Lender's rights and/or obligations
under this Agreement (including all or a portion of its Commitment and/or its
Pro Rata Share of the Loan owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
(iv) except to the extent consented by Administrative Agent in its sole
discretion with respect to each participation, any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement.

      (e) A Participant shall not be entitled to receive any greater payment
under Sections 1.7 1.8 or 1.9 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant.

      (f) Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement (including under its Notes, if
any) to secure obligations of such Lender, including any pledge or assignment to
secure obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

      (g) If the consent of the Borrower to an assignment or to an assignee is
required hereunder (including a consent to an assignment which does not meet the
minimum assignment threshold specified in clause (1) of the provision to the
first sentence of subsection (b) above), the Borrower shall be deemed to have
given its consent five Business Days after the date notice thereof has been
delivered by the assigning Lender (through the Administrative Agent) unless such
consent is expressly refused by the Borrower prior to such fifth Business Day.

      (h) As used herein, the following terms have the following meanings:

      "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c)
      an Approved Fund; and (d) any other person (other than a natural person)
      approved by the Administrative Agent, and, unless a Default has occurred
      and is continuing, the Borrower (each such approval not to be unreasonably
      withheld or delayed); provided, however, in no event shall the term
      Eligible Assignee include a direct competitor in the hospitality industry
      to Fe1Cor Lodging Limited Partnership without the consent of Borrower
      which consent may be withheld in the sole and absolute discretion of
      Borrower.

                                       34


      "Fund" means any person (other than a natural person) that is (or will be)
      engaged in making, purchasing, holding or otherwise investing in
      commercial real estate loans and similar extensions of credit in the
      ordinary course of its business.

      "Approved Fund" means any Fund that is administered or managed by (a) a
      Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of
      an entity that administers or manages a Lender.

      6.6 Confidentiality. Each of the Administrative Agent and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential); (b) to the extent requested
by any regulatory authority; (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process; (d) to any other party
to this Agreement or Guarantor; (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder; (0 subject to an agreement containing
provisions substantially the same as those of this Section, to (1) any assignee
of or participant in, or any prospective assignee of or participant in, any of
its rights or obligations under this Agreement or (ii) any direct or indirect
contractual counterparty or prospective counterparty (or such contractual
counterparty's or prospective counterparty's professional advisor) to any Swap
Agreement or credit derivative transaction relating to obligations of the
Borrower; (g) with the consent of the Borrower; or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent or any Lender
on a nonconfidential basis from a source other than the Borrower; or (i) to the
National Association of Insurance Commissioners or any other similar
organization or any nationally recognized rating agency that requires access to
information about a Lender's or its Affiliates' investment portfolio in
connection with ratings issued with respect to such Lender or its Affiliates.
For the purposes of this Section, "Information" means all information received
from the Borrower relating to the Borrower or its business or Guarantor, other
than any such information that is available to the Administrative Agent or any
Lender on a nonconfidential basis prior to disclosure by the Borrower or
Guarantor; provided that, in the case of information received from the Borrower
after the date hereof, such information is clearly identified in writing at the
time of delivery as confidential. Any person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such person has exercised the
same degree of care to maintain the confidentiality of such Information as such
person would accord to its own confidential information. The Administrative
Agent and the Lenders may disclose the existence of this Agreement and
information about this Agreement to market data collectors, similar service
providers to the lending industry, and service providers to the Administrative
Agent and the Lenders in connection with the administration and management of
this Agreement, the Loan and Loan Documents. The information set forth in the
Commitment letter shall remain confidential and is for the exclusive use of the
Lenders, the Lead Arranger and the Borrower or Guarantor and shall not be
disseminated to any third party other without the express written consent of the
Administrative Agent.

                                       35


      6.7 Set-off. In addition to any rights and remedies of Administrative
Agent and Lenders provided by law, upon the occurrence and during the
continuance of any Default, Administrative Agent and each Lender is authorized
at any time and from time to time, without prior notice to Borrower or any other
party to the Loan Documents, any such notice being waived by Borrower (on its
own behalf and on behalf of each party to the Loan Documents to the fullest
extent permitted by law), to set-off and apply any and all deposits, general or
special, time or demand, provisional or final, any time owing by Administrative
Agent or such Lender to or for the credit or the account of Borrower against any
and all Obligations, irrespective of whether or not the Administrative Agent or
such Lender shall have made demand under this Agreement or any other Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify Borrower and Administrative Agent after any
such set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application.

      6.8 Sharing of Payments. If, other than as expressly provided elsewhere
herein, any Lender shall obtain on account of the portions of the Loan advanced
by it, any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder) thereof, such Lender shall immediately (a) notify the
Administrative Agent of such fact, and (b) purchase from the other Lenders such
participations in the portions of the Loan made by them as shall be necessary to
cause such purchasing Lender to share the excess payment in respect of such
portions of the Loan or such participations, as the case may be, pro rata with
each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from the purchasing Lender, such purchase shall
to that extent be rescinded and each other Lender shall repay to the purchasing
Lender the purchase price paid therefor, together with an amount equal to such
paying Lender's ratable share (according to the proportion of (1) the amount of
such paying Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 6.7 with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. The Administrative Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section and will in each case notify the
Lenders following any such purchases or repayments. Each Lender that purchases a
participation pursuant to this Section shall from and after such purchase have
the right to give all notices, requests, demands, directions and other
communications under this Agreement with respect to the portion of the
Obligations purchased to the same extent as though the purchasing Lender were
the original owner of the Obligations purchased.

      6.9 Amendments; Survival. Administrative Agent and Lenders shall be
entitled to amend (whether pursuant to a separate intercreditor agreement or
otherwise) any of the terms, conditions or agreements set forth in Article 5
(except to the extent that such amendment would adversely affect the rights or
obligations of Borrower hereunder) or as to any other matter in the Loan
Documents respecting payments to Administrative Agent or Lenders or the required
number of the Lenders to approve or disapprove any matter or to take or refrain
from taking any action, without the consent of Borrower or any other Person or
the execution by Borrower or any

                                       36


other Person of any such amendment or intercreditor agreement. Subject to the
foregoing, Administrative Agent may amend or waive any provision of this
Agreement or any other Loan Document, or consent to any departure by any party
to the Loan Documents therefrom which amendment, waiver or consent in
Administrative Agent's reasonable determination shall not have a Material
Adverse Affect, or is otherwise intended to be within Administrative Agent's
discretion or determination; provided however, otherwise no such amendment,
waiver or consent shall be effective unless in writing, signed by the Required
Lenders and Borrower or the applicable party to the Loan Documents, as the case
may be, and acknowledged by Administrative Agent, and each such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided further however, no such amendment, waiver or
consent shall, unless in writing and signed by each of the Lenders directly
affected thereby and by the Borrower, and acknowledged by the Administrative
Agent, do any of the following:

      (a) extend or increase the Commitment of any Lender (or reinstate any
Commitment terminated pursuant to Section 4.2) (it being understood that a
waiver of a Default shall not constitute an extension or increase in any
Lender's Commitment);

      (b) postpone any date fixed by this Agreement or any other Loan Document
for any payment or mandatory prepayment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;

      (c) reduce the principal of, or the rate of interest specified herein on,
any Loan, or any fees or other amounts payable hereunder or under any other Loan
Document; provided, however, that the Administrative Agent may waive any
obligation of the Borrower to pay interest at the Past Due Rate and/or late
charges for periods of up to thirty days, and only the consent of the Required
Lenders shall be necessary to waive any obligation of the Borrower to pay
interest at the Past Due Rate or late charges thereafter, or to amend the
definition of "Past Due Rate" or "late charges";

      (d) change the percentage of the combined Commitments or of the aggregate
unpaid principal amount of the Loan which is required for the Lenders or any of
them to take any action hereunder;

      (e) change the definition of "Pro Rata Share" or "Required Lender";

      (f) amend this Section, or Section 6.8, or any provision herein providing
for consent or other action by all the Lenders;

      (g) release the liability of Borrower or any existing Guarantor;

      (h) permit the sale, transfer, pledge, mortgage or assignment of any Loan
collateral or any direct or indirect interest in Borrower, except as expressly
permitted under the Loan Documents;

      (i) transfer or release any lien on, or after foreclosure or other
acquisition of title by Administrative Agent on behalf of the Lenders transfer
or sell, any Loan collateral except as permitted in Section 5.10;

                                       37


      (j) reduce the aggregate gross amount of the release prices for all Units
by an amount greater than ten percent (10%) of such amount, without the written
consent of each Lender;

      (k) reduce the aggregate gross amount of the sales prices for all Units
set forth in Exhibit "E" of this Agreement, by an amount greater than ten
percent (10%) of such amount, without the written consent of each Lender;

      (1) modify or amend the amount of the interest reserve as reflected on the
Budget, including, without limitation, any reallocation of or to the interest
reserve amount, without the written consent of the Required Lenders; or

      (m) modify or amend the Administrative Agent's right to approve individual
change orders in an amount not to exceed $1,000,000.00 and to approve change
orders in an aggregate amount not to exceed $5,000,000.00, subject to the
provisions of Section 2.2 of this Agreement, without the written consent of the
Required Lenders.

and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Required
Lenders or each directly affected Lender, as the case may be, affect the rights
or duties of the Administrative Agent under this Agreement or any other Loan
Document. Notwithstanding anything to the contrary herein, any Lender that has
failed to fund any portion of its Pro Rata Share of the Loan required to be
funded by it hereunder shall not have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Pro Rata Share of such
Lender may not be increased without the consent of such Lender.

This Agreement shall continue in full force and effect until the Indebtedness is
paid in full and all of Administrative Agent and Lender's obligations under this
Agreement are terminated; and all representations and warranties and all
provisions herein for indemnity of the Indemnitees, Administrative Agent and
Lenders (and any other provisions herein specified to survive) shall survive
payment in full, satisfaction or discharge of the Indebtedness, the resignation
or removal of Administrative Agent or replacement of any Lender, and any release
or termination of this Agreement or of any other Loan Documents.

      6.10 Costs and Expenses. Without limiting any Loan Document and to the
extent not prohibited by applicable laws, Borrower shall pay when due, shall
reimburse to Administrative Agent for the benefit of itself and Lenders on
demand and shall indemnify Administrative Agent and Lenders from, all
out-of-pocket fees, costs, and expenses paid or incurred by Administrative Agent
in connection with the negotiation, preparation and execution of this Agreement
and the other Loan Documents (and any amendments, approvals, consents, waivers
and releases requested, required, proposed or done from time to time), or in
connection with the disbursement, administration or collection of the Loan or
the enforcement of the obligations of Borrower or the exercise of any right or
remedy of Administrative Agent, including (a) all fees and expenses of
Administrative Agent's counsel; (b) fees and charges of each Construction
Consultant, inspector and engineer; (c) appraisal and survey costs, subject to
the limitations herein; (d) title insurance charges and premiums; (e) title
search or examination costs, including abstracts, abstractors' certificates and
uniform commercial code searches; (f) judgment and tax lien searches for
Borrower and Guarantor incurred prior to the initial Advance or after Default;

                                       38


(g) escrow fees payable to the Title Insurer; (h) fees and costs of
environmental investigations site assessments and remediations incurred prior to
the initial Advance or after Default; (i) recordation taxes, documentary taxes,
transfer taxes and mortgage taxes; (j) filing and recording fees; and (k)
[Reserved]. Borrower shall pay all related costs and expenses incurred by
Administrative Agent, including attorneys' fees, if the obligations or any part
thereof are sought to be collected by or through an attorney at law, whether or
not involving probate, appellate, administrative or bankruptcy proceedings.
Borrower shall pay all of its costs and expenses of complying with the Loan
Documents, whether or not such costs and expenses are included in the Budget.
Borrower's obligations under this Section shall survive the delivery of the Loan
Documents, the making of advances, the payment in full of the obligations, the
release or reconveyance of any of the Loan Documents, the foreclosure of the
Mortgage or conveyance in lieu of foreclosure, any bankruptcy or other debtor
relief proceeding, and any other event whatsoever. Whether or not the Loan
closes, Borrower shall pay all out-of-pocket costs and expenses incurred by
Administrative Agent in connection with the Loan (pre- and post-closing),
including all insurance, appraisal, survey, recording, environmental,
engineering, closing, escrow and title, title insurance and tax service fees and
costs, reasonable and customary costs of syndication, recordation and transfer
taxes, mortgage taxes and other document and intangible taxes, all fees and
expenses of Administrative Agent's outside legal counsel and Administrative
Agent's Construction Consultant and the cost of any other reports or tests
deemed necessary by Administrative Agent to satisfy the requirements set forth
herein and in the Loan Documents. Such costs and expenses incurred at or prior
to Loan closing shall be due and payable prior to the closing of the Loan and
are not included in the Commitment Fee. The provisions of this paragraph shall
survive the expiration or termination of the Commitment Letter.

      6.11 Tax Forms. Each Lender, and each holder of a participation interest
herein, that is not a "United States person" (a "Foreign Lender") within the
meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended
from time to time ("Code") shall deliver to Administrative Agent, prior to
receipt of any payment subject to withholding. (or upon accepting an assignment
or receiving a participation interest herein), two duly signed completed copies
of either Form W-8BEN or any successor thereto (relating to such person and
entitling it to a complete exemption from withholding on all payments to be made
to such person by Borrower pursuant to this Agreement) or Form W-8ECI or any
successor thereto (relating to all payments to be made to such person by
Borrower pursuant to this Agreement) of the United States Internal Revenue
Service or such other evidence satisfactory to Borrower and Administrative Agent
that such person is entitled to an exemption from or reduction of, United States
withholding tax. Thereafter and from time to time, each such person shall (a)
promptly submit to Administrative Agent such additional duly completed and
signed copies of one of such forms (or such successor forms as shall be adopted
from time to time by the relevant United States taxing authorities) as may then
be available under then current United States laws and regulations to avoid, or
such evidence as is satisfactory to Borrower and Administrative Agent of any
available exemption from or reduction of, United States withholding taxes in
respect of all payments to be made to such person by Borrower pursuant to this
Agreement (b) promptly notify Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction, and (c) take such steps as shall not be materially disadvantageous to
it, in the reasonable judgment of such Lenders, and as may be reasonably
necessary (including the re-designation of its lending office, if any) to avoid
any requirement of applicable laws that Borrower make any deduction or
withholding for taxes from amounts payable to such person. If

                                       39


such persons fail to deliver the above forms or other documentation, then
Administrative Agent may withhold from any interest payment to such person an
amount equivalent to the applicable withholding tax imposed by Sections 1441 and
1442 of the Code, without reduction. Upon the request of Administrative Agent,
each Lender that is. a "United States person" within the meaning of Section
7701(a)(30) of the Code shall deliver to Administrative Agent two duly signed
completed copies of United States Internal Revenue Service Form W-9. If such
Lender fails to deliver such forms, then Administrative Agent may withhold from
any interest payment to such Lender an amount equivalent to the applicable
back-up withholding tax imposed by the Code, without reduction. If any Tribunal
asserts that Administrative Agent did not properly withhold or backup withhold,
as the case may be, any tax or other amount from payments made to or for the
account of any Lender, such Lender shall indemnify Administrative Agent
therefor, including all penalties and interest and costs and expenses (including
attorney fees) of Administrative Agent. The obligation of Lenders under this
subsection shall survive the removal or replacement of a Lender, the payment of
all Obligations and the resignation or replacement of Administrative Agent.

      6.12 Further Assurances. Borrower will, upon Administrative Agent's
request, (a) promptly correct any defect, error or omission in any Loan
Document; (b) execute, acknowledge, deliver, procure, record or file such
further instruments and do such further acts as Administrative Agent deems
necessary, desirable or proper to carry out the purposes of the Loan Documents
and to identify and subject to the liens and security interest of the Loan
Documents any property intended to be covered thereby, including any renewals,
additions, substitutions, replacements, or appurtenances to the Property; (c)
execute, acknowledge, deliver, procure, file or record any document or
instrument Administrative Agent deems necessary, desirable, or proper to protect
the liens or the security interest under the Loan Documents against the rights
or interests of third persons; and (d) provide such certificates, documents,
reports, information, affidavits and other instruments and do such further acts
deemed necessary, desirable or proper by Administrative Agent to comply with the
requirements of any agency having jurisdiction over Administrative Agent.

      6.13 Inducement to Lenders; Indemnity. The representations and warranties
contained in this Agreement and the other Loan Documents (a) are made to induce
Lenders to make the Loan and extend any other credit to or for the account of
the Borrower pursuant hereto, and Administrative Agent and Lenders are relying
thereon, and will continue to rely thereon, and (b) shall survive any bankruptcy
proceedings involving Borrower, Guarantor or the Property, foreclosure, or
conveyance in lieu of foreclosure.

      6.14 Forum. Borrower hereby irrevocably submits generally and
unconditionally for itself and in respect of its property to the jurisdiction of
any state court, or any United States federal court, sitting in the State
specified in Section 6.2 of this Agreement and to the jurisdiction of any state
court or any United States federal court, sitting in the state in which any of
the Property is located, over any suit, action or proceeding arising out of or
relating to this Agreement or the Indebtedness. Borrower hereby irrevocably
waives, to the fullest extent permitted by law, any objection that Borrower may
now or hereafter have to the laying of venue in any such court and any claim
that any such court is an inconvenient forum. Borrower hereby agrees and
consents that, in addition to any methods of service or process provided for
under applicable law, all service of process in any such suit, action or
proceeding in any state court, or

                                       40


any United States federal court, sitting in the state specified in Section 6.2
may be made by certified or registered mail, return receipt requested, directed
to Borrower at its address for notice stated in the Loan Documents, or at a
subsequent address of which Administrative Agent received actual notice from
Borrower in accordance with the Loan Documents, and service so made shall be
complete five (5) days after the same shall have been so mailed. Nothing herein
shall affect the right of Administrative Agent to serve process in any manner
permitted by law or limit the right of Administrative Agent to bring proceedings
against Borrower in any other court or jurisdiction.

      6.15 Interpretation. References to "Dollars," "$," "money," "payments" or
other similar financial or monetary terms are references to lawful money of the
United States of America. References to Articles, Sections, and Exhibits are,
unless specified otherwise, references to articles, sections and exhibits of
this Agreement. Words of any gender shall include each other gender. Words in
the singular shall include the plural and words in the plural shall include the
singular. References to Borrower or Guarantor shall mean, each person comprising
same, jointly and severally. References to "persons" shall include both natural
persons and any legal entities, including public or governmental bodies,
agencies or instrumentalities. The words "include" and "including" shall be
interpreted as if followed by the words "without limitation". Captions and
headings in the Loan Documents are for convenience only and shall not affect the
construction of the Loan Documents.

      6.16 No Partnership, etc. The relationship between Lenders (including
Administrative Agent) and Borrower is solely that of lender and borrower.
Neither Administrative Agent nor Lender has any fiduciary or other special
relationship with or duty to Borrower and none is treated by the Loan Documents.
Nothing contained in the Loan Documents, and no action taken or omitted pursuant
to the Loan Documents, is intended or shall be construed to create any
partnership, joint venture, association, or special relationship between
Borrower and Administrative Agent or any Lender or in any way make
Administrative Agent or any Lender a co-principal with Borrower with reference
to the Project, the Property or otherwise. In no event shall Administrative
Agent or Lender's rights and interests under the Loan Documents be construed to
give Administrative Agent or any Lender the right to control, or be deemed to
indicate that Administrative Agent or any Lender is in control of, the business,
properties, management or operations of Borrower.

      6.17 Records. The unpaid amount of the Loan and the amount of any other
credit extended by Administrative Agent or Lenders to or for the account of
Borrower set forth on the books and records of Administrative Agent shall be
presumptive evidence of the amount thereof owing and unpaid, but failure to
record any such amount on Administrative Agent's books and records shall not
limit or affect the obligations of Borrower under the Loan Documents to make
payments on the Loan when due.

      6.18 Commercial Purpose. Borrower warrants that the Loan is being made
solely to acquire or carry on a business or commercial enterprise, and/or
Borrower is a business or commercial organization. Borrower further warrants
that all of the proceeds of this Loan shall be used for commercial purposes and
stipulates that the Loan shall be construed for all purposes as a commercial
loan, and is made for other than personal, family, household or agricultural
purposes.

                                       41


      6.19 Dispute Resolution.

      (a) Arbitration. Except to the extent expressly provided below, any
controversy, claim or dispute between or among the parties to this Agreement,
including any such controversy, claim or dispute arising out of relating to (a)
this Agreement, (b) any other Loan Document, (c) any related agreements or
instructions, or (d) the transaction contemplated herein or therein (including
any claim based on or arising from an alleged personal injury or business tort)
(each a "Dispute") shall, upon the request of either party, be determined by
binding arbitration in accordance with the Federal Arbitration Act, Title 9,
United States Code (or if not applicable, the applicable state law), the
applicable rules for arbitration of disputes of JAMS and the "Special Rules" set
forth below. In the event of any inconsistency, the Special Rules shall control.
The filing of a court action is not intended to constitute a waiver of the right
of Borrower or Administrative Agent or any Lender, including the suing party,
thereafter to require submittal of the Dispute to arbitration. Any party to this
Agreement may bring an action, including a summary or expedited proceeding, to
compel arbitration of any Dispute in any court having jurisdiction over such
action. For the purposes of this dispute resolution provision only, the terms
"party" and "parties" shall include any parent corporation, subsidiary or
affiliate of Administrative Agent or any Lender involved in the servicing,
management or administration of any obligation described in or evidenced by this
Agreement, together with the officers, employees, successors and assigns of each
of the foregoing.

      (b) Special Rules.

            (i) The arbitration shall be conducted in any U.S. state where real
      or tangible personal property collateral is located, or if there is no
      such collateral, in the City and County where Administrative Agent is
      located pursuant to its address for notice purposes in this Agreement.

            (ii) The arbitration shall be administered by JAMS, who will appoint
      an arbitrator; if JAMS is unable or legally precluded from administering
      the arbitration, then the American Arbitration Association will serve. All
      Disputes shall be determined by one arbitrator; however, if the amount in
      controversy in a Dispute exceeds Five Million Dollars ($5,000,000), upon
      the request of any party, the Dispute shall be decided by three
      arbitrators (for purposes of this Agreement, referred to collectively as
      the "arbitrator").

            (iii) All arbitration hearings will be commenced within ninety (90)
      days of the demand for arbitration and completed within ninety (90) days
      from the date of commencement; provided, however, that upon a showing of
      good cause, the arbitrator shall be permitted to extend the commencement
      of such hearing for up to an additional sixty (60) days.

            (iv) The judgment and the award, if any, of the arbitrator shall be
      issued within thirty (30) days of the close of the hearing. The arbitrator
      shall provide a concise written statement setting forth the reasons for
      the judgment and for the award, if any. The arbitration award, if any, may
      be submitted to any court having jurisdiction to be confirmed and
      enforced, and such confirmation and enforcement shall not be subject to
      arbitration

                                       42


            (v) The arbitrator will have the authority to decide whether any
      Dispute is barred by the statute of limitations and, if so, to dismiss the
      arbitration on that basis. For purposes of the application of the statute
      of limitations, the service on JAMS under applicable JAMS rules of a
      notice of Disputes is the equivalent of the filing of a lawsuit.

            (vi) Any dispute concerning this arbitration provision, including
      any such dispute as to the validity or enforceability of this provision,
      or whether a Dispute is arbitrable, shall be determined by the arbitrator.

            (vii) The arbitrator shall have the power to award legal fees and
      costs pursuant to the terms of this Agreement.

      (c) Reservations of Rights. Nothing in this Agreement shall be deemed to
(1) limit the applicability of any otherwise applicable statutes of limitation
and any waivers contained in this Agreement, or (ii) apply to or limit the right
of Administrative Agent or any Lender (A) to exercise self help remedies such as
(but not limited to) setoff, or (B) to foreclose judicially or nonjudicially
against any real or personal property collateral, or to exercise judicial or
nonjudicial power of sale rights, (C) to obtain from a court provisional or
ancillary remedies such as (but not limited to) injunctive relief, writ of
possession, prejudgment attachment, or the appointment of a receiver, or (D) to
pursue rights against a party to this Agreement in a third- party proceeding in
any action brought against Administrative Agent or any Lender in a state,
federal or international court, tribunal or hearing body (including actions in
specialty courts, such as bankruptcy and patent courts). Administrative Agent
may exercise the rights set forth in clauses (A) through (D), inclusive, before,
during or after the pendency of any arbitration proceeding brought pursuant to
this Agreement. Neither the exercise of self help remedies nor the institution
or maintenance of an action for foreclosure or provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the Dispute occasioning resort to
such remedies. No provision in the Loan Documents regarding submission to
jurisdiction and/or venue in any court is intended or shall be construed to be
in derogation of the provisions in any Loan Document for arbitration of any
Dispute.

      (d) Conflicting Provisions for Dispute Resolution. If there is any
conflict between the terms, conditions and provisions of this Section and those
of any other provision or agreement for arbitration or dispute resolution, the
terms, conditions and provisions of this Section shall prevail as to any Dispute
arising out of or relating to (i) this Agreement, (ii) any other Loan Document,
(iii) any related agreements or instruments, or (iv) the transaction
contemplated herein or therein (including any claim based on or arising from an
alleged personal injury or business tort). In any other situation, if the
resolution of a given Dispute is specifically governed by another provision or
agreement for arbitration or dispute resolution, the other provision or
agreement shall prevail with respect to said Dispute.

      (e) Jury Trial Waiver in Arbitration. By agreeing to this Section, the
parties irrevocably and voluntarily waive any right they may have to a trial by
jury in respect of any Dispute.

      6.20 WAIVER OF JURY TRIAL.

                                       43


      WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO ARBITRATE
ANY DISPUTE AS SET FORTH IN THIS AGREEMENT, TO THE EXTENT ANY DISPUTE IS NOT
SUBMITTED TO ARBITRATION OR IS DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH
JURISDICTION TO BE NOT ARBITRABLE OR NOT REQUIRED TO BE ARBITRATED, BORROWER AND
LENDER WAIVE TRIAL BY JURY IN RESPECT OF ANY SUCH DISPUTE AND ANY ACTION ON SUCH
DISPUTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER
AND ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS, AND BORROWER AND
ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS, HEREBY REPRESENT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO
THE LOAN DOCUMENTS. BORROWER AND ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS,
ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER FURTHER REPRESENTS
AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.

      6.21 Service of Process. Borrower hereby irrevocably designates and
appoints CT Corporation System, 75 Beattie Place, Greenville, South Carolina
29601, as Borrower's authorized agent to accept and acknowledge on Borrower's
behalf service of any and all process that may be served in any Dispute
instituted in connection with this Loan in any state or federal court sitting in
the State of South Carolina. If such agent shall cease so to act, Borrower shall
irrevocably designate and appoint without delay another such agent in the State
of South Carolina satisfactory to Administrative Agent and shall promptly
deliver to Administrative Agent evidence in writing of such agent's acceptance
of such appointment and its agreement that such appointment shall be
irrevocable.

      Borrower hereby consents to process being served in any suit, action, or
proceeding instituted in connection with this Loan by (a) the mailing of a copy
thereof by certified mail, postage prepaid, return receipt requested, to
Borrower and (b) serving a copy thereof upon CT Corporation System, the agent,
if any, hereinabove designated and appointed by Borrower as Borrower's agent for
service of process. Borrower irrevocably agrees that such service shall be
deemed to be service of process upon Borrower in any such suit, action, or
proceeding. Nothing in any Note shall affect the right of Administrative Agent
to serve process in any manner otherwise permitted by law and nothing in any
Note will limit the right of Administrative Agent on behalf of the Lenders
otherwise to bring proceedings against Borrower in the courts of any
jurisdiction or jurisdictions.

                                       44


      6.22 Entire Agreement. The Loan Documents constitute the entire
understanding and agreement between Borrower, Administrative Agent and Lenders
with respect to the transactions arising in connection with the Loan, and
supersede all prior written or oral understandings and agreements between
Borrower, Administrative Agent and Lenders with respect to the matters addressed
in the Loan Documents. In particular, and without limitation, the terms of any
commitment letter, letter of intent or quote letter by Administrative Agent or
any Lender to make the Loan are merged into the Loan Documents. Neither
Administrative Agent nor any Lender has made any commitments to extend the term
of the Loan past its stated maturity date or to provide Borrower with financing
except as set forth in the Loan Documents. Except as incorporated in writing
into the Loan Documents, there are not, and were not, and no persons are or were
authorized by Administrative Agent or any Lender to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the matters addressed in the Loan Documents

      (a) No Waiver Or Modification/Entire Agreement/ Survival. NO MODIFICATION,
AMENDMENT OR WAIVER OF ANY PROVISION HEREUNDER SHALL BE EFFECTIVE OR DEEMED MADE
UNLESS THE SAME SHALL BE IN WRITING AND SIGNED BY THE ADMINISTRATIVE AGENT AND
THE BORROWER. ANY SUCH WRITTEN MODIFICATION, AMENDMENT OR WAIVER SHALL APPLY
ONLY TO THE PARTICULAR INSTANCE AND PURPOSE SPECIFIED THEREIN AND SHALL NOT
IMPAIR, MODIFY, AMEND OR WAIVE ANY OTHER PROVISION OR CONDITION SET FORTH IN
THIS COMMITMENT.

                    [Remainder of page intentionally blank]

                                       45


      6.23 Waiver of Appraisal Rights. Borrower hereby agrees and acknowledges
that the laws of South Carolina provide that in any real estate foreclosure
proceeding a defendant against whom a personal judgment is taken or asked may
within thirty days after the sale of the mortgaged property apply to the court
for an order of appraisal. The statutory appraisal value as approved by the
court would be substituted for the high bid and may decrease the amount of any
deficiency owing in connection with the transaction. THE UNDERSIGNED HEREBY
WAIVES AND RELINQUISHES THE STATUTORY APPRAISAL RIGHTS WHICH MEANS THE HIGH BID
AT THE JUDICIAL FORECLOSURE SALE WILL BE APPLIED TO THE DEBT REGARDLESS OF ANY
APPRAISED VALUE OF THE MORTGAGED PROPERTY. This waiver of appraisal rights
relates to any foreclosure of that certain Mortgage of Real Estate more
particularly described in Exhibit "A" attached hereto. The Borrower acknowledges
that notice of this Waiver of Appraisal Rights was received prior to the closing
of this transaction

      6.24 USA Patriot Act Notice. Each Lender and the Administrative Agent (for
itself and not on behalf of any Lender) hereby notifies the Borrower that
pursuant to the requirements of the USA patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the "Act"), it is required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Lender or the Administrative Agent, as applicable, to identify the
Borrower in accordance with the Act.

THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.

EXECUTED and DELIVERED UNDER SEAL as of April 27, 2005.

WITNESS/ATTEST:                        GRANDE PALMS, L.L.C., a Delaware limited
                                       liability company

[ILLEGIBLE]                             BY: /s/ Charles N. Nye  (SEAL)
[ILLEGIBLE]                                 -----------------
                                       Name: CHARLES N. NYE
                                       Title: VICE PRESIDENT

Borrower's Address for Notices:

545 E. John Carpenter Freeway
Suite 1300
Irving, Texas 75062-3933
Attn: General Counsel

The Federal Tax Identification Number of
Borrower: 20-0785850

                                       46


WITNESS/ATTEST:                       BANK OF AMERICA, N.A., individually as
                                      Administrative Agent, and a Lender

[ILLEGIBLE]

_______________________               By: /s/ Linda F. Woodside  (SEAL)
                                          ----------------------
                                      Name: LINDA F. WOODSIDE
                                      Title: S V P

                                       47


WITNESS/ATTEST:

                                     BANK OF MONTREAL, as a Lender

                                     By: /s/ [ILLEGIBLE]           (SEAL)
                                         -------------------------

[ILLEGIBLE]                          Name: [ILLEGIBLE]

                                     Title: MANAGING DIRECTOR

                                       48


                                   EXHIBIT "A"

                              PROPERTY DESCRIPTION

      ALL AND SINGULAR that certain piece, parcel, tract of land, lying, and
being in Little River Township, Horry County, South Carolina, consisting 3.99
+/- acres, and being more particularly shown and delineated as "3.99 +/- AC" on
a plat by Atlantic Land Surveying Company, dated February 22, 2005, and recorded
April 25, 2005, in Plat Book 204 at Page 217, records of Horry County, South
Carolina ("Plat") ("Construction Parcel").

      BOUNDED as shown upon the Plat by Lot 89, Lot 91, and Lot 92 to the
Northwest; Kingston Road and Grantor (the latter hereinafter referred to as
"Construction parcel"); to the Northeast and Southeast; and Kingston Plantation,
North Hampton, and Richmond Park, Phase XIV to the Southwest, and more
particularly described as follows:

      Beginning at a 5/8 inch iron old, the most northeasterly point of a 50
foot ingress and egress easement, which is a common corner for lot 89 Arcadian
Shores (now or formerly owned by J. Thayer Coggin) and the Kingston Road
(private) 70 foot right-of-way.

      THENCE South 35 degrees 45 minutes 21 seconds East for a distance of 75.51
feet to a 1/2 inch iron pipe old;

      THENCE South 35 degrees 48 minutes 21 seconds East for a distance of
299.75 feet to a 1/2 inch iron pipe old;

      THENCE South 35 degrees 30 minutes 05 seconds East for a distance of 65.19
feet to a 1/2 inch iron pipe old;

      THENCE South 35 degrees 44 minutes 39 seconds East for a distance of
345.66 feet to a '/2 inch iron pipe old;

      THENCE South 35 degrees 46 minutes 1 6 seconds East for a distance of
126.11 feet to a point;

      THENCE South 54 degrees 17 minutes 18 seconds West for a distance of
500.82 feet to a point;,

      THENCE North 35 degrees 44 minutes 31 seconds West for a distance of
185.34 feet to a 1/2 inch iron pipe old;

      THENCE North 35 degrees 44 minutes 31 seconds West for a distance of
286.34 feet to a 1/2 inch iron pipe old;

      THENCE North 35 degrees 47 minutes 49 seconds West for a distance of
364.85 feet to a '/2 inch iron pipe old;

      THENCE North 35 degrees 42 minutes 43 second West for a distance of 74.93
feet to a 1/2 inch iron pipe old;

      THENCE North 54 degrees 1 2 minutes 06 seconds East for a distance of
500.91 feet to a 5/8 inch iron new, the point of beginning.

      TOGETHER WITH, the right and easement to construct water, sewer, electric,
and other utility lines and facilities, and drainage systems and facilities, and
to construct such lines, systems, and facilities to water, sewer, electric, and
other utility lines and facilities, and/or drainage systems and facilities on
the Construction Parcel as set forth in that certain Declaration of Covenants,
Conditions and Restrictions for Kingston Shores declared by Myrtle Beach Hotels,
L.L.C., dated April______________________________, 2005, and recorded
April__________________, 2005, in Deed Book_____________________at
Page_________________, records of Horry County, South Carolina.

                                       49


                                   EXHIBIT "B"

                                BASIC INFORMATION

A. DEFINITIONS: As used in this Agreement and the attached exhibits, the
following terms shall have the following meanings:

      1. "Administrative Agent" means Bank of America, N.A., in its capacity as
administrative agent under any of the Loan Documents, or any successor
administrative agent.

      2. "Administrative Agent Advances" means advances as set forth in Section
1 of this Agreement.

      3. "Administrative Agent's Office" means Administrative Agent's address
and, as appropriate, account as set forth on the Schedule of Lenders, or such
other address or account as Administrative Agent hereafter may from time to time
notify to Borrower and Lenders.

      4. "Administrative Agent's Time" means the time of day observed in the
City of Charleston, South Carolina.

      5. [Reserved].

      6. "Affiliate" means any person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such person. A
person shall be deemed to be "controlled by" any other person if such other
person possesses, directly or indirectly, power (a) to vote fifty percent (50%)
or more of the securities (on a fully diluted basis) having ordinary voting
power for the election of directors or managing general partners; or (b) to
direct or cause the direction of the management and policies of such person
whether by contract or otherwise.

      7. "Agent-Related Persons" means Administrative Agent (including any
successor administrative agent), together with its Affiliates (including
Arranger), and the officers, directors, employees, agents and attorneys-in-fact
of such persons and Affiliates.

      8. "Aggregate Cost" has the meaning set forth in Section 1.4 of this
Agreement.

      9. "Agreement" has the meaning set forth in the introductory paragraph of
this Agreement, and includes all exhibits attached hereto and referenced in
Section 1.1.

      10. "Appraised Value" means $14,070,000.00 as to the Land and
$87,230,000.00 as to the Project.

      11. "Assignment and Assumption" means an Assignment and Assumption
substantially in the form of Exhibit "J".

      12. "Basic Information" has the meaning set forth in Section 1.1 of this
Agreement.

      13. "Borrower" has the meaning set forth in the introductory paragraph of
this Agreement.

                                       50


      14. "Borrower's Deposit" has the meaning set forth in Section 1.5 of this
Agreement.

      15. "Budget" means the budget and cost itemization for the Project
attached as Exhibit "D".

      16. "Business Day" means a day on which Agent is open for the conduct of
substantially all of its banking business and a day on which commercial banks
are open for international business (including dealings in U.S. Dollar deposits
in London, England).

      17. "Commitment" means, as to each Lender, its obligation to advance its
Pro Rata Share of the Loan in an aggregate principal amount not exceeding the
amount set forth opposite such Lender's name on the Schedule of Lenders at any
one time outstanding, as such amount may be reduced or adjusted from time to
time in accordance with this Agreement (collectively, the "combined
Commitments").

      18. "Completion Date" means the earlier of (i) May 1, 2007 or (ii)
twenty-four (24) months from the execution of the first Sales Contract and
deposit of earnest money therefor.

      19. "Construction Commencement Date" means the date on or before which
Borrower shall have commenced construction of the Improvements and all site
work, in accordance with the Plans, which date shall be not later than June 30,
2005.

      20. "Construction Consultant" means the construction consultant, if any,
reasonably acceptable to Borrower, engaged by Administrative Agent with respect
to the Project.

      21. " Cost Breakdown" shall have the meaning set forth in Exhibit C-1,
Section 1.

      22. "Debtor Relief Laws" means the Bankruptcy Code of the United States of
America, and all other liquidation, conservatorship, bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States of America or
other applicable jurisdictions from time to time in effect and affecting the
rights of creditors generally.

      23. "Default" has the meaning set forth in Section 4.1 of this Agreement.

      24. "Defaulting Lender" means a Lender that fails to pay its Pro Rata
Share of a Payment Amount within three (3) Business Days after notice from
Administrative Agent, until such Lender cures such failure as permitted in this
Agreement.

      25. "Defaulting Lender Amount" means the Defaulting Lender's Pro Rata
Share of a Payment Amount.

      26. "Defaulting Lender Payment Amounts" means a Defaulting Lender Amount
plus interest from the date such Defaulting Lender Amount was funded by
Administrative Agent and/or an Electing Lender, as applicable, to the date such
amount is repaid to Administrative Agent and/or such Electing Lender, as
applicable, at the rate per annum applicable to such Defaulting Lender Amount
under the Loan.

                                       51


      27. "Deposit" shall have the meaning set forth in Exhibit C-1, Section 6.

      28. "Draw Request" means a properly completed and executed written
application by Borrower to Lenders in the form of Exhibit "F-I" (or in another
form approved by Administrative Agent) setting forth the amount of Loan proceeds
desired, together with such schedules, affidavits, releases, waivers,
statements, invoices, bills and other documents, certificates and information
Administrative Agent may reasonably require.

      29. "Eligible Assignee" has the meaning set forth in Section 6.5.

      30. "Environmental Agreement" means the Environmental Indemnity Agreement
of even date herewith by and among Borrower, Guarantor and Administrative Agent
for the benefit of Lenders.

      31. "Eurodollar Daily Rate" has the meaning set forth in Section 1.7(a).

      32. "Excusable Delays" has the meaning set forth in Section 4.1.

      33. [Reserved].

      34. "Financial Statements" means for each reporting party, a balance
sheet, income statement, statements of cash flow and amounts and sources of
contingent liabilities, and reconciliation of changes in equity, and unless
Administrative Agent otherwise consents, consolidated and consolidating
statements if the reporting party is a holding company or a parent of a
subsidiary entity. For purposes of this definition and any covenant requiring
the delivery of Financial Statements, each party for whom Financial Statements
are required is a "reporting party" and a specified period to which the required
Financial Statements relate is a "reporting period".

      35. "Funding Date" means the date on which an advance of Loan proceeds or
Borrower's Deposit shall occur.

      36. "Guarantor" means FelCor Lodging Limited Partnership.

      37. "Improvements" means all improvements to the Land together with all
fixtures, tenant improvements, and appurtenances now or later to be located on
the Land and/or in such improvements, including but not limited to all fixtures,
equipment, systems, apparatus, building materials and components and other
personal property, which Improvements shall consist of a twenty-four (24) story
oceanfront condominium building (the "Condominium Building"), a pool and deck,
hot tubs, private cabanas, and other amenities, a covered walkway to the
adjacent Hilton Myrtle Beach Resort ("Hilton") and a separate parking deck
("Parking Deck") for the previously completed Hilton and the new condominium
units contemplated herein containing a minimum of 629 spaces, 381 of which shall
be allocated to use by the new condominium owners. The new condominiums, to be
known as "Grande Palms at Kingston Shores", will contain 183 units, an entrance
and two-story atrium, lobby area and a clubroom. The unit mix will consist of
forty-seven (47) two bedroom units having an average of 1,660 square feet,
forty-four (44) three bedroom units having an average of 1,825 square feet, and
ninety-two (92) three bedroom lockout units with an average of 2,070 square
feet. Each unit, whether two bedroom or three

                                       52


bedroom, or three bedroom lockout, shall be referred to herein individually as a
"Unit" and collectively as the "Units". All Units will be either oceanfront or
have an ocean view. The development, construction, operation and sale of the
foregoing Improvements shall be referred to herein as the "Project". Unit prices
will range from $422,000.00 to $547,000.00.

      38. "Indebtedness" means any and all indebtedness of Borrower to
Administrative Agent, or Lenders evidenced, governed or secured by, or arising
under, any of the Loan Documents, including the Loan, and Swap Contracts.

      39. "Indemnified Liabilities" has the meaning set forth in Section 6.1.

      40. "Land" means the real property described in Exhibit "A".

      41. "Laws" means all valid constitutions, treaties, statutes, laws,
ordinances, regulations, rules, orders, writs, injunctions, or decrees of the
United States of America, any state or commonwealth, any municipality or any
Tribunal thereof.

      42. "Lead Arranger" means Banc of America Securities LLC, in its capacity
as arranger and book manager.

      43. "Lender" means each lender from time to time party to this Agreement.

      44. "Lending Office" means, as to any Lender, the office or offices of
such Lender described as such on the Schedule of Lenders, or such other office
or offices as such Lender may from time to time notify Borrower and
Administrative Agent.

      45. "Loan" means the loan by Lenders to Borrower, in the maximum amount of
$69,800,000.00. In the event the aggregate amount of the actual costs incident
to the Project are less than the aggregate amount specified in the Budget, the
maximum amount described above shall be reduced by the difference between the
aggregate amount specified in the Budget and the aggregate amount of such actual
costs. Additionally, the Loan shall be subject to the results of the appraisal
described in Section 3 of Exhibit C and any required appraisal described in
Section 2.13, the equity contribution requirement described in Exhibit C-l,
Section 7 and the participation and syndication requirements set forth in
Section 6.1 (a).

      46. "Loan Documents" means this Agreement (including all exhibits), the
Mortgage, the Note, the Environmental Agreement, any guaranty, financing
statements, the Budget, each Draw Request, and such other documents evidencing,
securing or pertaining to the Loan as shall, from time to time, be executed
and/or delivered by Borrower or Guarantor to Administrative Agent or any Lender
pursuant to this Agreement, as they may be amended, modified, restated, replaced
and supplemented from time to time.

      47. "Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the Project, or the operations, business,
properties, condition (financial or otherwise) or prospects of the Borrower
taken as a whole; (b) a material impairment of the ability of any party to the
Loan Documents to perform in any material respects its obligations under any
Loan Document to which it is a party; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against any party to the
Loan Documents of any Loan Document

                                       53


to which it is a party, if such party does not provide an enforceable,
substitute Loan Document satisfactory in form and content reasonably to
Administrative Agent immediately upon demand from Administrative Agent.

      48. "Maturity Date" means thirty (30) months from the date of the Loan
Closing, as it may be earlier terminated or extended in accordance with the
terms hereof.

      49. "Mortgage" means that certain Mortgage, Assignment of Rents and
Leases, Security Agreement and Fixture Filing dated as of even date herewith,
from the Borrower to Administrative Agent and Lenders, securing repayment of the
Indebtedness and Borrower's performance of its other obligations to
Administrative Agent and Lenders under the Loan Documents, as amended, modified,
supplemented, restated and replaced from time to time.

      50. "Note" means, collectively, the promissory notes designated as
"Promissory Note (Name of Lender)" dated as of even date herewith executed by
Borrower in the aggregate maximum principal amount of $69,800,000.00,
substantially in the form of Exhibit "K" as amended, modified, replaced,
restated, extended or renewed from time to time.

      51. "Obligations" means all advances to, and debts, liabilities,
obligations, covenants and duties of, any party to a Loan Document arising under
any Loan Document, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest that accrues after the commencement by
or against any party to a Loan Document or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such person as the debtor in such
proceeding.

      52. "Parking Deck" has the meaning set forth in Exhibit B.

      53. "Payment Amount" means an advance of the Loan, an unreimbursed
Administrative Agent Advance, an unreimbursed Indemnified Liability, or any
other amount that a Lender is required to fund under this Agreement.

      54. "Permitted Changes" means changes to the Plans or Improvements,
provided the cost of any single change or extra does not exceed $500,000.00 and
the aggregate amount of all such changes and extras does not exceed
$5,000,000.00.

      55. "Permitted Encumbrances" means those liens, encumbrances, easements
and other matters listed on Exhibit B attached to the Mortgage and construction
easements, liens for taxes and other amounts not past due owed to vendors,
suppliers, etc.; 56. "Plans" shall have the meaning set forth in Exhibit C-1.

      57. [Reserved.]

      58. "Potential Default" means any condition or event which with the giving
of notice or lapse of time or both would, unless cured or waived, become a
Default.

      59. "Prime Rate" shall have the meaning set forth in Section 1.7(b).

                                       54


      60. "Principal Debt" means the aggregate unpaid principal balance of this
Loan at the time in question.

      61. "Pro Rata Share" means, with respect to each Lender, the percentage of
the Loan set forth opposite the name of that Lender on the Schedule of Lenders,
as such share may be adjusted pursuant to Section 6.5.

      62. "Pro'ect" shall have the meaning set forth in the definition of
"Improvements".

      63. "Property" means the Land, the Improvements and all other property
constituting the "Mortgage Property," as described in the Mortgage, or subject
to a right, lien or security interest to secure the Loan pursuant to any other
Loan Document.

      64. "Required Lenders" means as of any date of determination at least two
(2) Lenders (excluding Defaulting Lenders) holding Pro Rata Shares of the Loan
aggregating more than 50% of the aggregate outstanding principal amount of the
Loan (excluding Defaulting Lenders).

      65. "Rights" means rights, remedies, powers and privileges. 66. "Sales
Contract" shall have the meaning set forth in Section l.13(i).

      67. "Schedule of Lenders" means the schedule of Lenders party to this
Agreement as set forth on Exhibit "L", as it may be modified from time to time
in accordance with this Agreement.

      68. "Stored Materials Advance Limit" means $5,000,000.00.

      69. "Subsidiary" 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.

      70. "Survey" means a survey prepared in accordance with Exhibit "G" or as
otherwise approved by Administrative Agent in its sole discretion.

      71. "Swap Contract" means (a) any and all rate swap transactions, basis
swaps, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price
or bond index swaps or options or forward bond or forward bond price or forward
bond index transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap transactions, currency
options, or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether or
not any such transaction is governed by or subject to any master agreement, or
(b) any and all transactions of any kind, and the related confirmations, which
are subject to the terms and conditions of, or governed by, any form of master
agreement

                                       55


published by the International Swaps and Derivatives Association, Inc., or any
other master agreement (any such master agreement, together with any related
schedules, as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, a "Master Agreement"), including any such obligations
or liabilities under any Master Agreement.

      72. "Title Insurance" means the loan policy or policies of title insurance
issued to Administrative Agent for the benefit of Lenders by the Title Insurer,
in an aggregate amount equal to the maximum principal amount of the Loan,
insuring the validity and priority of the Mortgage encumbering the Land and
Improvements for the benefit of Administrative Agent and Lenders.

      73. "Title Insurer" means Stewart Title Guaranty Company, c/o Coastal
Title Services, Inc., Attn: Jill Griffith, Esquire.

      74. "Tribunal" means any state, commonwealth, federal, foreign,
territorial or other U.S. court or governmental department, commission, board,
bureau, district, authority, agency, central bank, or instrumentality, or any
arbitration authority.

      75. [Reserved].

      76. "Unit " or "Units" shall have the meaning set forth in the definition
of "Improvements".

      B. FINANCIAL STATEMENTS

      Borrower shall provide or cause to be provided to Administrative Agent all
of the following:

      (a) [Reserved.]

      (b) Financial Statements of Borrower and each member of Borrower for each
fiscal year of such reporting party during the term of this Agreement, as soon
as reasonably practicable and in any event within one hundred twenty (120) days
after the close of each fiscal year.

      (c) Financial Statements of Guarantor for each fiscal year of such
Guarantor during the term of this Agreement, as soon as reasonably practicable
and in any event within one hundred twenty (120) days after the close of each
fiscal year.

      (d) [Reserved].

      (e) [Reserved].

      (f) From time to time promptly after Administrative Agent's request, such
additional information, reports and statements respecting the Property and the
Improvements, or the business operations and financial condition of each
reporting party, as Administrative Agent may reasonably request.

                                       56


All Financial Statements shall be in form and detail reasonably satisfactory to
Administrative Agent and shall contain or be attached to the signed and dated
written certification of the reporting party in form specified by Administrative
Agent to certify that the Financial Statements are furnished to Administrative
Agent in connection with the extension of credit by Lenders are true and correct
and present fairly the reporting party's financial position and results of
operations as of the dates and for the periods specified therein. All
certifications and signatures on behalf of corporations, partnerships or other
entities shall be by a representative of the reporting party satisfactory to
Administrative Agent. All fiscal year-end Financial Statements of Borrower and
Guarantor shall be audited and certified (without, as to Borrower's Financial
Statements, any qualification or exception not acceptable to Administrative
Agent), by independent certified public accountants acceptable to Administrative
Agent, and shall contain all reports and disclosures required by generally
accepted accounting principles for a fair presentation.

                                       57


                                   EXHIBIT "C"

                CERTAIN CONDITIONS PRECEDENT TO THE LOAN CLOSING

      As conditions precedent to the Loan Closing, and the funding of the Note,
Borrower must have provided or caused to be provided to Administrative Agent,
and Administrative Agent must have received, reviewed and found satisfactory the
following requirements to the extent required by Administrative Agent:

      1. Fees and Expenses. Administrative Agent shall have received any and all
required commitment and other fees, and Borrower shall have paid all other fees,
costs and expenses (including the fees and costs of Lender's counsel) then
required to be paid pursuant to this Agreement and all other Loan Documents,
including, without limitation, all fees, costs and expenses that Borrower is
required to pay pursuant to any loan application or commitment.

      2. Financial Statements. Administrative Agent shall have received (with a
copy for each Lender) and each Lender shall have approved the Financial
Statements of Guarantor or any other party required by any loan application or
commitment or otherwise required or requested by Administrative Agent.

      3. Appraisal. Administrative Agent has received and each Lender shall have
approved an initial current appraisal of the Project showing the appraised value
of the Land to be at a minimum Fourteen Million Seventy Thousand and No/100 U.S.
Dollars ($14,070,000.00) and the appraised value of the Project, projected as of
completion of the Improvements, to be at a minimum Eighty-Seven Million Two
Hundred Thirty Thousand and No/100 U.S. Dollars ($87,230,000.00). Accordingly,
the initial Appraisal requirements as to the Administrative Agent have been
satisfied. The appraisal must be satisfactory to Administrative Agent (including
satisfaction of applicable regulatory requirements) and the appraiser must be
engaged directly by Administrative Agent. Borrower shall be responsible for all
costs associated with such appraisal whether or not the appraisal is deemed
accepted by Administrative Agent, and whether or not the Loan closes. The
maximum amount available to be funded under the Loan shall be adjusted to
reflect a loan-to-value of a maximum of eighty per cent (80%), based on the
results of the appraisal.

      4. Draw Schedule and Budget. Administrative Agent shall have received and
approved Borrower's proposed cash flow, draw schedule, and construction schedule
for the Project, and Administrative Agent shall be satisfied, in its sole
discretion, that the Improvements may be completed in accordance with the
construction schedule and for costs not exceeding those set forth in the Budget.

      5. Authorization. Administrative Agent shall have received and approved
evidence Administrative Agent requires of the existence, good standing,
authority and capacity of Borrower and Guarantor to execute, deliver and perform
their respective obligations to Administrative Agent and Lenders under the Loan
Documents, including:

      (a) For each partnership (including a joint venture or limited
partnership): (i) a true and complete copy of an executed partnership agreement
or limited partnership agreement, and all amendments thereto; (ii) for each
limited partnership, a copy of the certificate of limited

                                       58


partnership and all amendments thereto accompanied by a certificate issued by
the appropriate governmental official of the jurisdiction of formation that the
copy is true and complete, and satisfactory evidence of registration or
qualification to do business in the state where Borrower's principal place of
business is located and the state where the Project is located, and (iii) a
partnership affidavit certifying who will be authorized to execute or attest any
of the Loan Documents, and a true and complete copy of the partnership
resolutions approving the Loan Documents and authorizing the transactions
contemplated in this Agreement and the other Loan Documents.

      (b) For each corporation: (i) a true and complete copy of its articles of
incorporation and by-laws, and all amendments thereto, a certificate of
incumbency of all of its officers who are authorized to execute or attest to any
of the Loan Documents, and a true and complete copy of resolutions approving the
Loan Documents and authorizing the transactions contemplated in this Agreement
and the other Loan Documents; and (ii) certificates of existence, good standing
and qualification to do business issued by the appropriate governmental
officials in the state of its formation and, if different, the state in which
the Project is located.

      (c) For each limited liability company or limited liability partnership:
(1) a true and complete copy of the articles of organization and operating
agreement, and all amendments thereto, a certificate of incumbency of all of its
members who are authorized to execute or attest to any of the Loan Documents,
and a true and complete copy of resolutions approving the Loan Documents and
authorizing the transactions contemplated in this Agreement and the other Loan
Documents; and (ii) certificates of existence, good standing and qualification
to do business issued by appropriate governmental officials in the state of its
formation and, if different, the state in which the Property is located.

      (d) For each entity or organization that is not a corporation,
partnership, limited partnership, joint venture, limited liability company or
limited liability partnership, a copy of each document creating it or governing
the existence, operation, power or authority of it or its representatives.

      (e) All certificates, resolutions, and consents required by Administrative
Agent applicable to the foregoing.

      6. Loan Documents. Borrower, Guarantor and each other person required by
Administrative Agent shall have duly executed, acknowledged and/or sworn to as
required, and delivered to Administrative Agent (with a copy for each Lender)
all Loan Documents, including without limitation, the Note, mortgage, assignment
and security agreement, assignment of leases and rents, guaranty agreement by
Guarantor, financing statements, environmental indemnity agreements, loan
agreement, collateral assignments, approvals, consents and all documents then
required by Administrative Agent, dated the date of this Agreement, each in form
and content satisfactory to Administrative Agent, the Mortgage shall contain a
due on sale provision and shall have been recorded in the official records of
the city or county in which the Property is located and UCC-1 financing
statements shall have been filed in all filing offices that Administrative Agent
may require.

                                       59



      7. Opinions. Administrative Agent shall have received (with a copy for
each Lender) the written opinion of counsel satisfactory to Administrative Agent
for the Borrower, Guarantor, and any other persons or entities addressed to
Administrative Agent for the benefit of Lenders, confirming the legal status and
authority Borrower and Guarantor, the due authorization, validity and
enforceability of the Loan Documents and such other matters as Administrative
Agent requires, dated the date of this Agreement.

      8. Survey; No Special Flood Hazard. Not later than ten (10) days before
the Closing Date, Administrative Agent shall have received (a) four (4) prints
of an original survey (with a copy for each Lender) of the Land and Improvements
thereon, prepared by a registered professional surveyor, dated not more than
sixty (60) days prior to the date of the Closing Date satisfactory to
Administrative Agent and the Title Insurer, reflecting no intrusions or
protrusions over any property line, setback line, easement or other restricted
area and showing a state of facts satisfactory to Administrative Agent, signed,
sealed and certified by the surveyor to Borrower, Administrative Agent and each
title insurer in form and content satisfactory to Administrative Agent, and
otherwise, to the extent required by Administrative Agent, complying with
Exhibit "G", and (b) a flood insurance policy (with a copy for each Lender) in
an amount equal to the lesser of the maximum Loan amount or the maximum amount
of flood insurance available under the Flood Disaster Protection Act of 1973, as
amended, and otherwise in compliance with the requirements of the Loan
Documents, or evidence satisfactory to Administrative Agent, including without
limitation a surveyor's certificate that none of the Land is located in a flood
hazard area, which determination may in Administrative Agent's sole discretion
be independently verified.

      9. Title Insurance. Administrative Agent shall have received (with a copy
for each Lender) and approved an ALTA title insurance policy, issued by the
Title Insurer (which shall be approved by the Administrative Agent) in the
maximum amount of the Loan plus any other amount secured by the Mortgage, on a
coinsurance and/or reinsurance basis if and as required by Administrative Agent,
insuring without exclusion or exception for creditors' rights that the Mortgage
constitutes a valid lien covering the Land and all Improvements thereon, having
the priority required by Administrative Agent and subject only to those
exceptions and encumbrances (regardless of rank or priority) Administrative
Agent approves, in a form acceptable to Administrative Agent, and with all
"standard" exceptions which can be deleted, including the exception for matters
which a current survey would show, deleted to the fullest extent authorized
under applicable title insurance rules, and Borrower shall satisfy all
requirements therefor permitted; containing no exception for standby fees or
real estate taxes or assessments other than those for the year in which the
closing occurs to the extent the same are not then due and payable and endorsed
"not yet due and payable" and no exception for subsequent assessments for prior
years; providing full coverage against mechanics' and materialmens' liens to the
extent authorized under applicable title insurance rules, and Borrower shall
satisfy all requirements therefor; insuring that no restrictive covenants shown
in the Title Insurance have been violated, and that no violation of the
restrictions will result in a reversion or forfeiture of title; insuring all
appurtenant easements; insuring that fee simple indefeasible or marketable (as
coverage is available) fee simple title to the Land and Improvements is vested
in Borrower; containing such affirmative coverage and endorsements as
Administrative Agent may require and are available under applicable title
insurance rules, and Borrower shall satisfy all requirements therefor; insuring
any easements, leasehold estates or other matters appurtenant to

                                       60



or benefiting the Land and/or the Improvements as part of the insured estate;
insuring the right of access to the Land to the extent authorized under
applicable title insurance rules, and Borrower shall satisfy all requirements
therefor; and containing provisions acceptable to Administrative Agent regarding
advances and/or readvances of Loan funds after closing.

      10. Plans. Administrative Agent shall have received and approved two (2)
true and correct copies of all existing Plans (including the site plan),
together with satisfactory evidence that all applicable governmental
authorities, Borrower, Borrower's architect, engineer, and contractors and
Construction Consultant have approved the same.

      11. Contracts. Administrative Agent shall have received and approved (a) a
list containing the names and addresses of all existing contractors, architects,
engineers, and other suppliers of services and materials for the Project, their
respective contract amounts, and a copy of their contracts, including without
limitation any and all subcontracts; and (b) duly executed, acknowledged and
delivered originals from each contractor, architect, engineer, subcontractor, or
supplier of services or materials required by Administrative Agent, of consents
or other agreements reasonably satisfactory to Administrative.

      12. Insurance Policies. Administrative Agent shall have received (with a
copy for each Lender) and approved the insurance policies initially required by
Administrative Agent, pursuant to the Loan Documents, including without
limitation Borrower's effective, paid-up policies of fire and all risk
replacement cost coverage of all insurable property (during and with respect to
construction in builder's risk completed value form) with standard
noncontributory mortgagee clause in favor of Administrative Agent and with loss
proceeds payable to Administrative Agent; comprehensive general public liability
insurance with Administrative Agent as an additional insured; business
interruption or rent loss insurance; workers' compensation insurance; and such
other or additional insurance, and covering such risks, as Administrative Agent
requires; provided, however, that Administrative Agent has waived the
requirement for insurance covering loss from terrorist acts to the extent such
coverage is unavailable without payment of an additional premium amount. All
policies must be written by insurers, in amounts, with endorsements, and on
terms and conditions satisfactory to Administrative Agent, together with
evidence satisfactory to Administrative Agent that all premiums therefor have
been paid for a period of not less than one (1) year from the date of this
Agreement and that the policies are in full force and effect.

      13. [Reserved].

      14. Environmental Compliance/Report. Administrative Agent shall have
received and approved evidence satisfactory to Administrative Agent that no
portion of the Land is "wetlands" under any applicable law and that the Land
does not contain and is not within or near any area designated as a hazardous
waste site by any Tribunal, that neither the Property nor any adjoining property
contains or has ever contained any substance classified as hazardous or toxic
(or otherwise regulated, such as, without limitation, asbestos, radon and/or
petroleum products) under any law or governmental requirement pertaining to
health or the environment, and that neither the Property nor any use or activity
thereon violates or is or could be subject to any response, remediation,
clean-up or other obligation under any law or governmental requirement
pertaining to health or the environment including without limitation, a written
report of a Phase I

                                       61



environmental assessment of the Project, made within sixty (60) days prior to
the Closing Date, by an independent engineering firm selected by Borrower and
consented to by Administrative Agent, and of a scope and in form and content
satisfactory to Administrative Agent, complying with Administrative Agent's
established guidelines, showing that there is no evidence of any such substance
which has been generated, treated, stored, released or disposed of in the
Property in violation of applicable legal requirements, and such additional
evidence as may be reasonably required by Administrative Agent. Lender
acknowledges receipt of the Phase I Environmental Site Assessment Update dated
April 19, 2005. All reports, drafts of reports, and recommendations, whether
written or oral, from such engineering firm shall be made available and
communicated to Administrative Agent. The Borrower and Guarantor shall execute
Administrative Agent's standard form Environmental Indemnity Agreement. The
Environmental Indemnity Agreement shall survive repayment of the Loan.

      15. Soil Reports. Administrative Agent shall have received and approved a
soil composition and test boring report and a foundation report satisfactory to
Administrative Agent regarding the Land, made within thirty (30) days prior to
the date of this Agreement, by a licensed professional engineer satisfactory to
Lenders.

      16. Access, Utilities, and Laws. Administrative Agent shall have received
and approved (a) satisfactory evidence of access easements or other rights over
private roads; (b) letters from the applicable utility companies or governmental
authorities, or other evidence reasonably satisfactory to Administrative Agent,
confirming that all utilities necessary for the Improvements, including without
limitation public water, sewer, electrical, telephone lines and pipes, are
available at the Land in sufficient capacity, together with evidence reasonably
satisfactory to Administrative Agent of paid impact fees, utility reservation
deposits, and connection fees required to assure the availability of such
services; (c) reasonably satisfactory evidence that all applicable zoning
ordinances, restrictive covenants and governmental requirements affecting the
Property permit the use for which the Property is intended, including without
limitation parking, building setbacks, lot sizes, and ingress and egress, have
been or will be complied with, without the existence of any variance,
non-complying use, nonconforming use or other special exception unless disclosed
to Lender prior to closing; (d) evidence reasonably satisfactory to
Administrative Agent that the Land and Improvements comply and will comply with
all laws and governmental requirements regarding subdivision and platting and
would so comply if the Land and the Improvements thereon were conveyed as a
separate parcel; (e) a true and correct copy of a valid building permit for the
Improvements, together with all other consents, licenses, permits and approvals
necessary for construction of the Improvements, all in assignable form (to the
extent appropriate) and in full force and effect; (f) evidence satisfactory to
Administrative Agent of compliance by Borrower and the Property, and the
proposed construction, use and occupancy of the Improvements, with such other
applicable laws and governmental requirements as Administrative Agent may
request, including all laws and governmental requirements regarding access and
facilities for handicapped or disabled persons including, without limitation and
to the extent applicable, The Federal Architectural Barriers Act (42 U.S.C.
Section 4151 et seq.), The Fair Housing Amendments Act of 1988 (42 U.S.C.
Section 3601 et seq.), The Americans With Disabilities Act of 1990 (42 U.S.C.
Section 12101 et seq.), The Rehabilitation Act of 1973 (29 U.S.C. Section 794),
and any applicable state requirements; (g) written evidence satisfactory to
Administrative Agent that construction of the Improvements on the Land is
permissible under all federal, state and local statutes, regulations and rulings
protecting tidal

                                       62



and non-tidal wetlands and other environmentally protected areas; (h) soil tests
and a foundation report regarding the condition of the Land by an engineer
satisfactory to Administrative Agent; (i) evidence satisfactory to
Administrative Agent that there is no debt, claim, or lien against the Project;
(j) evidence satisfactory to Administrative Agent that the Improvements and the
use of the Project do not and will not violate or encroach upon any boundary
line, setback line, easement, restrictive covenant or other agreement or
restriction applicable to the Project nor, in Administrative Agent's sole
judgment, shall any such easement, restriction or agreement impose an
unsatisfactory restriction on the Project or its owner; (k) evidence
satisfactory to Administrative Agent that all taxes, assessments, standby fees
and other similar charges that are then due and payable have been paid, and that
the Land and Improvements constitute a separate tax lot or lots, with separate
assessment or assessments of the Land and Improvements, independent of any other
land or improvements; and (1) the Project will have adequate, properly approved
and permitted storm water run-off and/or detention.

      17. Priority. Administrative Agent shall have received and approved no
later than the Closing Date, assurances of Borrower's title to the Grande Palms
Tract and Guarantor's title to the remainder of the Land, and that the Loan
Documents will and do establish valid, perfected, first priority liens and
security rights against the Project, including: (a) evidence satisfactory to
Administrative Agent that prior to and as of the time the Mortgage was filed for
record (i) [Reserved]; (ii) no contract, or memorandum thereof, for
construction, design, surveying, or any other service relating to the Project
has been filed for record in the county where the Property is located; and (iii)
no mechanic's or materialman's lien claim or notice, lis pendens, judgment, or
other claim or encumbrance against the Property has been filed for record in the
county where the Property is located or in any other public record which by law
provides notice of claims or encumbrances regarding the Property; (b) a
certificate or certificates of a reporting service acceptable to Administrative
Agent, reflecting the results of searches made, (i) of the central and local
Uniform Commercial Code records, showing no filings against any of the
collateral for the Loan or against Borrower or Guarantor otherwise except as
consented to by Administrative Agent; (ii) if required by Administrative Agent,
of the appropriate judgment and tax lien records, showing no outstanding
judgment or tax lien against Borrower or Guarantor; and (iii) an affidavit from
the General Contractor in form and content reasonably acceptable to
Administrative Agent.

      18. Bonds. Administrative Agent shall have received and approved (a) a
performance bond for each contractor, and for each subcontractor specified by
Administrative Agent, in amount, form and content satisfactory to Administrative
Agent and (b) a payment bond for each contractor, in form and content
satisfactory to Administrative Agent. Each bond shall be issued by a corporate
surety acceptable to Administrative Agent and authorized and admitted to do
business and to execute bonds in the state where the Project is located.
Administrative Agent shall be named as additional obligee.

      19. Tax and Standby Fee Certificates. Administrative Agent shall have
received and approved satisfactory evidence (a) of the identity of all taxing
authorities and utility districts (or similar authorities) having jurisdiction
over the Property or any portion thereof, (b) that all taxes, standby fees and
any other similar charges have been paid, including, if applicable, copies of
receipts or statements marked "paid" by the appropriate authority; and (c) that
the Land is a separate tax lot or lots with separate assessment or assessments
of the Land and Improvements,

                                       63



independent of any other land or improvements and that the Land is a separate
legally subdivided parcel.

      20. Other Documents. Borrower and Guarantor shall have delivered to
Administrative Agent, in form and content reasonably satisfactory to
Administrative Agent, such other documents and certificates as Administrative
Agent may reasonably request.

      21. Tax Identification Number. Borrower and Guarantor must provide the
respective tax payer identification numbers.

      22. Litigation. Borrower and Guarantor must provide evidence satisfactory
to Administrative Agent that there is no pending or threatened litigation
involving Borrower, Guarantor, or the Project which, in the sole opinion of
Administrative Agent, could adversely affect the ability of Borrower or
Guarantor to perform their respective obligations under the Loan Documents. In
addition, neither Borrower nor any affiliate of Borrower, Guarantor nor any
affiliate of Guarantor, shall be involved in any litigation threatened or
existing against Administrative Agent or any affiliate of Administrative Agent.

      23. Adverse Change. There shall not have occurred, in the opinion of
Administrative Agent, any material adverse change in the business or financial
condition of Borrower or in the Project or in any other state of material facts
submitted to Administrative Agent in connection with the Loan, from that which
existed at the time Administrative Agent considered the issuance of this
Commitment.

                                       64



                                  EXHIBIT "C-1"

                         CONDITIONS PRECEDENT TO FUNDING

      In addition to the Pre-Closing submissions described in Exhibit C,
Borrower must have provided, or caused to be provided, the following submissions
prior to funding under the Note (the "Funding Date"):

      1. Cost Breakdown and Budget. With respect to the Improvements, no later
than 10 days before the Funding Date (i) a detailed breakdown of the cost of
constructing the Improvements ("Cost Breakdown"); and (ii) an itemization and
schedule of disbursements of all costs anticipated by Borrower incident to the
Improvements (including developer, contractor and/or other incentive fees), the
Project and the construction of the Improvements through the Maturity Date of
the Loan (together, the " Aggregate Cost"), and all cost amounts funded and to
be funded from equity contributions of Borrower or others. Loan funds shall be
allocated and disbursed as determined by Administrative Agent in accordance with
the Budget.

      2. Plans and Specifications. With respect to the Improvements, no later
than 10 days before the Funding Date, two (2) sets of detailed plans and
specifications (the "Plans") for all architectural, structural, mechanical,
plumbing, electrical, site development (on and offsite) and other work for or in
connection with the Improvements, which must be signed, sealed and dated by the
design professional.

      3. Contracts. With respect to the Improvements, no later than 10 days
before the Funding Date: (1) a complete correct list showing the name, address
and telephone number of all original contractors, architects and engineers, and
all subcontractors, including materialmen and other parties (as then known to
Borrower) who will supply labor, materials or services in connection with the
Improvements, and the total dollar amount of each contract and subcontract
(including any changes) and amounts paid through the date of the list; (ii)
originals of Borrower's construction, architectural and engineering contracts
regarding the Improvements; and (iii) if and as requested by Administrative
Agent, originals or true and correct copies of subcontracts. In addition, prior
to the Funding Date, Administrative Agent will require written consents to use
of the Plans by Administrative Agent in connection with the Improvements,
collateral assignments to Administrative Agent of Borrowers' rights in the Plans
and in such contracts as Administrative Agent shall require and agreements to
complete on behalf of Administrative Agent. Borrower's contractors, architects
and engineers and any major subcontractors shall be subject to the approval of
Administrative Agent. The general contractor's contract shall be a "guaranteed
maximum price" contract and at Administrative Agent's option, any other contract
shall be a "guaranteed maximum price" contract.

      4. Bonds. With respect to the Improvements, for each contractor,
performance and payment bonds naming Administrative Agent as an additional
obligee in an amount, form and content, and issued by sureties satisfactory to
Administrative Agent on behalf of Lenders and in compliance with applicable law.

      5. Management Agreement. With respect to the Improvements, a copy of any
agreement for the management of the Improvements.

                                       65



      6. Up-Front Equity Requirement. Borrower must provide up-front equity
equal to or greater than $16,715,000.00 (which shall be contributed in the form
of land value of $14,070,000.00 and cash of $2,645,000.00). Administrative Agent
acknowledges the up-front equity requirement, in the form of the Land valued at
not less than $14,070,000.00, is satisfied.

      7. Condominium Documentation. Borrower must provide draft documentation
related to the creation of the horizontal property regime related to the Project
to Administrative Agent prior to the filing/recording thereof, including without
limitation, the draft master deed, bylaws, disclosure documentation, and other
related documents, and such documentation must be in form and content acceptable
to Administrative Agent. The horizontal property regime related to the Project
shall be properly filed and in existence prior to the first closing of any
individual Unit and the formation of the horizontal property regime shall be
completed in accordance with all applicable laws.

                                       66



                                   EXHIBIT "D"

                                     BUDGET

                            [INTENTIONALLY OMITTED]

                                       67



                                   EXHIBIT "E"

               MINIMUM UNIT SALES PRICES AND UNIT RELEASE PRICES

                             [INTENTIONALLY OMITTED]

                                       68



                                   EXHIBIT "F"

                                    ADVANCES

      1. Draw Request.

      (a) A "Draw Request" means a properly completed and executed written
application by Borrower to Administrative Agent in the form of Exhibit "F-I" (or
in another form satisfactory to Administrative Agent) setting forth the amount
of Loan proceeds desired, together with the related AIA Document G-702 and G-703
and such schedules, affidavits, releases, waivers, statements, invoices, bills,
and other documents, certificates and information satisfactory to Administrative
Agent. At least five (5) Business Days before the requested date of each
advance, Borrower shall deliver a Draw Request to Administrative Agent. Borrower
shall be entitled to an advance only in an amount approved by Administrative
Agent in accordance with the terms of this Agreement and the Loan Documents.
Lenders shall not be required to make advances more frequently than once each
calendar month. Lenders shall, only upon the satisfaction, as determined by
Administrative Agent in its sole discretion, of all applicable conditions of
this Agreement and the Loan Documents, make the requested advance to Borrower on
a Funding Date which is a Business Day within five (5) Business Days after such
satisfaction. Each Draw Request, and Borrower's acceptance of any advance, shall
be deemed to ratify and confirm that all representations and warranties in the
Loan Documents remain true and correct as of the date of the Draw Request and
the advance, respectively.

      2. Advances. Borrower shall disburse all advances made to Borrower, for
payments of the costs and expenses specified in the Budget for which the
advances were made, and for no other purpose (subject to Borrower's right to
reallocate budget items as set forth Section 1.4 herein). Following receipt and
approval of a Draw Request, all supporting documentation and information, and
receipt and approval of a written report from Construction Consultant
satisfactory to Administrative Agent, Administrative Agent will determine the
amount of the advance Lenders shall make in accordance with this Agreement, the
Loan Documents, the Budget, and if and to the extent required by the
Administrative Agent, to Administrative Agent's satisfaction, the following
standards:

      (a) [Reserved].

      (b) For construction work, advances will be made on the basis of ninety
percent (90%) (or the percentage used with respect to disbursements for
construction work at the time of disbursement) of the costs shown on the
application for payment from the contractor reviewed and approved by
Administrative Agent of the work or material in place on the Improvements that
comply with the terms of the Loan Documents, minus all previous advances and all
amounts required to be paid by Borrower, as described in Columns (B) and (C) of
the Budget (subject to Borrower's right to reallocate Budget items as set forth
in Section 1.4 herein.

      (c) For materials stored on-site, advances will be made based on 90% (or
the percentage used with respect to disbursements for construction work at the
time of disbursement) of the invoice cost of materials stored for a time period
of not more than ninety (90) days on the Property, provided the same are
adequately secured and insured. All invoices for materials

                                       69



stored are subject to review and approval by the Administrative Agent. The
Administrative Agent on behalf of the Lenders must have a first lien on the
stored materials on-site, and a disbursement therefor must not be in conflict
with the terms of any construction document.

      (d) For materials stored off-site, advances shall be made provided: (1)
such materials are adequately identified, secured and insured; (ii) no material
is stored for a time period exceeding 45 days; (iii) at all times the total cost
of all materials stored off-site does not exceed the Stored Materials Advance
Limit at any one time; and (iv) the Administrative Agent on behalf of the
Lenders must have a lien or security interest (of the priority required by the
Administrative Agent) on all materials stored off-site. The amount of any Loan
disbursements for materials stored off-site shall be determined by applying the
effective disbursement percentage used for construction work to the costs of
such stored materials (as indicated on Administrative Agent approved invoices
therefore).

      3. Conditions to the First Advance. As conditions precedent to the first
advance hereunder, if and to the extent required by Administrative Agent, to
Administrative Agent's satisfaction, Borrower must have satisfied the conditions
required under this Agreement, including all of those conditions set forth in
Exhibit "C" Exhibit "C-1" and Section 4 below.

      4. Conditions to All Advances. As conditions precedent to each advance
made pursuant to a Draw Request, in addition to all other requirements contained
in this Agreement, if and to the extent required by Administrative Agent, to
Administrative Agent's satisfaction, Borrower must satisfy the following
conditions, and deliver to Administrative Agent evidence of such satisfaction:

      (a) All conditions to the first advance have been and continue to be
satisfied.

      (b) Borrower must have delivered to Administrative Agent a Draw Request.

      (c) No Default or any event which, with the giving of notice or the lapse
of time, or both, could become a Default, exists.

      (d) The representations and warranties made in the Loan Documents must be
true and correct on and as of the date of each advance and no event shall have
occurred or condition or circumstance shall exist which, if known to Borrower,
would render any such representation or warranty incorrect or misleading.

      (e) Each subcontract or other contract for labor, materials, services
and/or other work included in a Draw Request shall have been duly executed and
delivered by all parties thereto and shall be effective, and Administrative
Agent shall have received a true and complete copy of a fully executed copy of
each such subcontract or other contract as Administrative Agent may have
requested, together with performance and payment bonds securing such contracts
and subcontracts, to the extent required by Administrative Agent, in form and
substance satisfactory to Administrative Agent.

      (f) No mechanic's or materialmen's lien or other encumbrance shall have
been filed and remain in effect against the Property, no stop notices shall have
been served on Lenders that have not been bonded by Borrower in a manner and
amount satisfactory to Administrative

                                       70



Agent, and releases or waivers of mechanics' liens and receipted bills showing
payment of all amounts due to all parties who have furnished materials or
services or performed labor of any kind in connection with the Property shall
have been obtained (and, to the extent required by Administrative Agent, copies
thereof shall have been delivered to Administrative Agent).

      (g) If required by Administrative Agent, the Title Insurance shall have
been endorsed and brought to date in a manner satisfactory to Administrative
Agent to increase the coverage by the amount of each advance through the date of
each such advance with no additional title change or exception not approved by
Administrative Agent.

      (h) Administrative Agent shall have received written certification by
Construction Consultant, and if required by Administrative Agent by Borrower's
architect, that to the best of such party's knowledge, information, and belief,
construction is in accordance with the Plans, the quality of the work for which
the advance is requested is in accordance with the applicable contract, the
amount of the advance requested represents work in place based on on-site
observations and the data compromising the Draw Request, the work has progressed
in accordance with the construction contract and schedule, and the applicable
contractor is entitled to payment of the amount certified.

      (i) Administrative Agent shall have received (i) a foundation survey made
immediately after, but in no event later than ten (10) days after, the laying of
the foundation of each building or structure of the Improvements satisfactory to
Administrative Agent complying with Exhibit "G", (ii) a certificate of
Borrower's architect stating that based on personal inspection the foundations
have been completed in accordance with the Plans and are satisfactory in all
respects, and (iii) a bearing capacity test report with respect to the excavated
footings and foundations, reviewed and approved by the Construction Consultant
and Borrower's architect.

      (j) Administrative Agent shall have received within ten (10) days after
the pouring of concrete for any Improvements, a report satisfactory to
Construction Consultant of the results of concrete tests made at the time the
concrete is poured.

      (k) Administrative Agent shall have received within ten (10) days after
the compaction of any soil for construction, a report satisfactory to
Construction Consultant of the results of soil tests.

      (1) As of the date of making such advance, no event shall have occurred,
nor shall any condition exist, that could have a Material Adverse Effect on the
enforceability of the Loan Documents, or a Material Adverse Effect to the
financial condition of Borrower, impair the ability of Borrower to fulfill its
material obligations under the Loan Documents, or otherwise have a Material
Adverse Effect whatsoever on the Property.

      (m) [Reserved].

      (n) The Improvements shall not have been damaged and not repaired and
shall not be the subject of any pending or threatened condemnation or adverse
zoning proceeding.

      (o) Borrower shall have paid all amounts then required to be paid by
Borrower under Columns (B) and (C) of the Budget.

                                       71



      (p) Borrower shall have made Borrower's Deposit if required by Section 1.5
of this Agreement.

      (q) With respect to any advance to pay a contractor, Administrative Agent
shall have received original applications for payments in form approved by
Administrative Agent, containing a breakdown by trade and/or other categories
acceptable to Administrative Agent, executed and certified by each contractor
and Borrower's architect, accompanied by invoices, and approved by Construction
Consultant.

      (r) Borrower shall have delivered to Administrative Agent an Owner's
Affidavit certifying that the funds disbursed to date by Administrative Agent
have been paid to the appropriate parties.

      (s) Borrower shall have submitted copies of notarized partial lien waiver
forms executed by each contractor and each appropriate subcontractor, supplier
and materialman, including, without limitation, from all parties sending
statutory notices to contractors, notices to owners, or notices of nonpayment,
specifying in such partial lien waivers the amount paid in consideration of such
partial releases.

      (t) Borrower shall have delivered to Administrative Agent such other
information, documents and supplemental legal opinions as may be required by
Administrative Agent.

      5. Final Advance for Improvements. If and to the extent required by the
Administrative Agent, to Administrative Agent's satisfaction, the final advance
for the Improvements (including retainage) shall not be made until thirty (30)
days after the later of the date on which the Improvements have been
"completed," as defined by applicable state law, or if required by
Administrative Agent, the date on which an affidavit of completion has been
recorded, and in the case of each such Draw Request, if and to the extent
required by Administrative Agent, Administrative Agent shall have received the
following as additional conditions precedent to the requested advance:

      (a) Certificates from Borrower's architect, engineer, contractor and, if
required by Administrative Agent, from the Construction Consultant, certifying
that the Improvements (including any off-site improvements) have been completed
in accordance with, and as completed comply with, the Plans and all laws and
governmental requirements; and Administrative Agent shall have received two (2)
sets of detailed "as built" Plans approved in writing by Borrower, Borrower's
architect, and each contractor.

      (b) Final affidavits (in a form approved by Administrative Agent) from
Borrower's architect, engineer, and each contractor certifying that each of them
and their subcontractors, laborers, and materialmen has been paid in full for
all labor and materials for construction of the Improvements; and final lien
releases or waivers (in a form approved by Administrative Agent) by Borrower's
architect, engineer, contractor, and all subcontractors, materialmen, and other
parties who have supplied labor, materials, or services for the construction of
the Improvements, or who otherwise might be entitled to claim a contractual,
statutory or constitutional lien against the Property.

                                       72



      (c) The Title Insurance shall be endorsed to remove any exception for
mechanics' or materialmen's liens or pending disbursements, with no additional
title change or exception objectionable to Administrative Agent, and with such
other endorsements required by Administrative Agent.

      (d) Evidence satisfactory to Administrative Agent that all laws and
governmental requirements have been satisfied, including receipt by Borrower of
all necessary governmental licenses, certificates and permits (including
certificates of occupancy) with respect to the completion, use, occupancy and
operation of the Improvements, together with evidence satisfactory to
Administrative Agent that all such licenses, certificates, and permits are in
full force and effect and have not been revoked, canceled or modified.

      (e) Three (3) copies of a final as-built survey satisfactory to
Administrative Agent and complying with Exhibit "G".

      (f) [Reserved].

      (g) If applicable, an estoppel certificate and a subordination agreement,
in the form approved by Administrative Agent, from each tenant, and written
confirmation by each tenant having the right to do so that such tenant has
approved the completed Improvements.

      6. Direct Advances. Borrower hereby irrevocably authorizes Administrative
Agent on behalf of Lenders (but Administrative Agent shall have no obligation)
to (i) advance Loan funds directly to Lenders to pay interest due on the Loan,
and (ii) advance and directly apply the proceeds of any advance to the
satisfaction of any of Borrower's obligations under any of the Loan Documents,
even though Borrower did not include that amount in a Draw Request and/or no
Default exists. Each such direct advance (except for application of a Borrower's
Deposit) shall be added to the outstanding principal balance of the Loan and
shall be secured by the Loan Documents. Unless Borrower pays such interest from
other resources, Administrative Agent may advance Loan funds pursuant to this
Section for interest payments as and when due. Nothing contained in this
Agreement shall be construed to permit Borrower to defer payment of interest on
the Loan beyond the date(s) due. The allocation of Loan funds in the Budget for
interest shall not affect Borrower's absolute obligation to pay the same in
accordance with the Loan Documents. Administrative Agent may hold, use, disburse
and apply the Loan and the Borrower's Deposit for payment of any obligation of
Borrower under the Loan Documents. Borrower hereby assigns and pledges the
proceeds of the Loan and any Borrower's Deposit to Administrative Agent for
itself and for the benefit of Lenders for such purposes. Administrative Agent on
behalf of Lenders may advance and incur such expenses as Administrative Agent
deems necessary for the completion of the Improvements and to preserve the
Property and any other security for the Loan, and such expenses, even though in
excess of the amount of the Loan, shall be secured by the Loan Documents and
shall be payable to Administrative Agent on behalf of Lenders on demand.
Administrative Agent on behalf of Lenders may disburse any portion of any
advance at any time, and from time to time, to persons other than Borrower for
the purposes specified in this Section and the amount of advances to which
Borrower shall thereafter be entitled shall be correspondingly reduced.

                                       73



      7. Conditions and Waivers. All conditions precedent to the obligation of
Lenders to make any advance are imposed hereby solely for the benefit of
Administrative Agent and Lenders, and no other party may require satisfaction of
any such condition precedent or be entitled to assume that Lenders will refuse
to make any advance in the absence of strict compliance with such conditions
precedent. Administrative Agent shall have the right to approve and verify the
periodic progress, costs incurred by Borrower, and the estimated costs remaining
to be incurred, after consultation with the Construction Consultant. No advance
shall constitute an approval or acceptance by Administrative Agent of any
construction work, or a waiver of any condition precedent to any further
advance, or preclude Administrative Agent from thereafter declaring the failure
of Borrower to satisfy such condition precedent to be a Default. No waiver by
Administrative Agent of any condition precedent or obligation shall preclude
Administrative Agent from requiring such condition or obligation to be met prior
to making any other advance or from thereafter declaring the failure to satisfy
such condition or obligation to be a Default.

      8. Funding. Borrower shall establish and maintain a special account with
Administrative Agent into which advances funded directly to Borrower (but no
other funds), and excluding direct disbursements made to or by Administrative
Agent on behalf of Lenders pursuant to this Agreement, shall be deposited by
Borrower, and against which checks shall be drawn only for the payment of costs
specified in the Budget, but which special account shall not be used for any
other purpose. Borrower hereby irrevocably authorizes Administrative Agent to
deposit each advance requested by Borrower to the credit of Borrower in that
account, by wire transfer or other deposit. Advances may also be made, in
addition to other methods contemplated herein, at Administrative Agent's option,
by direct or joint check payment to any or all persons entitled to payment for
work or services performed or material furnished in connection with the Project
or the Loan, or by having the proceeds thereof made available to the Title
Insurer (or its agent) for disbursement. Neither Administrative Agent nor any
Lender shall not be required to, and has no responsibility to, supervise the
proper application or distribution of funds to third parties.

                                       74



                                  EXHIBIT "F-1"

                                  DRAW REQUEST

                                       75



                             [BORROWER'S LETTERHEAD]

                             DRAW REQUEST NO._______

TO: BANK OF AMERICA, N.A. ("Lender")

LOAN NO. _________________________________ DATE ______________________
PROJECT  _____________________________________________________________
LOCATION _____________________________________________________________

BORROWER _____________________________________________________________
         _____________________________________________________________
         _____________________________________________________________

FOR PERIOD ENDING ____________________________________________________

In accordance with the Construction Loan Agreement in the amount of
$_________________________________ dated__________________________, between
Borrower and Lender, Borrower requests that $_______________________be advanced
from Loan proceeds [Borrower's Deposit/ Up-Front Equity/Deferred Equity]. The
proceeds should be credited to the account of_____________________________
Account No.________________________________, at________________________________.

1. CURRENT DRAW REQUEST FOR HARD COSTS          $_____________________________

2. CURRENT DRAW REQUEST FOR SOFT COSTS          $_____________________________

3. TOTAL DRAW REQUEST                           $_____________________________

AUTHORIZED SIGNER
______________________________  Dated:________________________________________



                                   EXHIBIT "G"

                               SURVEY REQUIREMENTS

      1. Field Note Description. The Survey shall contain a certified metes and
bounds description complying with the following: (a) the beginning point shall
be established by a monument located at the beginning point, or by reference to
a nearby monument; (b) the sides of the Land shall be described by giving the
distances and bearings of each; (c) the distances, bearings, and angles shall be
taken from an instrument survey by a registered professional engineer or
registered professional land surveyor; (d) curved sides shall be described by
data including: length of arc, central angle, radius of circle for the arc and
chord distance, and bearing; (e) the description shall be a single perimeter
description of the entire Land, if and as instructed, there shall also be a
separate metes and bounds description of one or more constituent tracts out of
the Land; (f) the description shall include a reference to all streets, alleys,
and other rights-of-way that abut the Land, and the width of all rights-of-way
mentioned shall be given the first time these rights-of-way are referred to; (g)
for each boundary line abutting a street, road, alley or other means of access,
the description must, in calling the boundary line, state that the boundary line
and the right-of-way line are the same; (h) if the Land has been recorded on a
map or plat as part of an abstract or subdivision, reference to such recording
data shall be made; and (1) the total acreage and square footage of the Land
shall be certified.

      2. Lot and Block Description. If the Land consists of one or more complete
lots or blocks included within a properly established recorded subdivision or
addition, then a lot and block description will be an acceptable substitute for
a metes and bounds description, provided that the lot and block description must
completely and properly identify the name or designation of the recorded
subdivision or addition and give the recording information therefor.

      3. Map or Plat. The Survey shall also contain a certified map or plat
clearly showing the following: (a) the Land; (b) the relation of the point of
beginning of the Land to the monument from which it is fixed; (c) all easements,
streets, roads, alleys and rights-of-way on or abutting the Land, showing
recording information therefor by volume and page; (d) if the Land has been
recorded on a map or plat as part of an abstract or subdivision, all survey
lines must be shown, and all lot and block lines (with distances and bearings)
and numbers, must be shown; (e) the established building setback lines, if any,
including those by restrictive covenant, recorded plat and zoning ordinance
(identifying the source in each case, by volume and page reference if
applicable); (f) all easements appurtenant to said Land, with recording
information by volume and page; (g) the boundary lines of the street or streets
abutting the Land and the width of said streets and the width of the
rights-of-way therefor; (h) the distance from the nearest intersecting street or
road to the Land; (i) all structures and improvements on the Land (with
designation and dimensions thereof and of each party wall, if any) with
horizontal lengths of all sides and the relation thereof by distances to (1) all
boundary lines of the Land, (2) easements, (3) established building lines, and
(4) street lines; (j) the types of materials comprising the exterior walls and
roofs of all buildings; (k) all street addresses of improvements on the Land;
(I) all curb cuts, driveways, fences, sidewalks, stoops and landscaping; (m) the
number of stories of all multi-story structures; (n) the location, type and size
of all utility lines as they service the Land and Improvements (sewer, water,
gas, electric and telephone); (o) all encroachments and

                                       76



protrusions, if any, from or upon the Land or any improvements thereon or upon
any easement, building setback line or other restricted area, with exact
measurements; (p) all parking and paved areas, including the number of vehicles
that may be parked; (q) all distances, angles and other calls contained in the
legal description; (r) the location, type and size of all monuments, and as to
each monument, indication whether it was found or placed by the surveyor; (s)
the boundaries of any flood hazard area or flood plain area in which any part of
the Land lies, with the map number, date and source (Tribunal) of each flood map
shown; (t) all surface water bodies or courses; (u) the date of any revisions
subsequent to the initial survey prepared pursuant to these requirements; (v) a
legend explaining the meaning of all symbols used on the plat; and (w) the scale
of all distances and dimensions on the plat.

      4. Certification. The certification for the property description and the
map or plat shall be addressed to Administrative Agent for the benefit of
Lenders, Borrower and the Title Insurer, signed by the surveyor (a registered
professional land surveyor or registered professional engineer), bearing current
date, registration number, and seal, and shall be in the following form or its
substantial equivalent:

      This is to certify to Lenders, Borrower and Title Insurer that this map or
      plat and the survey on which it is based were made in accordance with
      "Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys"
      jointly established and adopted by ALTA , ACSM and NSPS in 1999, and
      pursuant to the Accuracy Standards as adopted by ALTA, NSPS and ACSM and
      in effect on the date of this certification. The undersigned hereby
      certifies that the Positional Uncertainties resulting from the survey
      measurements made on the survey do not exceed the allowable Positional
      Tolerance. The undersigned further certifies to Lenders, Borrower and the
      Title Insurer that (a) this survey is true and correct and was made on the
      ground under my supervision as per the field notes shown hereon and
      correctly shows the boundary lines and dimensions and area of the land
      indicated hereon and each individual parcel thereof indicated hereon; (b)
      all monuments shown hereon actually exist, and the location, size and type
      of such monuments are correctly shown; (c) the subject Property described
      in this survey is the same land as described in the title commitment
      described below; (d) this survey and the information, courses and
      distances shown on the survey are correct; (e) this survey correctly shows
      the size, location and type of all buildings, structures, other
      improvements and visible items on the subject Property and that all
      buildings and improvements are within the boundary lines and applicable
      set back lines of the subject Property; (f) this survey correctly shows
      the location and dimensions of all alleys, streets, roads, rights-of-way,
      easements, building setback lines and other matters of record of which the
      undersigned has been advised affecting the subject Property according to
      the legal description in such easements and other matters (with
      instrument, book, and page number indicated); (g) there are no violations
      of zoning ordinances, restrictions or other rules and regulations with
      reference to the location of the buildings and improvements: (h) except as
      shown, there are no visible (1) improvements, easements, rights-of-way,
      party walls, drainage ditches, streams, uses, discrepancies or conflicts,
      (2) party walls or encroachments onto adjoining premises, streets, or
      alleys by any of said buildings, structures, or other improvements, (3)
      encroachments onto the subject Property by buildings, structures, or other
      improvements on adjoining premises, or (4) encroachments on any easement,
      building setback line or other restricted area by any buildings,

                                       77



      structures or other improvements on the subject Property; (i) the distance
      from the nearest intersecting street or road is as shown hereon; (j) the
      subject Property abuts a dedicated public street or road as shown hereon;
      (k) all utility services required for the operation of the subject
      Property either enter the subject Property through adjoining public
      streets, or this survey shows the point of entry and location of any
      utilities that pass through or are located on the adjoining premises; (1)
      any discharge into streams, rivers or other conveyance system is shown on
      this survey; (m) if the subject Property consists of two or more parcels
      having common boundaries, those parcels are contiguous along the common
      boundaries; (n) except as shown, no part of the Property is located in a
      100-year Flood Plain or in an identified "flood prone area," as defined
      pursuant to the Flood Disaster Protection Act of 1973, as amended, as
      reflected by Flood Insurance Rate Map Panel # dated _, which such map
      panel covers the area in which the Property is situated and this survey
      correctly indicates the zone designation of any area as being in the
      100-year Flood Plain or "flood prone area"; (o) no portion of the subject
      Property lies within a delineated wetlands area under federal, state or
      local law or policy; (p) the subject Property does not serve any adjoining
      premises for drainage, utilities, or ingress or egress; (q) the record
      description of the subject Property forms a mathematically closed figure;
      and (r) the subject Property has a tax map designation separate and
      distinct from that of any other premises and the subject Property is a
      separate, legally subdivided parcel. The undersigned has received and
      examined a copy of the Title Insurance Commitment No. Grande Palms/Bank of
      America, N.A. issued by the Title Insurer for the Property as well as a
      copy of each instrument listed therein, and the location of any matter
      shown thereon, to the extent it can be located, has been shown on this
      survey.

                                       78



                                  EXHIBIT "H"

                                   [RESERVED]

                                       79



                                   EXHIBIT "I"

                             LIST OF REQUIRED BONDS

      Payment and Performance Bonds with respect to all Improvements.

                                       80



                                   EXHIBIT "J"

                            ASSIGNMENT AND ASSUMPTION

      This Assignment and Assumption (this "Assignment") is dated as of the
Effective Date set forth below and is entered into by and
between_____________________________________(the "Assignor") and
______________________________(the "Assignee"). Capitalized terms used but not
defined herein shall have the meanings given to them in the Construction Loan
Agreement identified below (the "Loan Agreement"), receipt of a copy of which is
hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth
in Annex I attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment as if set forth herein in full.

      For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Loan Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below, the interest in and to all of the
Assignor's rights and obligations under the Loan Agreement and any other
documents or instruments delivered pursuant thereto that represents the amount
and percentage interest identified below of all of the Assignor's outstanding
rights and obligations under the respective facilities identified below
(including, to the extent permitted to be assigned under applicable law, all
claims [including, without limitation, contract claims, tort claims, malpractice
claims and all other claims at law or in equity, including claims under any law
governing the purchase and sale of securities or governing indentures pursuant
to which securities are issued], suits, causes of action and any other right of
the Assignor against any other person) (the "Assigned Interest"). Such sale and
assignment is without recourse to the Assignor and, except as expressly provided
in this Assignment, without representation or warranty by the Assignor.

      1. Assignor: _________________________________________

      2. Assignee: _________________________________________ [is an
Affiliate/Approved Fund]

      3. Borrower(s): ______________________________________________

      4. Administrative Agent: ______________________________________, as the
administrative agent under the Loan Agreement

      5. Loan Agreement: The Construction Loan Agreement, dated as
of___________________________________, among_________________________________,
the Lenders parties thereto, Bank of America, N.A., as Administrative Agent, and
the other agents parties thereto.

                                       81



      6. Assigned Interest:



Aggregate Amount of           Amount of          Percentage
Commitment/Loans for      Commitment/Loans      Assigned of
 all Lenders                  Assigned        Commitment/Loans
                                        

$__________________       $_______________    $______________%


Effective Date: __________,20___

The terms set forth in this Assignment are hereby agreed to:

                                         ASSIGNOR

                                         By:__________________________________
                                         Title:_______________________________

                                         ASSIGNEE

                                         By:__________________________________
                                         Title:_______________________________

[Consented to and] Accepted:

_________________________________, as
Administrative Agent

By:______________________________
Title:___________________________

[Consented to:]

By:______________________________
Title:___________________________

                                       82



                      ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

                        STANDARD TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

      1. Representations and Warranties.

      (a) Assignor. The Assignor (a) represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and to consummate the transactions contemplated hereby;
and (b) assumes no responsibility with respect to (i) any statements, warranties
or representations made in or in connection with the Loan Agreement or any other
Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents, or any collateral
thereunder, (iii) the financial condition of the Borrower, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of any Loan
Document or (iv) the performance or observance by the Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Document.

      (b) Assignee. The Assignee (a) represents and warrants that (i) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and to consummate the transactions contemplated hereby
and to become a Lender under the Loan Agreement, (ii) it meets all requirements
of an Eligible Assignee under the Loan Agreement (subject to receipt of such
consents as may be required under the Loan Agreement), (iii) from and after the
Effective Date, it shall be bound by the provisions of the Loan Agreement as a
Lender thereunder and, to the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has received a copy of the Loan
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section_____________thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision independently and without reliance on the Administrative
Agent or any other Lender to enter into this Assignment and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision,
and (v) if it is a Foreign Lender, attached hereto is any documentation required
to be delivered by it pursuant to the terms of the Loan Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

      (c) Assignee's Address for Notices, etc. Attached hereto as Schedule I is
all contact information, address, account and other administrative information
relating to the Assignee.

      2. Payments. From and after the Effective Date, the Administrative Agent
shall make all payments in respect of the Assigned interest (including payments
of principal, interest, fees and other amounts) to the Assignee whether such
amounts have accrued prior to or on or

                                       83



after the Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Administrative Agent for periods
prior to the Effective Date or with respect to the making of this assignment
directly between themselves.

      3. General Provisions. This Assignment shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and assigns.
This Assignment may be executed in any number of counterparts, which together
shall constitute one instrument. Delivery of an executed counterpart of a
signature page of this Assignment by telecopy shall be effective as delivery of
a manually executed counterpart of this Assignment. This Assignment shall be
governed by, and construed in accordance with, the law of the State of South
Carolina.

                                       84



                     SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION

                             ADMINISTRATIVE DETAILS

(ASSIGNEE TO LIST NAMES OF CREDIT CONTACTS, ADDRESSES, PHONE AND FACSIMILE
     NUMBERS, ELECTRONIC MAIL ADDRESSES AND ACCOUNT AND PAYMENT INFORMATION)

(Signatures continue)

                  (a)         Libor Lending Office:

                              Assignee name:
                              Address:

                              Attention:
                              Telephone: (_)
                              Telecopier: (_)
                              Electronic Mail:

                  (b)         Domestic Lending Office:

                              Assignee name:
                              Address:

                              Attention:
                              Telephone: (_)
                              Telecopier: (_)
                              Electronic Mail:

                  (c)         Notice Address:

                              Assignee name:
                              Address:

                              Attention:
                              Telephone: (_)
                              Telecopier: (_)
                              Electronic Mail:

                  (d)         Payment Instructions: Account No.:
                              Account No._____________________________________
                              Attention:______________________________________
                              Reference:

                                       85


                                   EXHIBIT "K"

                                 PROMISSORY NOTE
                                (Name of Lender)

$_____________________.00                                         April 27, 2005

FOR VALUE RECEIVED, GRANDE PALMS, L.L.C., a Delaware limited liability company
("Borrower," whether one or more) hereby promises to pay to the order of
________________________________(one of the "Lenders") under that certain Loan
Agreement (defined below) among Borrower, Bank of America, N.A., a national
banking association (together with any and all of its successors and assigns,
the "Administrative Agent") as agent for the benefit of the Lenders from time to
time a party to that certain Construction Loan Agreement (the "Loan Agreement")
dated of even date herewith, without offset, in immediately available funds in
lawful money of the United States of America, at the Administrative Agent's
Office as defined in the Loan Agreement, the principal sum of __________________
_________________________________________________and NO/00 DOLLARS
($_______________________________.00) (or the unpaid balance of all principal
advanced against this Note, if that amount is less), together with interest on
the unpaid principal balance of this Note from day to day outstanding as
hereinafter provided.

      1.    Note; Interest; Payment Schedule and Maturity Date. This Note is one
of the Notes referred to in Loan Agreement and is entitled to the benefits
thereof and subject to prepayment in whole or part as provided therein. The
entire principal balance of this Note then unpaid shall be due and payable at
the times as set forth in the Loan Agreement. Accrued unpaid interest shall be
due and payable at the times and at the interest rate as set forth in the Loan
Agreement until all principal and accrued interest owing on this Note shall have
been fully paid and satisfied. Any amount not paid when due and payable
hereunder shall, to the extent permitted by applicable law, bear interest and if
applicable a late charge as set forth in the Loan Agreement.

      2.    Security; Loan Documents. The security for this Note includes a
Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing
(which, as it may have been or may be amended, restated, modified or
supplemented from time to time, is herein called the "Mortgage") dated of even
date herewith from Borrower to Administrative Agent and Lenders, covering
certain property in Horry County, South Carolina described therein (the
"Property"). This Note, the Mortgage, the Loan Agreement and all other documents
now or hereafter securing, guaranteeing or executed in connection with the loan
evidenced by this Note (the "Loan"), are, as the same have been or may be
amended, restated, modified or supplemented from time to time, herein sometimes
called individually a "Loan Document" and together the "Loan Documents."

      3.    Defaults.

            (a)   It shall be a default ("Default") under this Note and each of
the other Loan Documents if (1) any principal, interest or other amount of money
due under this Note is not paid in full when due, regardless of how such amount
may have become due; (ii) any covenant,

                                       86


agreement, condition, representation or warranty herein or in any other Loan
Documents is not fully and timely performed, observed or kept; or (iii) there
shall occur any default or event of default under the Mortgage or any other Loan
Document. Upon the occurrence of a Default, Administrative Agent on behalf of
the Lenders shall have the rights to declare the unpaid principal balance and
accrued but unpaid interest on this Note, and all other amounts due hereunder
and under the other Loan Documents, at once due and payable (and upon such
declaration, the same shall be at once due and payable), to foreclose any liens
and security interests securing payment hereof and to exercise any of its other
rights, powers and remedies under this Note, under any other Loan Document, or
at law or in equity.

            (b)   All of the rights, remedies, powers and privileges (together,
"Rights") of Administrative Agent on behalf of the Lenders provided for in this
Note and in any other Loan Document are cumulative of each other and of any and
all other Rights at law or in equity. The resort to any Right shall not prevent
the concurrent or subsequent employment of any other appropriate Right. No
single or partial exercise of any Right shall exhaust it, or preclude any other
or further exercise thereof, and every Right may be exercised at any time and
from time to time. No failure by Administrative Agent or Lenders to exercise,
nor delay in exercising any Right, including but not limited to the right to
accelerate the maturity of this Note, shall be construed as a waiver of any
Default or as a waiver of any Right. Without limiting the generality of the
foregoing provisions, the acceptance by Lender from time to time of any payment
under this Note which is past due or which is less than the payment in full of
all amounts due and payable at the time of such payment, shall not (i)
constitute a waiver of or impair or extinguish the right of Administrative Agent
or Lenders to accelerate the maturity of this Note or to exercise any other
Right at the time or at any subsequent time, or nullify any prior exercise of
any such Right, or (ii) constitute a waiver of the requirement of punctual
payment and performance or a novation in any respect.


          (c)   If any holder of this Note retains an attorney in connection
with any Default or at maturity or to collect, enforce or defend this Note or
any other Loan Document in any lawsuit or in any probate, reorganization,
bankruptcy, arbitration or other proceeding, or if Borrower sues any holder in
connection with this Note or any other Loan Document and does not prevail, then
Borrower agrees to pay to each such holder, in addition to principal, interest
and any other sums owing to Lenders hereunder and under the other Loan
Documents, all costs and expenses incurred by such holder in trying to collect
this Note or in any such suit or proceeding, including, without limitation,
attorneys' fees and expenses, investigation costs and all court costs, whether
or not suit is filed hereon, whether before or after the Maturity Date, or
whether in connection with bankruptcy, insolvency or appeal, or whether
collection is made against Borrower or Guarantor or endorser or any other person
primarily or secondarily liable hereunder.



      4.    Heirs, Successors and Assigns. The terms of this Note and of the
other Loan Documents shall bind and inure to the benefit of the heirs, devisees,
representatives, successors and assigns of the parties. The foregoing sentence
shall not be construed to permit Borrower to assign the Loan except as otherwise
permitted under the Loan Documents. As further provided in the Loan Agreement, a
Lender may, at any time, sell, transfer, or assign all or a portion of its
interest in this Note, the Mortgage and the other Loan Documents, as set forth
in the Loan Agreement.

                                       87



      5.    General Provisions. Time is of the essence with respect to
Borrower's obligations under this Note. If more than one person or entity
executes this Note as Borrower, all of said parties shall be jointly and
severally liable for payment of the indebtedness evidenced hereby. Borrower,
endorsers, and any other party now or hereafter liable for the payment of this
Note in whole or in part, hereby severally (a) waive demand, presentment for
payment, notice of dishonor and of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notices
(except any notices which are specifically required by this Note or any other
Loan Document), filing of suit and diligence in collecting this Note or
enforcing any of the security herefor; (b) agree to any substitution,
subordination, exchange or release of any such security or the release of any
party primarily or secondarily liable hereon; (c) agree that neither
Administrative Agent nor any Lender shall be required first to institute suit or
exhaust its remedies hereon against Borrower or others liable or to become
liable hereon or to perfect or enforce its rights against them or any security
herefor; (d) consent to any extensions or postponements of time of payment of
this Note for any period or periods of time and to any partial payments, before
or after maturity, and to any other indulgences with respect hereto, without
notice thereof to any of them; and (e) submit (and waive all rights to object)
to non-exclusive personal jurisdiction of any state or federal court sitting in
the city and county, and venue in the city or county, in which payment is to be
made as specified in Section 1 of this Note, for the enforcement of any and all
obligations under this Note and the Loan Documents; (f) waive the benefit of all
homestead and similar exemptions as to this Note; (g) agree that their liability
under this Note shall not be affected or impaired by any determination that any
security interest or lien taken by Lender to secure this Note is invalid or
unperfected; and (h) hereby subordinate any and all rights against Borrower and
any of the security for the payment of this Note, whether by subrogation,
agreement or otherwise, until this Note is paid in full. A determination that
any provision of this Note is unenforceable or invalid shall not affect the
enforceability or validity of any other provision and the determination that the
application of any provision of this Note to any person or circumstance is
illegal or unenforceable shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances. This Note may not
be amended except in a writing specifically intended for such purpose and
executed by the party against whom enforcement of the amendment is sought.
Captions and headings in this Note are for convenience only and shall be
disregarded in construing it. THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND
INTERPRETATION, SHALL BE GOVERNED BY SOUTH CAROLINA LAW (WITHOUT REGARD TO ANY
CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW.

      6.    Notices. Any notice, request, or demand to or upon Borrower or
Lender shall be deemed to have been properly given or made when delivered in
accordance with the Loan Agreement.

      THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.

      THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

                                       88



      IN WITNESS WHEREOF, Borrower has duly executed this Note under seal as of
the date first above written.

                                        BORROWER:

                                        GRANDE PALMS, L.L.C., a Delaware limited
                                        liability company

                                        By:_______________________________(SEAL)
                                        Name:_____________________________
                                        Title:____________________________

                                       89



                                   EXHIBIT "L"

                               SCHEDULE OF LENDERS

BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT
LOAN ADMINISTRATION
200 MEETING STREET, SUITE 104
CHARLESTON, SOUTH CAROLINA 29401

BANK OF MONTREAL, AS LENDER                    Commitment Amount: $20,000,000.00
115 S. LaSalle Street
17W                                            Pro Rata Share: 28.65%
Chicago, IL 60603
Attn: Anita Blake

THE BANK OF NOVA SCOTIA, AS LENDER             Commitment Amount: $24,800,000.00
_____________________________
_____________________________                  Pro Rata Share: 35.53%
_____________________________

BANK OF AMERICA, N.A., AS LENDER               Commitment Amount: $25,000,000.00
Loan Administration
200 Meeting Street, Suite 104                  Pro Rata, Suite: 35.82%
Charleston, South Carolina 29401

                                       90



                                   EXHIBIT "M"

                                    GUARANTY

                                       91



                THIS GUARANTY IS SUBJECT TO ARBITRATION PURSUANT
           TO THE FEDERAL ARBITRATION ACT AND/OR SECTION 15-48-10 OF
               THE SOUTH CAROLINA CODE OF LAWS (1976), AS AMENDED

                               GUARANTY AGREEMENT

            This Guaranty Agreement (this "Guaranty") is made as of the 27th day
of April, 2005, by FelCor Lodging Limited Partnership, a Delaware limited
partnership ("Guarantor"), in favor of Bank of America, N.A., a national banking
association (together with its successors and assigns "Administrative Agent") on
behalf of the Lenders (as defined in the Loan Agreement (defined below)).

                             PRELIMINARY STATEMENTS

      Administrative Agent, Lenders, and Grande Palms, L.L.C. ("Borrower"), have
entered into, are entering into concurrently herewith, or contemplate entering
into, that certain Construction Loan Agreement dated of even date herewith
(herein called, as it may hereafter be modified, supplemented, restated,
extended, or renewed and in effect from time to time, the "Loan Agreement"),
which Loan Agreement sets forth the terms and conditions of a loan (the "Loan")
to Borrower for the construction of the Improvements on, and with respect to,
land located in Horry County, South Carolina, as more particularly described in
the Loan Agreement and identified therein as the Land.

      A condition precedent to Lenders' and Administrative Agent's obligation to
make the Loan to Borrower is Guarantor's execution and delivery to
Administrative Agent on behalf of the Lenders of this Guaranty.

      The Loan is, or will be, evidenced by those certain Promissory Notes
designated as "Promissory Note (Name of Lender)" of even date with the Loan
Agreement, executed by Borrower and payable to the order of particular Lenders
in the aggregate principal face amount of Sixty-Nine Million Eight Hundred
Thousand and No/100 Dollars ($69,800,000.00) (such notes, as each may hereafter
be renewed, extended, supplemented, increased or modified and in effect from
time to time, and all other notes given in substitution therefor, or in
modification, renewal, or extension thereof, in whole or in part, is herein
called, collectively, the "Note").

      Any capitalized term used and not defined in this Guaranty shall have the
meaning given to such term in the Loan Agreement. This Guaranty is one of the
Loan Documents described in the Loan Agreement.

                             STATEMENT OF AGREEMENTS

      For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and as a material inducement to Administrative Agent and
the Lenders to extend credit to Borrower, Guarantor hereby guarantees to
Administrative Agent and the Lenders the prompt payment of the Indebtedness
(collectively called the "Guaranteed Obligations"), this Guaranty being upon the
following terms and conditions:

                                       1



      1.    Guaranty of Payment. Guarantor hereby unconditionally and
irrevocably guarantees to Administrative Agent and the Lenders the punctual
payment when due, whether by lapse of time, by acceleration of maturity, or
otherwise, of principal, interest (including interest accruing after the
commencement of any bankruptcy or insolvency proceeding by or against Borrower,
whether or not allowed in such proceeding), fees, late charges, costs, expenses,
indemnification indebtedness, and other sums of money now or hereafter due and
owing, or which Borrower is obligated to pay, pursuant to (i) the terms of the
Note, the Loan Agreement, the Mortgage, the Environmental Agreement, Swap
Contract, any application, agreement, note or other document executed and
delivered in connection with any Letter of Credit, or any other Loan Documents
and any indemnifications contained in the Loan Documents, now or hereafter
existing, and (ii) all renewals, extensions, refinancings, modifications,
supplements or amendments of such indebtedness, or any of the Loan Documents, or
any part thereof (the indebtedness described in clauses (1) and (ii) above in
this Section 1 is herein collectively called the "Indebtedness"); provided such
renewals, extensions, financings, modifications, supplements or amendments are
made with Guarantor's written consent. This Guaranty covers the Indebtedness,
whether presently outstanding or arising subsequent to the date hereof,
including all amounts advanced by Administrative Agent in stages or
installments. The guaranty of Guarantor as set forth in this Section 1 is a
continuing guaranty of payment and not a guaranty of collection.

      2.    [Reserved.]

      3.    Primary Liability of Guarantor.

      (a)   This Guaranty is an absolute, irrevocable and unconditional guaranty
of payment. Guarantor shall be liable for the payment of the Guaranteed
Obligations as a primary obligor. This Guaranty shall be effective as a waiver
of, and Guarantor hereby expressly waives, any and all rights to which Guarantor
may otherwise have been entitled under any suretyship laws in effect from time
to time, including any right or privilege, whether existing under statute, at
law or in equity, to require Administrative Agent to take prior recourse or
proceedings against any collateral, security or Person (hereinafter defined)
whatsoever.

      (b)   Guarantor hereby agrees that in the event of a Default (as defined
in the Loan Agreement) by Borrower in payment of the Guaranteed Obligations, or
any part thereof, when such indebtedness becomes due, either by its terms or as
the result of the exercise of any power to accelerate, Guarantor shall, on
demand and without presentment, protest, notice of protest, further notice of
nonpayment or of dishonor, default or nonperformance, or notice of acceleration
or of intent to accelerate, or any other notice whatsoever, without any notice
having been given to Guarantor previous to such demand of the acceptance by
Administrative Agent of this Guaranty, and without any notice having been given
to Guarantor previous to such demand of the creating or incurring of such
indebtedness, all such notices being hereby waived by Guarantor, pay the amount
due thereon to Administrative Agent and pay all costs and expenses that may
arise in consequence of such Event of Default (including, without limitation,
all reasonable attorneys' fees and expenses, investigation costs, court costs,
and any and all other costs and expenses reasonably incurred by Administrative
Agent or the Lenders in connection with the collection and enforcement of the
Note or any other Loan Document), whether or not suit is filed thereon, or
whether at maturity or by acceleration, or whether before or after

                                       2



maturity, or whether in connection with bankruptcy, insolvency or appeal. It
shall not be necessary for Administrative Agent, in order to enforce such
payment by Guarantor, first to institute suit or pursue or exhaust any rights or
remedies against Borrower or others liable on such indebtedness or for such
performance, or to enforce any rights against any security that shall ever have
been given to secure such indebtedness or performance, or to join Borrower or
any others liable for the payment or performance of the Guaranteed Obligations
or any part thereof in any action to enforce this Guaranty, or to resort to any
other means of obtaining payment or performance of the Guaranteed Obligations;
provided, however, that nothing herein contained shall prevent Administrative
Agent from suing on the Note or foreclosing the Mortgage or from exercising any
other rights thereunder, and if such foreclosure or other remedy is availed of,
only the net proceeds therefrom, after deduction of all charges and expenses of
every kind and nature whatsoever, shall be applied in reduction of the amount
due on the Note and Mortgage, and Administrative Agent shall not be required to
institute or prosecute proceedings to recover any deficiency as a condition of
payment hereunder or enforcement hereof. At any sale of the Property or other
collateral given for the Indebtedness or any part thereof, whether by
foreclosure or otherwise, Administrative Agent may at its discretion purchase
all or any part of the Property or collateral so sold or offered for sale for
its own account and may, in payment of the amount bid therefor, deduct such
amount from the balance due it pursuant to the terms of the Note, Mortgage and
other Loan Documents.

      (c)   Suit may be brought or demand may be made against Borrower or
against the Guarantor or any other guarantor of the Guaranteed Obligations, or
against any one or more of them, separately or together, without impairing the
rights of Administrative Agent or the Lenders against any party hereto.

      4.    Certain Agreements and Waivers by Guarantor.

      (a)   Guarantor hereby agrees that neither Administrative Agent's nor
Lenders' rights or remedies nor Guarantor's obligations under the terms of this
Guaranty shall be released, diminished, impaired, reduced or affected by any one
or more of the following events, actions, facts, or circumstances, and the
liability of Guarantor under this Guaranty shall be absolute and unconditional
irrespective of:

            (i)     any limitation of liability or recourse in any other Loan
Document or arising under any law;

            (ii)    any claim or defense that this Guaranty was made without
consideration or is not supported by adequate consideration;

            (iii)   the taking or accepting of any other security or guaranty
for, or right of recourse with respect to, any or all of the Guaranteed
Obligations;

            (iv)    any homestead exemption or any other exemption under
applicable law;

            (v)     any release, surrender, abandonment, exchange, alteration,
sale or other disposition, subordination, deterioration, waste, failure to
protect or preserve, impairment, or loss of, or any failure to create or perfect
any lien or security interest with respect to, or any other dealings with, any
collateral or security at any time existing or purported, believed or expected
to

                                       3



exist in connection with any or all of the Guaranteed Obligations, including any
impairment of Guarantor's recourse against any Person or collateral;

            (vi)    except as expressly provided for herein, any partial release
of the liability of Guarantor hereunder (whether by operation of law or
otherwise), or if one or more other guaranties are now or hereafter obtained by
Administrative Agent covering all or any part of the Guaranteed Obligations, any
complete or partial release of any one or more of such guarantors under any such
other guaranty, or any complete or partial release of Borrower or any other
party liable, directly or indirectly, for the payment of any or all of the
Guaranteed Obligations;

            (vii)   the insolvency, bankruptcy, dissolution, liquidation,
termination, receivership, reorganization, merger, consolidation, change of
form, structure or ownership, sale of all assets, or lack of corporate,
partnership or other power of Borrower or any other party at any time liable for
the payment or performance of any or all of the Guaranteed Obligations;

            (viii)  with consent of Guarantor: any renewal, extension,
modification, supplement, subordination or rearrangement of the terms of any or
all of the Guaranteed Obligations and/or any of the Loan Documents, including,
without limitation, material alterations of the terms of payment (including
changes in maturity date(s) and interest rate(s)) or performance (including
changes in the Plans and other terms or aspects of construction of the
Improvements) or any other terms thereof, or any waiver, termination, or release
of, or consent to departure from, any of the Loan Documents or any other
guaranty of any or all of the Guaranteed Obligations, or any adjustment,
indulgence, forbearance, or compromise that may be granted from time to time by
Administrative Agent on behalf of the Lenders to Borrower, Guarantor, and/or any
other Person at any time liable for the payment or performance of any or all of
the Guaranteed Obligations;

            (ix)    any neglect, lack of diligence, delay, omission, failure, or
refusal of Administrative Agent to take or prosecute (or in taking or
prosecuting) any action for the collection or enforcement of any of the
Guaranteed Obligations, or to foreclose or take or prosecute any action to
foreclose (or in foreclosing or taking or prosecuting any action to foreclose)
upon any security therefor, or to exercise (or in exercising) any other right or
power with respect to any security therefor, or to take or prosecute (or in
taking or prosecuting) any action in connection with any Loan Document, or any
failure to sell or otherwise dispose of in a commercially reasonable manner any
collateral securing any or all of the Guaranteed Obligations;

            (x)     except as expressly provided for herein, any failure of
Administrative Agent to notify Guarantor of any creation, renewal, extension,
rearrangement, modification, supplement, subordination, or assignment of the
Guaranteed Obligations or any part thereof, or of any Loan Document, or of any
release of or change in any security, or of any other action taken or refrained
from being taken by Administrative Agent against Borrower or any security or
other recourse, or of any new agreement between Administrative Agent and
Borrower, it being understood that Administrative Agent shall not be required
(other than as expressly provided herein) to give Guarantor any notice (other
than as expressly provided herein) of any kind under any circumstances with
respect to or in connection with the Guaranteed Obligations, any and all rights
to notice Guarantor may have otherwise had being hereby waived by Guarantor, and
the

                                       4



Guarantor shall be responsible for obtaining for itself information regarding
the Borrower, including, but not limited to, any changes in the business or
financial condition of the Borrower, and the Guarantor acknowledges and agrees
that the Administrative Agent shall have no duty to notify the Guarantor .of any
information which the Administrative Agent or Lenders may have concerning the
Borrower.

            (xi)    if for any reason Administrative Agent is required to refund
any payment by Borrower to any other party liable for the payment or performance
of any or all of the Guaranteed Obligations or pay the amount thereof to someone
else;

            (xii)   the making of advances by Administrative Agent on behalf of
the Lenders to protect its interest in the Property, preserve the value of the
Property or for the purpose of performing any term or covenant contained in any
of the Loan Documents;

            (xiii)  the existence of any claim, counterclaim, setoff or other
right that Guarantor may at any time have against Borrower, Lenders,
Administrative Agent, or any other Person, whether or not arising in connection
with this Guaranty, the Note, the Loan Agreement, or any other Loan Document;

            (xiv)   the unenforceability of all or any part of the Guaranteed
Obligations against Borrower, whether because the Guaranteed Obligations exceed
the amount permitted by law or violate any usury law, or because the act of
creating the Guaranteed Obligations, or any part thereof, is ultra vires, or
because the officers or Persons creating the Guaranteed Obligations acted in
excess of their authority, or because of a lack of validity or enforceability of
or defect or deficiency in any of the Loan Documents, or because Borrower has
any valid defense, claim or offset with respect thereto, or because Borrower's
obligation ceases to exist by operation of law, or because of any other reason
or circumstance, it being agreed that Guarantor shall remain liable hereon
regardless of whether Borrower or any other Person be found not liable on the
Guaranteed Obligations, or any part thereof, for any reason (and regardless of
any joinder of Borrower or any other party in any action to obtain payment or
performance of any or all of the Guaranteed Obligations);

            (xv)    any order, ruling or plan of reorganization emanating from
proceedings under Title 11 of the United States Code with respect to Borrower or
any other Person, including any extension, reduction, composition, or other
alteration of the Guaranteed Obligations, whether or not consented to by
Administrative Agent; or

            (xvi)   any other condition, event, omission, action or inaction
that would in the absence of this paragraph result in the release or discharge
of the Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty or any other agreement;

            (xvii)  [Reserved];

            (xviii) Administrative Agent's enforcement or forbearance from
enforcement of the Guaranteed Obligations on a net or gross basis; or

                                       5



            (xix)   any invalidity, irregularity or unenforceability in whole or
in part (including with respect to any netting provision) of any Interest Rate
Protection Agreement or any confirmation, instrument or agreement required
thereunder or related thereto, or any transaction entered into thereunder, or
any limitation on the liability of Borrower thereunder or any limitation on the
method or terms of payment thereunder which may now or hereafter be caused or
imposed in any manner whatsoever.

      (b)   In the event any payment by Borrower or any other Person to
Administrative Agent or the Lenders is held to constitute a preference,
fraudulent transfer or other voidable payment under any bankruptcy, insolvency
or similar law, or if for any other reason Administrative Agent or Lenders are
required to refund such payment or pay the amount thereof to any other party,
such payment by Borrower or any other party to Administrative Agent or Lenders
shall not constitute a release of Guarantor from any liability hereunder, and
this Guaranty shall continue to be effective or shall be reinstated
(notwithstanding any prior release, surrender or discharge by Administrative
Agent of this Guaranty or of Guarantor), as the case may be, with respect to,
and this Guaranty shall apply to, any and all amounts so refunded by
Administrative Agent or Lenders or paid by Administrative Agent or Lenders to
another Person (which amounts shall constitute part of the Guaranteed
Obligations), and any interest paid by Administrative Agent or Lenders and any
attorneys' fees, costs and expenses paid or incurred by Administrative Agent or
Lenders in connection with any such event. It is the intent of Guarantor and
Administrative Agent that the obligations and liabilities of Guarantor hereunder
are absolute and unconditional under any and all circumstances and that until
the Guaranteed Obligations are fully and finally paid, and not subject to refund
or disgorgement, the obligations and liabilities of Guarantor hereunder shall
not be discharged or released, in whole or in part, by any act or occurrence
that might, but for the provisions of this Guaranty, be deemed a legal or
equitable discharge or release of a guarantor.

      (c)   If acceleration of the time for payment of any amount payable by
Borrower under the Note, the Loan Agreement, or any other Loan Document is
stayed or delayed by any law or tribunal, all such amounts shall nonetheless be
payable by Guarantor on demand by Administrative Agent.

      (d)   Guarantor agrees that neither the Guarantor nor anyone claiming
through or under the Guarantor shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension or redemption laws now
or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of the Mortgage or the absolute sale of the Property or the final
and absolute putting into possession thereof, immediately after such sale, of
the purchasers thereat, and the Guarantor, for themselves and all who may at any
time claim through or under any of them, hereby waive the benefit of all such
laws and any and all rights to have the assets comprising the Property
marshalled upon any foreclosure of the Mortgage.

      5.    Subordination. If, for any reason whatsoever, Borrower is now or
hereafter becomes indebted to Guarantor:

      (a)   such indebtedness and all interest thereon and all liens, security
interests and rights now or hereafter existing with respect to property of
Borrower securing such indebtedness shall, at all times, be subordinate in all
respects to the Guaranteed Obligations and to all liens,

                                       6



security interests and rights now or hereafter existing to secure the Guaranteed
Obligations. All promissory notes or other evidences of such indebtedness of
Borrower, now or hereafter held by Guarantor, of obligations of Borrower to
Guarantor shall contain a specific written notice thereon that the indebtedness
evidenced thereby is .subordinated under and is subject to the terms of this
Guaranty; and

      (b)   Guarantor shall not be entitled to enforce or receive payment,
directly or indirectly, of any such indebtedness of Borrower to Guarantor until
the Guaranteed Obligations have been fully and finally paid except for the
project management fees to be paid by Borrower to the Guarantor under the Budget
or other amounts specifically identified in the Budget.

      6.    Other Liability of Guarantor or Borrower. If Guarantor is or becomes
liable, by endorsement or otherwise, for any indebtedness owing by Borrower to
Lenders or Administrative Agent other than under this Guaranty, such liability
shall not be in any manner impaired or affected hereby, and the rights of
Lenders and Administrative Agent hereunder shall be cumulative of any and all
other rights that Lenders and Administrative Agent may have against Guarantor.
If Borrower is or becomes indebted to Lenders and Administrative Agent for any
indebtedness other than or in excess of the Indebtedness for which Guarantor is
liable under this Guaranty, any payment received or recovery realized upon any
indebtedness of Borrower to Lenders or Administrative Agent may, except to the
extent paid by Guarantor on the Indebtedness or specifically required by law or
agreement of Administrative Agent to be applied to the Indebtedness, in
Administrative Agent's sole discretion, be applied upon indebtedness of Borrower
to Lenders or Administrative Agent other than the Indebtedness. This Guaranty is
independent of (and shall not be limited by) any other guaranty now existing or
hereafter given. Further, Guarantor's liability under this Guaranty is in
addition to any and all other liability Guarantor may have in any other
capacity, including without limitation, its capacity as a general partner.

      7.    Administrative Agent. Assigns. This Guaranty is for the benefit of
Administrative Agent for the benefit of the Lenders and Administrative Agent's
successors and assigns, and in the event of an assignment of the Guaranteed
Obligations, or any part thereof, the rights and benefits hereunder, to the
extent applicable to the Guaranteed Obligations so assigned, may be transferred
with such Guaranteed Obligations. Guarantor waives notice of any transfer or
assignment of the Guaranteed Obligations, or any part thereof, and agrees that
failure to give notice of any such transfer or assignment will not affect the
liabilities of Guarantor hereunder.

      8.    Binding Effect. This Guaranty is binding not only on Guarantor, but
also on Guarantor's successors and assigns.

      9.    Governing Law; Forum; Consent to Jurisdiction. This Guaranty is an
agreement executed under seal. The validity, enforcement, and interpretation of
this Guaranty, shall for all purposes be governed by and construed in accordance
with the laws of the State of South Carolina and applicable United States
federal law, and is intended to be performed in accordance with, and only to the
extent permitted by, such laws. If any Guarantor is a corporation, the
designation "(SEAL)" on this Guaranty shall be effective as the affixing of such
Guarantor's corporate seal physically to this Guaranty. All obligations of
Guarantor hereunder are payable and performable at the place or places where the
Guaranteed Obligations are payable and

                                       7

performable. Guarantor hereby irrevocably submits generally and unconditionally
for Guarantor and in respect of Guarantor's property to the nonexclusive
jurisdiction of any state court, or any United States federal court, sitting in
the state specified in the first sentence of this Section and to the
jurisdiction of any state or United States federal court sitting in the state in
which any of the Land is located, over any suit, action or proceeding arising
out of or relating to this Guaranty or the Guaranteed Obligations. Guarantor
hereby irrevocably waives, to the fullest extent permitted by law, any objection
that Guarantor may now or hereafter have to the laying of venue in any such
court and any claim that any such court is an inconvenient forum. Final judgment
in any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon Guarantor and may be enforced in any court in which
Guarantor is subject to jurisdiction. Guarantor hereby agrees and consents that,
in addition to any methods of service of process provided for under applicable
law, all service of process in any such suit, action or proceeding in any state
court, or any United States federal court, sitting in the state specified in the
first sentence of this Section may be made by certified or registered mail,
return receipt requested, directed to Guarantor at the address set forth at the
end of this Guaranty, or at a subsequent address of which Administrative Agent
received actual notice from Guarantor in accordance with the notice provisions
hereof, and service so made shall be complete five (5) days after the same shall
have been so mailed. Nothing herein shall affect the right of Administrative
Agent to serve process in any manner permitted by law or limit the right of
Administrative Agent to bring proceedings against Guarantor in any other court
or jurisdiction. The authority and power to appear for and enter judgment
against the Guarantor shall not be exhausted by one or more exercises thereof or
by any imperfect exercise thereof and shall not be extinguished by any judgment
entered pursuant thereto. Such authority may be exercised on one or more
occasions or from time to time in the same or different jurisdiction as often as
the Administrative Agent shall deem necessary and desirable.

      10.   Invalidity of Certain Provisions. If any provision of this Guaranty
or the application thereof to any Person or circumstance shall, for any reason
and too any extent, be declared to be invalid or unenforceable, neither the
remaining provisions of this Guaranty nor the application of such provision to
any other Person or circumstance shall be affected thereby, and the remaining
provisions of this Guaranty, or the applicability of such provision to other
Persons or circumstances, as applicable, shall remain in effect and be
enforceable to the maximum extent permitted by applicable law.

      11.   Attorneys' Fees and Costs of Collection. Guarantor shall pay on
demand all attorneys' fees and all other costs and expenses incurred by Lenders
or Administrative Agent in the enforcement of or preservation of Lenders' or
Administrative Agent's rights under this Guaranty including, without limitation,
all attorneys' fees and expenses, investigation costs, and all court costs,
whether or not suit is filed herein, or whether at maturity or by acceleration,
or whether before or after maturity, or whether in connection with bankruptcy,
insolvency or appeal. Guarantor agrees to pay interest on any expenses or other
sums due to Administrative Agent under this Section 11 that are not paid when
due, at a rate per annum equal to the interest rate provided for in the Note.
Guarantor's obligations and liabilities under this Section 11 shall survive any
payment or discharge in full of the Guaranteed Obligations.

                                       8



      12.   Payments. All sums payable under this Guaranty shall be paid in
lawful money of the United States of America that at the time of payment is
legal tender for the payment of public and private debts.

      13.   Controlling Agreement. It is not the intention of Administrative
Agent or Guarantor to obligate Guarantor to pay interest in excess of that
lawfully permitted to be paid by Guarantor under applicable law. Should it be
determined that any portion of the Guaranteed Obligations or any other amount
payable by Guarantor under this Guaranty constitutes interest in excess of the
maximum amount of interest that Guarantor, in Guarantor's capacity as guarantor,
may lawfully be required to pay under applicable law, the obligation of
Guarantor to pay such interest shall automatically be limited to the payment
thereof in the maximum amount so permitted under applicable law. The provisions
of this Section 13 shall override and control all other provisions of this
Guaranty and of any other agreement between Guarantor and Administrative Agent.

      14.   Representations, Warranties, and Covenants of Guarantor. Guarantor
hereby represents, warrants, and covenants that (a) Guarantor has a financial
interest in the Borrower, is (directly or indirectly) a member of Borrower, and
will derive a material and substantial benefit, directly or indirectly, from the
making of the Loan to Borrower and from the making of this Guaranty by
Guarantor; (b) this Guaranty is duly authorized and valid, and is binding upon
and enforceable against Guarantor; (c) Guarantor is not, and the execution,
delivery and performance by Guarantor of this Guaranty will not cause Guarantor
to be, in violation of or in default with respect to any law or in default under
any agreement or restriction by which Guarantor is bound or affected; (d)
Guarantor is duly organized, validly existing, and in good standing under the
laws of the state of its organization and under such laws, and has full power
and authority to enter into and perform this Guaranty; (e) the Guarantor will
indemnify the Lenders and Administrative Agent from any loss, cost or expense as
a result of any representation or warranty of the Guarantor being false,
incorrect, incomplete or misleading in any material respect; (f) [reserved]; (g)
all financial statements and information heretofore furnished to Administrative
Agent by Guarantor do, and all financial statements and information hereafter
furnished to Administrative Agent by Guarantor will, present the financial
condition of Guarantor as of their dates and the results of Guarantor's
operations for the periods therein specified, and, since the date of the most
recent financial statements of Guarantor heretofore furnished to Administrative
Agent, no material adverse change has occurred in the financial condition of
Guarantor; (h) after giving effect to this Guaranty, Guarantor is solvent, is
not engaged or about to engage in business or a transaction for which the
property of Guarantor is an unreasonably small capital, and does not intend to
incur or believe that it will incur debts that will be beyond its ability to pay
as such debts mature; (i) Administrative Agent and Lenders have no duty at any
time to investigate or inform Guarantor of the financial or business condition
or affairs of Borrower or any change therein, and Guarantor will keep fully
appraised of Borrower's financial and business condition; (j) Guarantor
acknowledges and agrees that Guarantor may be required to pay the Guaranteed
Obligations in full without assistance or support from the Borrower or any other
Person; and (k) Guarantor has read and fully understands the provisions
contained in the Note, the Loan Agreement, the Mortgage, the Environmental
Agreement, and the other Loan Documents. Guarantor's representations, warranties
and covenants are a material inducement to Lenders and Administrative Agent to
enter into the other Loan Documents and shall survive the execution

                                       9



hereof and any bankruptcy, foreclosure, transfer of security or other event
affecting Borrower, Guarantor, any other party, or any security for all or any
part of the Guaranteed Obligations.

      15.   Notices. All notices, requests, consents, demands and other
communications required or which any party desires to give hereunder or under
any other Loan Document shall be in writing and, unless otherwise specifically
provided in such other Loan Document, shall be deemed sufficiently given or
furnished if delivered by personal delivery, by nationally recognized overnight
courier service, or by registered or certified United States mail, postage
prepaid, addressed to the party to whom directed at the addresses specified in
this Guaranty (unless changed by similar notice in writing given by the
particular party whose address is to be changed) or by telegram, telex, or
facsimile. Any such notice or communication shall be deemed to have been given
either at the time of personal delivery or, in the case of courier or mail, as
of the date of first attempted delivery at the address and in the manner
provided herein, or, in the case of telegram, telex or facsimile, upon receipt;
provided that, service of a notice required by any applicable statute shall be
considered complete when the requirements of that statute are met.
Notwithstanding the foregoing, no notice of change of address shall be effective
except upon actual receipt. This section shall not be construed in any way to
affect or impair any waiver of notice or demand provided in this Guaranty or in
any Loan Document or to require giving of notice or demand to or upon any person
in any situation or for any reason.

      16.   Cumulative Rights. The exercise by Administrative Agent of any right
or remedy hereunder or under any other Loan Document, or at law or in equity,
shall not preclude the concurrent or subsequent exercise of any other right or
remedy. Administrative Agent and the Lenders shall have all rights, remedies and
recourses afforded to Administrative Agent and the Lenders by reason of this
Guaranty or any other Loan Document or by law or equity or otherwise, and the
same (a) shall be cumulative and concurrent, (b) may be pursued separately,
successively or concurrently against Guarantor or others obligated for the
Guaranteed Obligations, or any part thereof, or against any one or more of them,
or against any security or otherwise, at the sole discretion of Administrative
Agent, (c) may be exercised as often as occasion therefor shall arise, it being
agreed by Guarantor that the exercise of, discontinuance of the exercise of or
failure to exercise any of such rights, remedies, or recourses shall in no event
be construed as a waiver or release thereof or of any other right, remedy, or
recourse, and (d) are intended to be, and shall be, nonexclusive. No waiver of
any default on the part of Guarantor or of any breach of any of the provisions
of this Guaranty or of any other document shall be considered a waiver of any
other or subsequent default or breach, and no delay or omission in exercising or
enforcing the rights and powers granted herein or in any other document shall be
construed as a waiver of such rights and powers, and no exercise or enforcement
of any rights or powers hereunder or under any other document shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time. The granting of any consent, approval or waiver by
Administrative Agent shall be limited to the specific instance and purpose
therefor and shall not constitute consent or approval in any other instance or
for any other purpose. No notice to or demand on Guarantor in any case shall of
itself entitle Guarantor to any other or further notice or demand in similar or
other circumstances. No provision of this Guaranty or any right, remedy or
recourse of Administrative Agent or Lenders with respect hereto, or any default
or breach, can be waived, nor can this Guaranty or Guarantor be released or
discharged in any way or to any extent, except specifically in each case by a
writing intended

                                       10



for that purpose (and which refers specifically to this Guaranty) executed, and
delivered to Guarantor, by Administrative Agent on behalf of the Lenders.

      17.   Term of Guaranty. This Guaranty shall continue in effect until all
the Guaranteed Obligations are fully and finally paid and discharged.

      18.   Financial Statements. As used in this Section, "Financial
Statements" means a consolidated balance sheet, a consolidated income statement,
and a consolidated statement of cash flow. Guarantor shall provide or cause to
be provided to Administrative Agent the following: Financial Statements of
Guarantor, for each fiscal year as soon as reasonably practicable and in any
event within one hundred twenty (120) calendar days after the close of each
fiscal year. All fiscal year end Financial Statements shall be audited and
certified without any qualification or exception not acceptable to
Administrative Agent, by independent certified public accountants engaged by
Guarantor from time to time and shall contain all reports and disclosures
required by generally accepted accounting principles for a fair presentation.

Acceptance of any financial statement by Administrative Agent, whether or not in
the form prescribed herein, shall be relied upon by Administrative Agent in the
administration, enforcement, and extension of the Guaranteed Obligations.

      19.   Disclosure of Information. Administrative Agent and Lenders may sell
or offer to sell the Loan or interests in the Loan to one or more assignees or
participants and may disclose to any such assignee or participant or prospective
assignee or participant, to Administrative Agent's affiliates, including without
limitation Banc of America Securities LLC, to any regulatory body having
jurisdiction over Lenders or Administrative Agent and to any other parties as
necessary or appropriate in Administrative Agent's reasonable judgment, any
information Administrative Agent now has or hereafter obtains pertaining to the
Guaranteed Obligations, this Guaranty, or Guarantor, including, without
limitation, information regarding any security for the Guaranteed Obligations or
for this Guaranty, credit or other information on Guarantor, Borrower, and/or
any other party liable, directly or indirectly, for any part of the Guaranteed
Obligations.

      20.   Subrogation. Notwithstanding anything to the contrary contained
herein, Guarantor shall not exercise any right of subrogation in or under any of
the Loan Documents or to participate in any way therein, or in any right, title
or interest in and to any security or right of recourse for the Indebtedness or
any right to reimbursement, exoneration, contribution, indemnification or any
similar rights, until the Indebtedness has been fully and finally paid. This
waiver is given to induce Administrative Agent and the Lenders to make the Loan
to Borrower.

      21.   [Reserved].

      22.   No Fiduciary Relationship. The relationship between the Lenders',
Administrative Agent and Guarantor is solely that of lender and guarantor.
Administrative Agent and the Lenders have no fiduciary or other special
relationship with or duty to Guarantor and none is created hereby or may be
inferred from any course of dealing or act or omission of Administrative Agent
and the Lenders.

      23.   Interpretation. The term "Administrative Agent" shall be deemed to
include any subsequent holder(s) of the Note. Whenever the context of any
provisions hereof shall require it,

                                       11



words in the singular shall include the plural, words in the plural shall
include the singular, and pronouns of any gender shall include the other
genders. Captions and headings in the Loan Documents are for convenience only
and shall not affect the construction of the Loan Documents. All references in
this Guaranty to Schedules, Articles, Sections, Subsections, paragraphs and
subparagraphs refer to the respective subdivisions of this Guaranty, unless such
reference specifically identifies another document. The terms "herein",
"hereof', "hereto", "hereunder" and similar terms refer to this Guaranty and not
to any particular Section or subsection of this Guaranty. The terms "include"
and "including" shall be interpreted as if followed by the words "without
limitation". All references in this Guaranty to sums denominated in dollars or
with the symbol "$" refer to the lawful currency of the United States of
America, unless such reference specifically identifies another currency. For
purposes of this Guaranty, "Person" or "Persons" shall include firms,
associations, partnerships (including limited partnerships), joint ventures,
trusts, corporations, limited liability companies, and other legal entities,
including governmental bodies, agencies, or instrumentalities, as well as
natural persons.

      24.   Time of Essence. Time shall be of the essence in this Guaranty with
respect to all of Guarantor's obligations hereunder.

      25.   Counterparts. This Guaranty may be executed in multiple
counterparts, each of which, for all purposes, shall be deemed an original, and
all of which together shall constitute one and the same agreement.

      26.   Entire Agreement. This Guaranty embodies the entire agreement
between Administrative Agent on behalf of the Lenders and Guarantor with respect
to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty
supersedes all prior agreements and understandings, if any, with respect to the
guaranty by Guarantor of the Guaranteed Obligations. No condition or conditions
precedent to the effectiveness of this Guaranty exist. This Guaranty shall be
effective upon execution by Guarantor and delivery to Administrative Agent. This
Guaranty may not be modified, amended or superseded except in a writing signed
by Administrative Agent and Guarantor referencing this Guaranty by its date and
specifically identifying the portions hereof that are to be modified, amended or
superseded.

      27.   Dispute Resolution.

      (a)   Arbitration. Except to the extent expressly provided below, any
controversy, claim or dispute between or among the parties hereto, including any
such controversy, claim or dispute arising out of or relating to (1) this
Guaranty, (ii) any other Loan Document, (iii) any related agreements or
instruments, or (iv) the transaction contemplated herein or therein (including
any claim based on or arising from an alleged personal injury or business tort)
(collectively, a "Dispute"), shall, upon the request of either party, be
determined by binding arbitration in accordance with the Federal Arbitration
Act, Title 9, United States Code (or if not applicable, the applicable state
law), the applicable rules for arbitration of disputes of JAMS LLC, a Delaware
limited liability company, or any successor thereof ("JAMS"), and the "Special
Rules" set forth below. In the event of any inconsistency, the Special Rules
shall control. The filing of a court action is not intended to constitute a
waiver of the right of Guarantor or Administrative Agent or any Lender,
including the suing party, thereafter to require submittal of the Dispute to
arbitration. Any party to this Guaranty may bring an action, including a summary
or expedited

                                       12



proceeding, to compel arbitration of any Dispute in any court having
jurisdiction over such action. For the purposes of this dispute resolution
provision only, the terms "party" and "parties" shall include any parent
corporation, subsidiary or affiliate of Administrative Agent or any Lender
involved in the servicing, management or administration of any obligation
described in or evidenced by this Guaranty, together with the officers,
employees, successors and assigns of each of the foregoing.

      (b)   Special Rules.

            (i)   The arbitration shall be conducted in any U.S. state where
      real or tangible personal property collateral is located, or if there is
      no such collateral in the City and County where Administrative Agent or
      any Lender is located pursuant to its address for notice purposes in this
      Guaranty.

            (ii)  The arbitration shall be administered by JAMS, who will
      appoint an arbitrator; if JAMS is unable to administer or legally
      precluded from administering the arbitration, then the American
      Arbitration Association will serve. All Disputes shall be determined by
      one arbitrator; however, if the amount in controversy in a Dispute exceeds
      Five Million Dollars ($5,000,000), upon the request of any party, the
      Dispute shall be decided by three arbitrators (for purposes of this
      Guaranty, referred to collectively as the "arbitrator").

            (iii) All arbitration hearings will be commenced within ninety (90)
      days of the demand for arbitration and completed within ninety (90) days
      from the date of commencement; provided, however, that upon a showing of
      good cause, the arbitrator shall be permitted to extend the commencement
      of such hearing for up to an additional sixty (60) days.

            (iv)  The judgment and the award, if any, of the arbitrator shall be
      issued with thirty (30) days of the close of the hearing. The arbitrator
      shall provide a concise written statement setting forth the reasons for
      the judgment and for the award, if any. The arbitration award, if any, may
      be submitted to any court having jurisdiction to be confirmed and
      enforced, and such confirmation and enforcement shall not be subject to
      arbitration

            (v)   The arbitrator will have the authority to decide whether any
      Dispute is barred by the statute of limitations and, if so, to dismiss the
      arbitration on that basis. For purposes of the application of the statute
      of limitations, the service on JAMS under applicable JAMS rules of a
      notice of Disputes is the equivalent of the filing of a lawsuit.

            (vi)  Any dispute concerning this arbitration provision, including
      any such dispute as to the validity or enforceability of this provision,
      or whether a Dispute is arbitrable, shall be determined by the arbitrator.

            (vii) The arbitrator shall have the power to award legal fees and
      costs pursuant to the terms of this Guaranty.

                                       13



      (c)   Reservations of Rights. Nothing in this Guaranty shall be deemed to
(i) limit the applicability of any otherwise applicable statutes of limitation
and any waivers contained in this Guaranty, or (ii) apply to or limit the right
of Administrative Agent or any Lender (A) to exercise self help remedies such as
(but not limited to) setoff, or (B) to foreclose judicially or nonjudicially
against any real or personal property collateral, or to exercise judicial or
nonjudicial power of sale rights, (C) to obtain from a court provisional or
ancillary remedies such as (but not limited to) injunctive relief, writ of
possession, prejudgment attachment, or the appointment of a receiver, or (D) to
pursue rights against a party to this Guaranty in a third-party proceeding in
any action brought against Lender in a state, federal or international court,
tribunal or hearing body (including actions in specialty courts, such as
bankruptcy and patent courts). Administrative Agent may exercise the rights set
forth in clauses (A) through (D), inclusive, before, during or after the
pendency of any arbitration proceeding brought pursuant to this Guaranty.
Neither the exercise of self help remedies nor the institution or maintenance of
an action for foreclosure or provisional or ancillary remedies shall constitute
a waiver of the right of any party, including the claimant in any such action,
to arbitrate the merits of the Dispute occasioning resort to such remedies. No
provision in the Loan Documents regarding submission to jurisdiction and/or
venue in any court is intended or shall be construed to be in derogation of the
provisions in any Loan Document for arbitration of any Dispute.

      (d)   Conflicting Provisions for Dispute Resolution. If there is any
conflict between the terms, conditions and provisions of this Section and those
of any other provision or agreement for arbitration or dispute resolution, the
terms, conditions and provisions of this Section shall prevail as to any Dispute
arising out of or relating to (i) this Guaranty, (ii) any other Loan Document,
(iii) any related agreements or instruments, or (iv) the transaction
contemplated herein or therein (including any claim based on or arising from an
alleged personal injury or business tort). In any other situation, if the
resolution of a given Dispute is specifically governed by another provision or
agreement for arbitration or dispute resolution, the other provision or
agreement shall prevail with respect to said Dispute.

      (e)   Jury Trial Waiver in Arbitration. By agreeing to this Section, the
parties irrevocably and voluntarily waive any right they may have to a trial by
jury in respect of any Dispute.

      28.   Forum.

      Guarantor hereby irrevocably submits generally and unconditionally for
itself and in respect of its property to the jurisdiction of any state court or
any United States federal court sitting in the State specified in the governing
law section of this Guaranty and to the jurisdiction of any state court or any
United States federal court sitting in the state in which any of the Property is
located, over any Dispute. Guarantor hereby irrevocably waives, to the fullest
extent permitted by Law, any objection that Guarantor may now or hereafter have
to the laying of venue in any such court and any claim that any such court is an
inconvenient forum. Guarantor hereby agrees and consents that, in addition to
any methods of service of process provided for under applicable law, all service
of process in any such suit, action or proceeding in any state court or any
United States federal court sitting in the state specified in the governing law
section

                                       14



of this Guaranty may be made by certified or registered mail, return receipt
requested, directed to Guarantor at its address for notice set forth in this
Guaranty, or at a subsequent address of which Administrative Agent received
actual notice from Guarantor in accordance with the notice section of this
Guaranty, and service so made shall be complete five (5) days after the same
shall have been so mailed. Nothing herein shall affect the right of Lender to
serve process in any manner permitted by Law or limit the right of Lender to
bring proceedings against Guarantor in any other court or jurisdiction.

      29.   WAIVER OF JURY TRIAL.

      WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO ARBITRATE
ANY "DISPUTE" (FOR PURPOSES OF THIS SECTION, AS DEFINED ABOVE) AS SET FORTH IN
THIS GUARANTY, TO THE EXTENT ANY "DISPUTE" IS NOT SUBMITTED TO ARBITRATION OR IS
DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT ARBITRABLE
OR NOT REQUIRED TO BE ARBITRATED, GUARANTOR AND ADMINISTRATIVE AGENT, FOR ITSELF
AND LENDERS, WAIVE TRIAL BY JURY IN RESPECT OF ANY SUCH "DISPUTE" AND ANY ACTION
ON SUCH "DISPUTE." THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY
GUARANTOR AND ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS, AND GUARANTOR AND
ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS, HEREBY REPRESENT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO
THE LOAN DOCUMENTS. GUARANTOR AND ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS,
ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. GUARANTOR FURTHER REPRESENTS
AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.

                                       15



      30.   Waiver of Appraisal Rights. The laws of South Carolina provide that
in any real estate foreclosure proceeding a defendant against whom a personal
judgment is taken or asked may within thirty days after the sale of the
mortgaged property apply to the court for an order of appraisal. The statutory
appraisal value as approved by the court would be substituted for the high bid
and may decrease the amount of any deficiency owing in connection with the
transaction. THE GUARANTOR HEREBY WAIVES AND RELINQUISHES THE STATUTORY
APPRAISAL RIGHTS WHICH MEANS THE HIGH BID AT THE JUDICIAL FORECLOSURE SALE WILL
BE APPLIED TO THE DEBT REGARDLESS OF ANY APPRAISED VALUE OF THE MORTGAGED
PROPERTY.

      THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES-THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

      IN WITNESS WHEREOF, Guarantor duly executed this Guaranty under seal as of
the date first written above.

Address of Guarantor:                     GUARANTOR:
545 E. Carpenter Freeway, Suite 1300
Irving, Texas 75062-3933                  FELCOR LODGING LIMITED PARTNERSHIP, a
Fax No.: 972-444-4949                     Delaware limited partnership
                                          By: FelCor Lodging Trust Incorporated,
                                          its General Partner

                                          By:_____________________________(SEAL)
                                          Name:___________________________
                                          Title:__________________________

Address of Administrative Agent:
200 Meeting Street, Suite 104
Charleston, South Carolina 29401
Attention: Loan Administration Section
           Real Estate Banking Group
           Location Code SC1300-01-03
Fax No.: 843-720-2282

                                       16

EX-10.34.2

                                                                 EXHIBIT 10.34.2

                THIS GUARANTY IS SUBJECT TO ARBITRATION PURSUANT
           TO THE FEDERAL ARBITRATION ACT AND/OR SECTION 15-48-10 OF
               THE SOUTH CAROLINA CODE OF LAWS (1976), AS AMENDED

                               GUARANTY AGREEMENT

            This Guaranty Agreement (this "Guaranty") is made as of the 27th day
of April, 2005, by FelCor Lodging Limited Partnership, a Delaware limited
partnership ("Guarantor"), in favor of Bank of America, N.A., a national banking
association (together with its successors and assigns "Administrative Agent") on
behalf of the Lenders (as defined in the Loan Agreement (defined below)).

                             PRELIMINARY STATEMENTS

      Administrative Agent, Lenders, and Grande Palms, L.L.C. ("Borrower"), have
entered into, are entering into concurrently herewith, or contemplate entering
into, that certain Construction Loan Agreement dated of even date herewith
(herein called, as it may hereafter be modified, supplemented, restated,
extended, or renewed and in effect from time to time, the "Loan Agreement"),
which Loan Agreement sets forth the terms and conditions of a loan (the "Loan")
to Borrower for the construction of the Improvements on, and with respect to,
land located in Horry County, South Carolina, as more particularly described in
the Loan Agreement and identified therein as the Land.

      A condition precedent to Lenders' and Administrative Agent's obligation to
make the Loan to Borrower is Guarantor's execution and delivery to
Administrative Agent on behalf of the Lenders of this Guaranty.

      The Loan is, or will be, evidenced by those certain Promissory Notes
designated as "Promissory Note (Name of Lender)" of even date with the Loan
Agreement, executed by Borrower and payable to the order of particular Lenders
in the aggregate principal face amount of Sixty-Nine Million Eight Hundred
Thousand and No/100 Dollars ($69,800,000.00) (such notes, as each may hereafter
be renewed, extended, supplemented, increased or modified and in effect from
time to time, and all other notes given in substitution therefor, or in
modification, renewal, or extension thereof, in whole or in part, is herein
called, collectively, the "Note").

      Any capitalized term used and not defined in this Guaranty shall have the
meaning given to such term in the Loan Agreement. This Guaranty is one of the
Loan Documents described in the Loan Agreement.

                             STATEMENT OF AGREEMENTS

      For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and as a material inducement to Administrative Agent and
the Lenders to extend credit to Borrower, Guarantor hereby guarantees to
Administrative Agent and the Lenders the prompt payment of the Indebtedness
(collectively called the "Guaranteed Obligations"), this Guaranty being upon the
following terms and conditions:

                                       1



      1.    Guaranty of Payment. Guarantor hereby unconditionally and
irrevocably guarantees to Administrative Agent and the Lenders the punctual
payment when due, whether by lapse of time, by acceleration of maturity, or
otherwise, of principal, interest (including interest accruing after the
commencement of any bankruptcy or insolvency proceeding by or against Borrower,
whether or not allowed in such proceeding), fees, late charges, costs, expenses,
indemnification indebtedness, and other sums of money now or hereafter due and
owing, or which Borrower is obligated to pay, pursuant to (i) the terms of the
Note, the Loan Agreement, the Mortgage, the Environmental Agreement, Swap
Contract, any application, agreement, note or other document executed and
delivered in connection with any Letter of Credit, or any other Loan Documents
and any indemnifications contained in the Loan Documents, now or hereafter
existing, and (ii) all renewals, extensions, refinancings, modifications,
supplements or amendments of such indebtedness, or any of the Loan Documents, or
any part thereof (the indebtedness described in clauses (i) and (ii) above in
this Section 1 is herein collectively called the "Indebtedness"); provided such
renewals, extensions, financings, modifications, supplements or amendments are
made with Guarantor's written consent. This Guaranty covers the Indebtedness,
whether presently outstanding or arising subsequent to the date hereof,
including all amounts advanced by Administrative Agent in stages or
installments. The guaranty of Guarantor as set forth in this Section 1 is a
continuing guaranty of payment and not a guaranty of collection.

      2.    [Reserved.]

      3.    Primary Liability of Guarantor.

      (a)   This Guaranty is an absolute, irrevocable and unconditional guaranty
of payment. Guarantor shall be liable for the payment of the Guaranteed
Obligations as a primary obligor. This Guaranty shall be effective as a waiver
of, and Guarantor hereby expressly waives, any and all rights to which Guarantor
may otherwise have been entitled under any suretyship laws in effect from time
to time, including any right or privilege, whether existing under statute, at
law or in equity, to require Administrative Agent to take prior recourse or
proceedings against any collateral, security or Person (hereinafter defined)
whatsoever.

      (b)   Guarantor hereby agrees that in the event of a Default (as defined
in the Loan Agreement) by Borrower in payment of the Guaranteed Obligations, or
any part thereof, when such indebtedness becomes due, either by its terms or as
the result of the exercise of any power to accelerate, Guarantor shall, on
demand and without presentment, protest, notice of protest, further notice of
nonpayment or of dishonor, default or nonperformance, or notice of acceleration
or of intent to accelerate, or any other notice whatsoever, without any notice
having been given to Guarantor previous to such demand of the acceptance by
Administrative Agent of this Guaranty, and without any notice having been given
to Guarantor previous to such demand of the creating or incurring of such
indebtedness, all such notices being hereby waived by Guarantor, pay the amount
due thereon to Administrative Agent and pay all costs and expenses that may
arise in consequence of such Event of Default (including, without limitation,
all reasonable attorneys' fees and expenses, investigation costs, court costs,
and any and all other costs and expenses reasonably incurred by Administrative
Agent or the Lenders in connection with the collection and enforcement of the
Note or any other Loan Document), whether or not suit is filed thereon, or
whether at maturity or by acceleration, or whether before or after

                                       2



maturity, or whether in connection with bankruptcy, insolvency or appeal. It
shall not be necessary for Administrative Agent, in order to enforce such
payment by Guarantor, first to institute suit or pursue or exhaust any rights or
remedies against Borrower or others liable on such indebtedness or for such
performance, or to enforce any rights against any security that shall ever have
been given to secure such indebtedness or performance, or to join Borrower or
any others liable for the payment or performance of the Guaranteed Obligations
or any part thereof in any action to enforce this Guaranty, or to resort to any
other means of obtaining payment or performance of the Guaranteed Obligations;
provided, however, that nothing herein contained shall prevent Administrative
Agent from suing on the Note or foreclosing the Mortgage or from exercising any
other rights thereunder, and if such foreclosure or other remedy is availed of,
only the net proceeds therefrom, after deduction of all charges and expenses of
every kind and nature whatsoever, shall be applied in reduction of the amount
due on the Note and Mortgage, and Administrative Agent shall not be required to
institute or prosecute proceedings to recover any deficiency as a condition of
payment hereunder or enforcement hereof. At any sale of the Property or other
collateral given for the Indebtedness or any part thereof, whether by
foreclosure or otherwise, Administrative Agent may at its discretion purchase
all or any part of the Property or collateral so sold or offered for sale for
its own account and may, in payment of the amount bid therefor, deduct such
amount from the balance due it pursuant to the terms of the Note, Mortgage and
other Loan Documents.

      (c)   Suit may be brought or demand may be made against Borrower or
against the Guarantor or any other guarantor of the Guaranteed Obligations, or
against any one or more of them, separately or together, without impairing the
rights of Administrative Agent or the Lenders against any party hereto.

      4.    Certain Agreements and Waivers by Guarantor.

      (a)   Guarantor hereby agrees that neither Administrative Agent's nor
Lenders' rights or remedies nor Guarantor's obligations under the terms of this
Guaranty shall be released, diminished, impaired, reduced or affected by any one
or more of the following events, actions, facts, or circumstances, and the
liability of Guarantor under this Guaranty shall be absolute and unconditional
irrespective of:

            (i)     any limitation of liability or recourse in any other Loan
Document or arising under any law;

            (ii)    any claim or defense that this Guaranty was made without
consideration or is not supported by adequate consideration;

            (iii)   the taking or accepting of any other security or guaranty
for, or right of recourse with respect to, any or all of the Guaranteed
Obligations;

            (iv)    any homestead exemption or any other exemption under
applicable law;

            (v)     any release, surrender, abandonment, exchange, alteration,
sale or other disposition, subordination, deterioration, waste, failure to
protect or preserve, impairment, or loss of, or any failure to create or perfect
any lien or security interest with respect to, or any other dealings with, any
collateral or security at any time existing or purported, believed or expected
to

                                       3



exist in connection with any or all of the Guaranteed Obligations, including any
impairment of Guarantor's recourse against any Person or collateral;

            (vi)    except as expressly provided for herein, any partial release
of the liability of Guarantor hereunder (whether by operation of law or
otherwise), or if one or more other guaranties are now or hereafter obtained by
Administrative Agent covering all or any part of the Guaranteed Obligations, any
complete or partial release of any one or more of such guarantors under any such
other guaranty, or any complete or partial release of Borrower or any other
party liable, directly or indirectly, for the payment of any or all of the
Guaranteed Obligations;

            (vii)   the insolvency, bankruptcy, dissolution, liquidation,
termination, receivership, reorganization, merger, consolidation, change of
form, structure or ownership, sale of all assets, or lack of corporate,
partnership or other power of Borrower or any other party at any time liable for
the payment or performance of any or all of the Guaranteed Obligations;

            (viii)  with consent of Guarantor: any renewal, extension,
modification, supplement, subordination or rearrangement of the terms of any or
all of the Guaranteed Obligations and/or any of the Loan Documents, including,
without limitation, material alterations of the terms of payment (including
changes in maturity date(s) and interest rate(s)) or performance (including
changes in the Plans and other terms or aspects of construction of the
Improvements) or any other terms thereof, or any waiver, termination, or release
of, or consent to departure from, any of the Loan Documents or any other
guaranty of any or all of the Guaranteed Obligations, or any adjustment,
indulgence, forbearance, or compromise that may be granted from time to time by
Administrative Agent on behalf of the Lenders to Borrower, Guarantor, and/or any
other Person at any time liable for the payment or performance of any or all of
the Guaranteed Obligations;

            (ix)    any neglect, lack of diligence, delay, omission, failure, or
refusal of Administrative Agent to take or prosecute (or in taking or
prosecuting) any action for the collection or enforcement of any of the
Guaranteed Obligations, or to foreclose or take or prosecute any action to
foreclose (or in foreclosing or taking or prosecuting any action to foreclose)
upon any security therefor, or to exercise (or in exercising) any other right or
power with respect to any security therefor, or to take or prosecute (or in
taking or prosecuting) any action in connection with any Loan Document, or any
failure to sell or otherwise dispose of in a commercially reasonable manner any
collateral securing any or all of the Guaranteed Obligations;

            (x)     except as expressly provided for herein, any failure of
Administrative Agent to notify Guarantor of any creation, renewal, extension,
rearrangement, modification, supplement, subordination, or assignment of the
Guaranteed Obligations or any part thereof, or of any Loan Document, or of any
release of or change in any security, or of any other action taken or refrained
from being taken by Administrative Agent against Borrower or any security or
other recourse, or of any new agreement between Administrative Agent and
Borrower, it being understood that Administrative Agent shall not be required
(other than as expressly provided herein) to give Guarantor any notice (other
than as expressly provided herein) of any kind under any circumstances with
respect to or in connection with the Guaranteed Obligations, any and all rights
to notice Guarantor may have otherwise had being hereby waived by Guarantor, and
the

                                       4



Guarantor shall be responsible for obtaining for itself information regarding
the Borrower, including, but not limited to, any changes in the business or
financial condition of the Borrower, and the Guarantor acknowledges and agrees
that the Administrative Agent shall have no duty to notify the Guarantor of any
information which the Administrative Agent or Lenders may have concerning the
Borrower.

            (xi)    if for any reason Administrative Agent is required to refund
any payment by Borrower to any other party liable for the payment or performance
of any or all of the Guaranteed Obligations or pay the amount thereof to someone
else;

            (xii)   the making of advances by Administrative Agent on behalf of
the Lenders to protect its interest in the Property, preserve the value of the
Property or for the purpose of performing any term or covenant contained in any
of the Loan Documents;

            (xiii)  the existence of any claim, counterclaim, setoff or other
right that Guarantor may at any time have against Borrower, Lenders,
Administrative Agent, or any other Person, whether or not arising in connection
with this Guaranty, the Note, the Loan Agreement, or any other Loan Document;

            (xiv)   the unenforceability of all or any part of the Guaranteed
Obligations against Borrower, whether because the Guaranteed Obligations exceed
the amount permitted by law or violate any usury law, or because the act of
creating the Guaranteed Obligations, or any part thereof, is ultra vires, or
because the officers or Persons creating the Guaranteed Obligations acted in
excess of their authority, or because of a lack of validity or enforceability of
or defect or deficiency in any of the Loan Documents, or because Borrower has
any valid defense, claim or offset with respect thereto, or because Borrower's
obligation ceases to exist by operation of law, or because of any other reason
or circumstance, it being agreed that Guarantor shall remain liable hereon
regardless of whether Borrower or any other Person be found not liable on the
Guaranteed Obligations, or any part thereof, for any reason (and regardless of
any joinder of Borrower or any other party in any action to obtain payment or
performance of any or all of the Guaranteed Obligations);

            (xv)    any order, ruling or plan of reorganization emanating from
proceedings under Title 11 of the United States Code with respect to Borrower or
any other Person, including any extension, reduction, composition, or other
alteration of the Guaranteed Obligations, whether or not consented to by
Administrative Agent; or

            (xvi)   any other condition, event, omission, action or inaction
that would in the absence of this paragraph result in the release or discharge
of the Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty or any other agreement;

            (xvii)  [Reserved];

            (xviii) Administrative Agent's enforcement or forbearance from
enforcement of the Guaranteed Obligations on a net or gross basis; or

                                       5



            (xix)   any invalidity, irregularity or unenforceability in whole or
in part (including with respect to any netting provision) of any Interest Rate
Protection Agreement or any confirmation, instrument or agreement required
thereunder or related thereto, or any transaction entered into thereunder, or
any limitation on the liability of Borrower thereunder or any limitation on the
method or terms of payment thereunder which may now or hereafter be caused or
imposed in any manner whatsoever.

      (b)   In the event any payment by Borrower or any other Person to
Administrative Agent or the Lenders is held to constitute a preference,
fraudulent transfer or other voidable payment under any bankruptcy, insolvency
or similar law, or if for any other reason Administrative Agent or Lenders are
required to refund such payment or pay the amount thereof to any other party,
such payment by Borrower or any other party to Administrative Agent or Lenders
shall not constitute a release of Guarantor from any liability hereunder, and
this Guaranty shall continue to be effective or shall be reinstated
(notwithstanding any prior release, surrender or discharge by Administrative
Agent of this Guaranty or of Guarantor), as the case may be, with respect to,
and this Guaranty shall apply to, any and all amounts so refunded by
Administrative Agent or Lenders or paid by Administrative Agent or Lenders to
another Person (which amounts shall constitute part of the Guaranteed
Obligations), and any interest paid by Administrative Agent or Lenders and any
attorneys' fees, costs and expenses paid or incurred by Administrative Agent or
Lenders in connection with any such event. It is the intent of Guarantor and
Administrative Agent that the obligations and liabilities of Guarantor hereunder
are absolute and unconditional under any and all circumstances and that until
the Guaranteed Obligations are fully and finally paid, and not subject to refund
or disgorgement, the obligations and liabilities of Guarantor hereunder shall
not be discharged or released, in whole or in part, by any act or occurrence
that might, but for the provisions of this Guaranty, be deemed a legal or
equitable discharge or release of a guarantor.

      (c)   If acceleration of the time for payment of any amount payable by
Borrower under the Note, the Loan Agreement, or any other Loan Document is
stayed or delayed by any law or tribunal, all such amounts shall nonetheless be
payable by Guarantor on demand by Administrative Agent.

      (d)   Guarantor agrees that neither the Guarantor nor anyone claiming
through or under the Guarantor shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension or redemption laws now
or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of the Mortgage or the absolute sale of the Property or the final
and absolute putting into possession thereof, immediately after such sale, of
the purchasers thereat, and the Guarantor, for themselves and all who may at any
time claim through or under any of them, hereby waive the benefit of all such
laws and any and all rights to have the assets comprising the Property
marshalled upon any foreclosure of the Mortgage.

      5.    Subordination. If, for any reason whatsoever, Borrower is now or
hereafter becomes indebted to Guarantor:

      (a)   such indebtedness and all interest thereon and all liens, security
interests and rights now or hereafter existing with respect to property of
Borrower securing such indebtedness shall, at all times, be subordinate in all
respects to the Guaranteed Obligations and to all liens,

                                       6



security interests and rights now or hereafter existing to secure the Guaranteed
Obligations. All promissory notes or other evidences of such indebtedness of
Borrower, now or hereafter held by Guarantor, of obligations of Borrower to
Guarantor shall contain a specific written notice thereon that the indebtedness
evidenced thereby is subordinated under and is subject to the terms of this
Guaranty; and

      (b)   Guarantor shall not be entitled to enforce or receive payment,
directly or indirectly, of any such indebtedness of Borrower to Guarantor until
the Guaranteed Obligations have been fully and finally paid except for the
project management fees to be paid by Borrower to the Guarantor under the Budget
or other amounts specifically identified in the Budget.

      6.    Other Liability of Guarantor or Borrower. If Guarantor is or becomes
liable, by endorsement or otherwise, for any indebtedness owing by Borrower to
Lenders or Administrative Agent other than under this Guaranty, such liability
shall not be in any manner impaired or affected hereby, and the rights of
Lenders and Administrative Agent hereunder shall be cumulative of any and all
other rights that Lenders and Administrative Agent may have against Guarantor.
If Borrower is or becomes indebted to Lenders and Administrative Agent for any
indebtedness other than or in excess of the Indebtedness for which Guarantor is
liable under this Guaranty, any payment received or recovery realized upon any
indebtedness of Borrower to Lenders or Administrative Agent may, except to the
extent paid by Guarantor on the Indebtedness or specifically required by law or
agreement of Administrative Agent to be applied to the Indebtedness, in
Administrative Agent's sole discretion, be applied upon indebtedness of Borrower
to Lenders or Administrative Agent other than the Indebtedness. This Guaranty is
independent of (and shall not be limited by) any other guaranty now existing or
hereafter given. Further, Guarantor's liability under this Guaranty is
in.addition to any and all other liability Guarantor may have in any other
capacity, including without limitation, its capacity as a general partner.

      7.    Administrative Agent Assigns. This Guaranty is for the benefit of
Administrative Agent for the benefit of the Lenders and Administrative Agent's
successors and assigns, and in the event of an assignment of the Guaranteed
Obligations, or any part thereof, the rights and benefits hereunder, to the
extent applicable to the Guaranteed Obligations so assigned, may be transferred
with such Guaranteed Obligations. Guarantor waives notice of any transfer or
assignment of the Guaranteed Obligations, or any part thereof, and agrees that
failure to give notice of any such transfer or assignment will not affect the
liabilities of Guarantor hereunder.

      8.    Binding Effect. This Guaranty is binding not only on Guarantor, but
also on Guarantor's successors and assigns.

      9.    Governing Law; Forum; Consent to Jurisdiction. This Guaranty is an
agreement executed under seal. The validity, enforcement, and interpretation of
this Guaranty, shall for all purposes be governed by and construed in accordance
with the laws of the State of South Carolina and applicable United States
federal law, and is intended to be performed in accordance with, and only to the
extent permitted by, such laws. If any Guarantor is a corporation, the
designation "(SEAL)" on this Guaranty shall be effective as the affixing of such
Guarantor's corporate seal physically to this Guaranty. All obligations of
Guarantor hereunder are payable and performable at the place or places where the
Guaranteed Obligations are payable and

                                       7



performable. Guarantor hereby irrevocably submits generally and unconditionally
for Guarantor and in respect of Guarantor's property to the nonexclusive
jurisdiction of any state court, or any United States federal court, sitting in
the state specified in the first sentence of this Section and to the
jurisdiction of any state or United States federal court sitting in the state in
which any of the Land is located, over any suit, action or proceeding arising
out of or relating to this Guaranty or the Guaranteed Obligations. Guarantor
hereby irrevocably waives, to the fullest extent permitted by law, any objection
that Guarantor may now or hereafter have to the laying of venue in any such
court and any claim that any such court is an inconvenient forum. Final judgment
in any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon Guarantor and may be enforced in any court in which
Guarantor is subject to jurisdiction. Guarantor hereby agrees and consents that,
in addition to any methods of service of process provided for under applicable
law, all service of process in any such suit, action or proceeding in any state
court, or any United States federal court, sitting in the state specified in the
first sentence of this Section may be made by certified or registered mail,
return receipt requested, directed to Guarantor at the address set forth at the
end of this Guaranty, or at a subsequent address of which Administrative Agent
received actual notice from Guarantor in accordance with the notice provisions
hereof, and service so made shall be complete five (5) days after the same shall
have been so mailed. Nothing herein shall affect the right of Administrative
Agent to serve process in any manner permitted by law or limit the right of
Administrative Agent to bring proceedings against Guarantor in any other court
or jurisdiction. The authority and power to appear for and enter judgment
against the Guarantor shall not be exhausted by one or more exercises thereof or
by any imperfect exercise thereof and shall not be extinguished by any judgment
entered pursuant thereto. Such authority may be exercised on one or more
occasions or from time to time in the same or different jurisdiction as often as
the Administrative Agent shall deem necessary and desirable.

      10.   Invalidity of Certain Provisions. If any provision of this Guaranty
or the application thereof to any Person or circumstance shall, for any reason
and to any extent, be declared to be invalid or unenforceable, neither the
remaining provisions of this Guaranty nor the application of such provision to
any other Person or circumstance shall be affected thereby, and the remaining
provisions of this Guaranty, or the applicability of such provision to other
Persons or circumstances, as applicable, shall remain in effect and be
enforceable to the maximum extent permitted by applicable law.

      11.   Attorneys' Fees and Costs of Collection. Guarantor shall pay on
demand all attorneys' fees and all other costs and expenses incurred by Lenders
or Administrative Agent in the enforcement of or preservation of Lenders' or
Administrative Agent's rights under this Guaranty including, without limitation,
all attorneys' fees and expenses, investigation costs, and all court costs,
whether or not suit is filed herein, or whether at maturity or by acceleration,
or whether before or after maturity, or whether in connection with bankruptcy,
insolvency or appeal. Guarantor agrees to pay interest on any expenses or other
sums due to Administrative Agent under this Section 11 that are not paid when
due, at a rate per annum equal to the interest rate provided for in the Note.
Guarantor's obligations and liabilities under this Section 11 shall survive any
payment or discharge in full of the Guaranteed Obligations.

                                       8



      12.   Payments. All sums payable under this Guaranty shall be paid in
lawful money of the United States of America that at the time of payment is
legal tender for the payment of public and private debts.

      13.   Controlling Agreement. It is not the intention of Administrative
Agent or Guarantor to obligate Guarantor to pay interest in excess of that
lawfully permitted to be paid by Guarantor under applicable law. Should it be
determined that any portion of the Guaranteed Obligations or any other amount
payable by Guarantor under this Guaranty constitutes interest in excess of the
maximum amount of interest that Guarantor, in Guarantor's capacity as guarantor,
may lawfully be required to pay under applicable law, the obligation of
Guarantor to pay such interest shall automatically be limited to the payment
thereof in the maximum amount so permitted under applicable law. The provisions
of this Section 13 shall override and control all other provisions of this
Guaranty and of any other agreement between Guarantor and Administrative Agent.

      14.   Representations, Warranties, and Covenants of Guarantor. Guarantor
hereby represents, warrants, and covenants that (a) Guarantor has a financial
interest in the Borrower, is (directly or indirectly) a member of Borrower, and
will derive a material and substantial benefit, directly or indirectly, from the
making of the Loan to Borrower and from the making of this Guaranty by
Guarantor; (b) this Guaranty is duly authorized and valid, and is binding upon
and enforceable against Guarantor; (c) Guarantor is not, and the execution,
delivery and performance by Guarantor of this Guaranty will not cause Guarantor
to be, in violation of or in default with respect to any law or in default under
any agreement or restriction by which Guarantor is bound or affected; (d)
Guarantor is duly organized, validly existing, and in good standing under the
laws of the state of its organization and under such laws, and has full power
and authority to enter into and perform this Guaranty; (e) the Guarantor will
indemnify the Lenders and Administrative Agent from any loss, cost or expense as
a result of any representation or warranty of the Guarantor being false,
incorrect, incomplete or misleading in any material respect; (f) [reserved]; (g)
all financial statements and information heretofore furnished to Administrative
Agent by Guarantor do, and all financial statements and information hereafter
furnished to Administrative Agent by Guarantor will, present the financial
condition of Guarantor as of their dates and the results of Guarantor's
operations for the periods therein specified, and, since the date of the most
recent financial statements of Guarantor heretofore furnished to Administrative
Agent, no material adverse change has occurred in the financial condition of
Guarantor; (h) after giving effect to this Guaranty, Guarantor is solvent, is
not engaged or about to engage in business or a transaction for which the
property of Guarantor is an unreasonably small capital, and does not intend to
incur or believe that it will incur debts that will be beyond its ability to pay
as such debts mature; (i) Administrative Agent and Lenders have no duty at any
time to investigate or inform Guarantor of the financial or business condition
or affairs of Borrower or any change therein, and Guarantor will keep fully
appraised of Borrower's financial and business condition; (j) Guarantor
acknowledges and agrees that Guarantor may be required to pay the Guaranteed
Obligations in full without assistance or support from the Borrower or any other
Person; and (k) Guarantor has read and fully understands the provisions
contained in the Note, the Loan Agreement, the Mortgage, the Environmental
Agreement, and the other Loan Documents. Guarantor's representations, warranties
and covenants are a material inducement to Lenders and Administrative Agent to
enter into the other Loan Documents and shall survive the execution

                                       9



hereof and any bankruptcy, foreclosure, transfer of security or other event
affecting Borrower, Guarantor, any other party, or any security for all or any
part of the Guaranteed Obligations.

      15.   Notices. All notices, requests, consents, demands and other
communications required or which any party desires to give hereunder or under
any other Loan Document shall be in writing and, unless otherwise specifically
provided in such other Loan Document, shall be deemed sufficiently given or
furnished if delivered by personal delivery, by nationally recognized overnight
courier service, or by registered or certified United States mail, postage
prepaid, addressed to the party to whom directed at the addresses specified in
this Guaranty (unless changed by similar notice in writing given by the
particular party whose address is to be changed) or by telegram, telex, or
facsimile. Any such notice or communication shall be deemed to have been given
either at the time of personal delivery or, in the case of courier or mail, as
of the date of first attempted delivery at the address and in the manner
provided herein, or, in the case of telegram, telex or facsimile, upon receipt;
provided that, service of a notice required by any applicable statute shall be
considered complete when the requirements of that statute are met.
Notwithstanding the foregoing, no notice of change of address shall be effective
except upon actual receipt. This section shall not be construed in any way to
affect or impair any waiver of notice or demand provided in this Guaranty or in
any Loan Document or to require giving of notice or demand to or upon any person
in any situation or for any reason.

      16.   Cumulative Rights. The exercise by Administrative Agent of any right
or remedy hereunder or under any other Loan Document, or at law or in equity,
shall not preclude the concurrent or subsequent exercise of any other right or
remedy. Administrative Agent and the Lenders shall have all rights, remedies and
recourses afforded to Administrative Agent and the Lenders by reason of this
Guaranty or any other Loan Document or by law or equity or otherwise, and the
same (a) shall be cumulative and concurrent, (b) may be pursued separately,
successively or concurrently against Guarantor or others obligated for the
Guaranteed Obligations, or any part thereof, or against any one or more of them,
or against any security or otherwise, at the sole discretion of Administrative
Agent, (c) may be exercised as often as occasion therefor shall arise, it being
agreed by Guarantor that the exercise of, discontinuance of the exercise of or
failure to exercise any of such rights, remedies, or recourses shall in no event
be construed as a waiver or release thereof or of any other right, remedy, or
recourse, and (d) are intended to be, and shall be, nonexclusive. No waiver of
any default on the part of Guarantor or of any breach of any of the provisions
of this Guaranty or of any other document shall be considered a waiver of any
other or subsequent default or breach, and no delay or omission in exercising or
enforcing the rights and powers granted herein or in any other document shall be
construed as a waiver of such rights and powers, and no exercise or enforcement
of any rights or powers hereunder or under any other document shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time. The granting of any consent, approval or waiver by
Administrative Agent shall be limited to the specific instance and purpose
therefor and shall not constitute consent or approval in any other instance or
for any other purpose. No notice to or demand on Guarantor in any case shall of
itself entitle Guarantor to any other or further notice or demand in similar or
other circumstances. No provision of this Guaranty or any right, remedy or
recourse of Administrative Agent or Lenders with respect hereto, or any default
or breach, can be waived, nor can this Guaranty or Guarantor be released or
discharged in any way or to any extent, except specifically in each case by a
writing intended

                                       10



for that purpose (and which refers specifically to this Guaranty) executed, and
delivered to Guarantor, by Administrative Agent on behalf of the Lenders.

      17.   Term of Guaranty. This Guaranty shall continue in effect until all
the Guaranteed Obligations are fully and finally paid and discharged.

      18.   Financial Statements. As used in this Section, "Financial
Statements" means a consolidated balance sheet, a consolidated income statement,
and a consolidated statement of cash flow. Guarantor shall provide or cause to
be provided to Administrative Agent the following: Financial Statements of
Guarantor, for each fiscal year as soon as reasonably practicable and in any
event within one hundred twenty (120) calendar days after the close of each
fiscal year. All fiscal year end Financial Statements shall be audited and
certified without any qualification or exception not acceptable to
Administrative Agent, by independent certified public accountants engaged by
Guarantor from time to time and shall contain all reports and disclosures
required by generally accepted accounting principles for a fair presentation.

Acceptance of any financial statement by Administrative Agent, whether or not in
the form prescribed herein, shall be relied upon by Administrative Agent in the
administration, enforcement, and extension of the Guaranteed Obligations.

      19.   Disclosure of Information. Administrative Agent and Lenders may sell
or offer to sell the Loan or interests in the Loan to one or more assignees or
participants and may disclose to any such assignee or participant or prospective
assignee or participant, to Administrative Agent's affiliates, including without
limitation Banc of America Securities LLC, to any regulatory body having
jurisdiction over Lenders or Administrative Agent and to any other parties as
necessary or appropriate in Administrative Agent's reasonable judgment, any
information Administrative Agent now has or hereafter obtains pertaining to the
Guaranteed Obligations, this Guaranty, or Guarantor, including, without
limitation, information regarding any security for the Guaranteed Obligations
or. for this Guaranty, credit or other information on Guarantor, Borrower,
and/or any other party liable, directly or indirectly, for any part of the
Guaranteed Obligations.

      20.   Subrogation. Notwithstanding anything to the contrary contained
herein, Guarantor shall not exercise any right of subrogation in or under any of
the Loan Documents or to participate in any way therein, or in any right, title
or interest in and to any security or right of recourse for the Indebtedness or
any right to reimbursement, exoneration, contribution, indemnification or any
similar rights, until the Indebtedness has been fully and finally paid. This
waiver is given to induce Administrative Agent and the Lenders to make the Loan
to Borrower.

      21.   [Reserved].

      22.   No Fiduciary Relationship. The relationship between the Lenders',
Administrative Agent and Guarantor is solely that of lender and guarantor.
Administrative Agent and the Lenders have no fiduciary or other special
relationship with or duty to Guarantor and none is created hereby or may be
inferred from any course of dealing or act or omission of Administrative Agent
and the Lenders.

      23.   Interpretation. The term "Administrative Agent" shall be deemed to
include any subsequent holder(s) of the Note. Whenever the context of any
provisions hereof shall require it,

                                       11



words in the singular shall include the plural, words in the plural shall
include the singular, and pronouns of any gender shall include the other
genders. Captions and headings in the Loan Documents are for convenience only
and shall not affect the construction of the Loan Documents. All references in
this Guaranty to Schedules, Articles, Sections, Subsections, paragraphs and
subparagraphs refer to the respective subdivisions of this Guaranty, unless such
reference specifically identifies another document. The terms "herein",
"hereof', "hereto", "hereunder" and similar terms refer to this Guaranty and not
to any particular Section or subsection of this Guaranty. The terms "include"
and "including" shall be interpreted as if followed by the words "without
limitation". All references in this Guaranty to sums denominated in dollars or
with the symbol "$" refer to the lawful currency of the United States of
America, unless such reference specifically identifies another currency. For
purposes of this Guaranty, "Person" or "Persons" shall include firms,
associations, partnerships (including limited partnerships), joint ventures,
trusts, corporations, limited liability companies, and other legal entities,
including governmental bodies, agencies, or instrumentalities, as well as
natural persons.

      24.   Time of Essence. Time shall be of the essence in this Guaranty with
respect to all of Guarantor's obligations hereunder.

      25.   Counterparts. This Guaranty may be executed in multiple
counterparts, each of which, for all purposes, shall be deemed an original, and
all of which together shall constitute one and the same agreement.

      26.   Entire Agreement. This Guaranty embodies the entire agreement
between Administrative Agent on behalf of the Lenders and Guarantor with respect
to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty
supersedes all prior agreements and understandings, if any, with respect to the
guaranty by Guarantor of the Guaranteed Obligations. No condition or conditions
precedent to the effectiveness of this Guaranty exist. This Guaranty shall be
effective upon execution by Guarantor and delivery to Administrative Agent. This
Guaranty may not be modified, amended or superseded except in a writing signed
by Administrative Agent and Guarantor referencing this Guaranty by its date and
specifically identifying the portions hereof that are to be modified, amended or
superseded.

      27.   Dispute Resolution.

      (a)   Arbitration. Except to the extent expressly provided below, any
controversy, claim or dispute between or among the parties hereto, including any
such controversy, claim or dispute arising out of or relating to (i) this
Guaranty, (ii) any other Loan Document, (iii) any related agreements or
instruments, or (iv) the transaction contemplated herein or therein (including
any claim based on or arising from an alleged personal injury or business tort)
(collectively, a "Dispute"), shall, upon the request of either party, be
determined by binding arbitration in accordance with the Federal Arbitration
Act, Title 9, United States Code (or if not applicable, the applicable state
law), the applicable rules for arbitration of disputes of JAMS LLC, a Delaware
limited liability company, or any successor thereof ("JAMS"), and the "Special
Rules" set forth below. In the event of any inconsistency, the Special Rules
shall control. The filing of a court action is not intended to constitute a
waiver of the right of Guarantor or Administrative Agent or any Lender,
including the suing party, thereafter to require submittal of the Dispute to
arbitration. Any party to this Guaranty may bring an action, including a summary
or expedited

                                       12



proceeding, to compel arbitration of any Dispute in any court having
jurisdiction over such action. For the purposes of this dispute resolution
provision only, the terms "party" and "parties" shall include any parent
corporation, subsidiary or affiliate of Administrative Agent or any Lender
involved in the servicing, management or administration of any obligation
described in or evidenced by this Guaranty, together with the officers,
employees, successors and assigns of each of the foregoing.

      (b)   Special Rules.

            (i)   The arbitration shall be conducted in any U.S. state where
      real or tangible personal property collateral is located, or if there is
      no such collateral in the City and County where Administrative Agent or
      any Lender is located pursuant to its address for notice purposes in this
      Guaranty.

            (ii)  The arbitration shall be administered by JAMS, who will
      appoint an arbitrator; if JAMS is unable to administer or legally
      precluded from administering the arbitration, then the American
      Arbitration Association will serve. All Disputes shall be determined by
      one arbitrator; however, if the amount in controversy in a Dispute exceeds
      Five Million Dollars ($5,000,000), upon the request of any party, the
      Dispute shall be decided by three arbitrators (for purposes of this
      Guaranty, referred to collectively as the "arbitrator").

            (iii) All arbitration hearings will be commenced within ninety (90)
      days of the demand for arbitration and completed within ninety (90) days
      from the date of commencement; provided, however, that upon a showing of
      good cause, the arbitrator shall be permitted to extend the commencement
      of such hearing for up to an additional sixty (60) days.

            (iv)  The judgment and the award, if any, of the arbitrator shall be
      issued with thirty (30) days of the close of the hearing. The arbitrator
      shall provide a concise written statement setting forth the reasons for
      the judgment and for the award, if any. The arbitration award, if any, may
      be submitted to any court having jurisdiction to be confirmed and
      enforced, and such confirmation and enforcement shall not be subject to
      arbitration.

            (v)   The arbitrator will have the authority to decide whether any
      Dispute is barred by the statute of limitations and, if so, to dismiss the
      arbitration on that basis. For purposes of the application of the statute
      of limitations, the service on JAMS under applicable JAMS rules of a
      notice of Disputes is the equivalent of the filing of a lawsuit.

            (vi)  Any dispute concerning this arbitration provision, including
      any such dispute as to the validity or enforceability of this provision,
      or whether a Dispute is arbitrable, shall be determined by the arbitrator.

            (vii) The arbitrator shall have the power to award legal fees and
      costs pursuant to the terms of this Guaranty.

                                       13



      (c)   Reservations of Rights. Nothing in this Guaranty shall be deemed to
(i) limit the applicability of any otherwise applicable statutes of limitation
and any waivers contained in this Guaranty, or (ii) apply to or limit the right
of Administrative Agent or any Lender (A) to exercise self help remedies such as
(but not limited to) setoff, or (B) to foreclose judicially or nonjudicially
against any real or personal property collateral, or to exercise judicial or
nonjudicial power of sale rights, (C) to obtain from a court provisional or
ancillary remedies such as (but not limited to) injunctive relief, writ of
possession, prejudgment attachment, or the appointment of a receiver, or (D) to
pursue rights against a party to this Guaranty in a third-party proceeding in
any action brought against Lender in a state, federal or international court,
tribunal or hearing body (including actions in specialty courts, such as
bankruptcy and patent courts). Administrative Agent may exercise the rights set
forth in clauses (A) through (D), inclusive, before, during or after the
pendency of any arbitration proceeding brought pursuant to this Guaranty.
Neither the exercise of self help remedies nor the institution or maintenance of
an action for foreclosure or provisional or ancillary remedies shall constitute
a waiver of the right of any party, including the claimant in any such action,
to arbitrate the merits of the Dispute occasioning resort to such remedies. No
provision in the Loan Documents regarding submission to jurisdiction and/or
venue in any court is intended or shall be construed to be in derogation of the
provisions in any Loan Document for arbitration of any Dispute.

      (d)   Conflicting Provisions for Dispute Resolution. If there is any
conflict between the terms, conditions and provisions of this Section and those
of any other provision or agreement for arbitration or dispute resolution, the
terms, conditions and provisions of this Section shall prevail as to any Dispute
arising out of or relating to (i) this Guaranty, (ii) any other Loan Document,
(iii) any related agreements or instruments, or (iv) the transaction
contemplated herein or therein (including any claim based on or arising from an
alleged personal injury or business tort). In any other situation, if the
resolution of a given Dispute is specifically governed by another provision or
agreement for arbitration or dispute resolution, the other provision or
agreement shall prevail with respect to said Dispute.

      (e)   Jury Trial Waiver in Arbitration. By agreeing to this Section, the
parties irrevocably and voluntarily waive any right they may have to a trial by
jury in respect of any Dispute.

      28.   Forum.

      Guarantor hereby irrevocably submits generally and unconditionally for
itself and in respect of its property to the jurisdiction of any state court or
any United States federal court sitting in the State specified in the governing
law section of this Guaranty and to the jurisdiction of any state court or any
United States federal court sitting in the state in which any of the Property is
located, over any Dispute. Guarantor hereby irrevocably waives, to the fullest
extent permitted by Law, any objection that Guarantor may now or hereafter have
to the laying of venue in any such court and any claim that any such court is an
inconvenient forum. Guarantor hereby agrees and consents that, in addition to
any methods of service of process provided for under applicable law, all service
of process in any such suit, action or proceeding in any state court or any
United States federal court sitting in the state specified in the governing law
section

                                       14


of this Guaranty may be made by certified or registered mail, return receipt
requested, directed to Guarantor at its address for notice set forth in this
Guaranty, or at a subsequent address of which Administrative Agent received
actual notice from Guarantor in accordance with the notice section of this
Guaranty, and service so made shall be complete five (5) days after the same
shall have been so mailed. Nothing herein shall affect the right of Lender to
serve process in any manner permitted by Law or limit the right of Lender to
bring proceedings against Guarantor in any other court or jurisdiction.

      29. WAIVER OF JURY TRIAL.

      WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO ARBITRATE
ANY "DISPUTE" (FOR PURPOSES OF THIS SECTION, AS DEFINED ABOVE) AS SET FORTH IN
THIS GUARANTY, TO THE EXTENT ANY "DISPUTE" IS NOT SUBMITTED TO ARBITRATION OR IS
DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT ARBITRABLE
OR NOT REQUIRED TO BE ARBITRATED, GUARANTOR AND ADMINISTRATIVE AGENT, FOR ITSELF
AND LENDERS, WAIVE TRIAL BY JURY IN RESPECT OF ANY SUCH "DISPUTE" AND ANY ACTION
ON SUCH "DISPUTE." THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY
GUARANTOR AND ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS, AND GUARANTOR AND
ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS, HEREBY REPRESENT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO
THE LOAN DOCUMENTS. GUARANTOR AND ADMINISTRATIVE AGENT, FOR ITSELF AND LENDERS,
ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. GUARANTOR FURTHER REPRESENTS
AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.

                                       15


      30. Waiver of Appraisal Rights. The laws of South Carolina provide that in
any real estate foreclosure proceeding a defendant against whom a personal
judgment is taken or asked may within thirty days after the sale of the
mortgaged property apply to the court for an order of appraisal. The statutory
appraisal value as approved by the court would be substituted for the high bid
and may decrease the amount of any deficiency owing in connection with the
transaction. THE GUARANTOR HEREBY WAIVES AND RELINQUISHES THE STATUTORY
APPRAISAL RIGHTS WHICH MEANS THE HIGH BID AT THE JUDICIAL FORECLOSURE SALE WILL
BE APPLIED TO THE DEBT REGARDLESS OF ANY APPRAISED VALUE OF THE MORTGAGED
PROPERTY.

      THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES

      IN WITNESS WHEREOF, Guarantor duly executed this Guaranty under seal as of
the date first written above.

Address of Guarantor:                 GUARANTOR:

                                      FELCOR LODGING LIMITED PARTNERSHIP, a
                                      Delaware limited partnership

                                      By: FelCor Lodging Trust Incorporated, its
                                      General Partner

545 E.Carpenter Freeway, Suite 1300     By: /s/ Charles N. Nye
Irving, Texas 75062-3933                    ------------------- (SEAL)
Fax No.: 972-444-4949                   Name: CHARLES N. NYE
Attn: General Counsel                   Title : VICE PRESIDENT

Address of Administrative Agent:
200 Meeting Street, Suite 104
Charleston, South Carolina 29401
Attention: Loan Administration Section
           Real Estate Banking Group
           Location Code SC1300-01-03
Fax No.: 843-720-2282

                                       16

EX-10.34.3

                                                                 EXHIBIT 10.34.3

                                PROMISSORY NOTE
                                (Name of Lender)

$_____________________.00                                         April 27, 2005

FOR VALUE RECEIVED, GRANDE PALMS, L.L.C., a Delaware limited liability company
("Borrower," whether one or more) hereby promises to pay to the order of
________________________________(one of the "Lenders") under that certain Loan
Agreement (defined below) among Borrower, Bank of America, N.A., a national
banking association (together with any and all of its successors and assigns,
the "Administrative Agent") as agent for the benefit of the Lenders from time to
time a party to that certain Construction Loan Agreement (the "Loan Agreement")
dated of even date herewith, without offset, in immediately available funds in
lawful money of the United States of America, at the Administrative Agent's
Office as defined in the Loan Agreement, the principal sum of
_________________________________________________and NO/00 DOLLARS
($_______________________________.00) (or the unpaid balance of all principal
advanced against this Note, if that amount is less), together with interest on
the unpaid principal balance of this Note from day to day outstanding as
hereinafter provided.

      1.    Note; Interest; Payment Schedule and Maturity Date. This Note is one
of the Notes referred to in Loan Agreement and is entitled to the benefits
thereof and subject to prepayment in whole or part as provided therein. The
entire principal balance of this Note then unpaid shall be due and payable at
the times as set forth in the Loan Agreement. Accrued unpaid interest shall be
due and payable at the times and at the interest rate as set forth in the Loan
Agreement until all principal and accrued interest owing on this Note shall have
been fully paid and satisfied. Any amount not paid when due and payable
hereunder shall, to the extent permitted by applicable law, bear interest and if
applicable a late charge as set forth in the Loan Agreement.

      2.    Security; Loan Documents. The security for this Note includes a
Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing
(which, as it may have been or may be amended, restated, modified or
supplemented from time to time, is herein called the "Mortgage") dated of even
date herewith from Borrower to Administrative Agent and Lenders, covering
certain property in Horry County, South Carolina described therein (the
"Property"). This Note, the Mortgage, the Loan Agreement and all other documents
now or hereafter securing, guaranteeing or executed in connection with the loan
evidenced by this Note (the "Loan"), are, as the same have been or may be
amended, restated, modified or supplemented from time to time, herein sometimes
called individually a "Loan Document" and together the "Loan Documents."

      3.    Defaults.

            (a) It shall be a default ("Default") under this Note and each of
the other Loan Documents if (1) any principal, interest or other amount of money
due under this Note is not paid in full when due, regardless of how such amount
may have become due; (ii) any covenant,

                                       1


agreement, condition, representation or warranty herein or in any other Loan
Documents is not fully and timely performed, observed or kept; or (iii) there
shall occur any default or event of default under the Mortgage or any other Loan
Document. Upon the occurrence of a Default, Administrative Agent on behalf of
the Lenders shall have the rights to declare the unpaid principal balance and
accrued but unpaid interest on this Note, and all other amounts due hereunder
and under the other Loan Documents, at once due and payable (and upon such
declaration, the same shall be at once due and payable), to foreclose any liens
and security interests securing payment hereof and to exercise any of its other
rights, powers and remedies under this Note, under any other Loan Document, or
at law or in equity.

            (b) All of the rights, remedies, powers and privileges (together,
"Rights") of Administrative Agent on behalf of the Lenders provided for in this
Note and in any other Loan Document are cumulative of each other and of any and
all other Rights at law or in equity. The resort to any Right shall not prevent
the concurrent or subsequent employment of any other appropriate Right. No
single or partial exercise of any Right shall exhaust it, or preclude any other
or further exercise thereof, and every Right may be exercised at any time and
from time to time. No failure by Administrative Agent or Lenders to exercise,
nor delay in exercising any Right, including but not limited to the right to
accelerate the maturity of this Note, shall be construed as a waiver of any
Default or as a waiver of any Right. Without limiting the generality of the
foregoing provisions, the acceptance by Lender from time to time of any payment
under this Note which is past due or which is less than the payment in full of
all amounts due and payable at the time of such payment, shall not (i)
constitute a waiver of or impair or extinguish the right of Administrative Agent
or Lenders to accelerate the maturity of this Note or to exercise any other
Right at the time or at any subsequent time, or nullify any prior exercise of
any such Right, or (ii) constitute a waiver of the requirement of punctual
payment and performance or a novation in any respect.

            (c) If any holder of this Note retains an attorney in connection
with any Default or at maturity or to collect, enforce or defend this Note or
any other Loan Document in any lawsuit or in any probate, reorganization,
bankruptcy, arbitration or other proceeding, or if Borrower sues any holder in
connection with this Note or any other Loan Document and does not prevail, then
Borrower agrees to pay to each such holder, in addition to principal, interest
and any other sums owing to Lenders hereunder and under the other Loan
Documents, all costs and expenses incurred by such holder in trying to collect
this Note or in any such suit or proceeding, including, without limitation,
attorneys' fees and expenses, investigation costs and all court costs, whether
or not suit is filed hereon, whether before or after the Maturity Date, or
whether in connection with bankruptcy, insolvency or appeal, or whether
collection is made against Borrower or Guarantor or endorser or any other person
primarily or secondarily liable hereunder.

      4.    Heirs, Successors and Assigns. The terms of this Note and of the
other Loan Documents shall bind and inure to the benefit of the heirs, devisees,
representatives, successors and assigns of the parties. The foregoing sentence
shall not be construed to permit Borrower to assign the Loan except as otherwise
permitted under the Loan Documents. As further provided in the Loan Agreement, a
Lender may, at any time, sell, transfer, or assign all or a portion of its
interest in this Note, the Mortgage and the other Loan Documents, as set forth
in the Loan Agreement.

                                       2


      5. General Provisions. Time is of the essence with respect to Borrower's
obligations under this Note. If more than one person or entity executes this
Note as Borrower, all of said parties shall be jointly and severally liable for
payment of the indebtedness evidenced hereby. Borrower, endorsers, and any other
party now or hereafter liable for the payment of this Note in whole or in part,
hereby severally (a) waive demand, presentment for payment, notice of dishonor
and of nonpayment, protest, notice of protest, notice of intent to accelerate,
notice of acceleration and all other notices (except any notices which are
specifically required by this Note or any other Loan Document), filing of suit
and diligence in collecting this Note or enforcing any of the security herefor;
(b) agree to any substitution, subordination, exchange or release of any such
security or the release of any party primarily or secondarily liable hereon; (c)
agree that neither Administrative Agent nor any Lender shall be required first
to institute suit or exhaust its remedies hereon against Borrower or others
liable or to become liable hereon or to perfect or enforce its rights against
them or any security herefor; (d) consent to any extensions or postponements of
time of payment of this Note for any period or periods of time and to any
partial payments, before or after maturity, and to any other indulgences with
respect hereto, without notice thereof to any of them; and (e) submit (and waive
all rights to object) to non-exclusive personal jurisdiction of any state or
federal court sitting in the city and county, and venue in the city or county,
in which payment is to be made as specified in Section 1 of this Note, for the
enforcement of any and all obligations under this Note and the Loan Documents;
(f) waive the benefit of all homestead and similar exemptions as to this Note;
(g) agree that their liability under this Note shall not be affected or impaired
by any determination that any security interest or lien taken by Lender to
secure this Note is invalid or unperfected; and (h) hereby subordinate any and
all rights against Borrower and any of the security for the payment of this
Note, whether by subrogation, agreement or otherwise, until this Note is paid in
full. A determination that any provision of this Note is unenforceable or
invalid shall not affect the enforceability or validity of any other provision
and the determination that the application of any provision of this Note to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances. This Note may not be amended except in a writing specifically
intended for such purpose and executed by the party against whom enforcement of
the amendment is sought. Captions and headings in this Note are for convenience
only and shall be disregarded in construing it. THIS NOTE, AND ITS VALIDITY,
ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY SOUTH CAROLINA LAW (WITHOUT
REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL
LAW.

      6. Notices. Any notice, request, or demand to or upon Borrower or Lender
shall be deemed to have been properly given or made when delivered in accordance
with the Loan Agreement.

      THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.

      THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

                                       3


      IN WITNESS WHEREOF, Borrower has duly executed this Note under seal as of
the date first above written.

                                      BORROWER:

                                      GRANDE PALMS, L.L.C., a Delaware limited
                                      liability company

                                      By: ________________________________(SEAL)
                                      Name: ______________________________
                                      Title: _____________________________

                                       4

EX-10.34.4

                                                                 EXHIBIT 10.34.4

                THIS MORTGAGE IS SUBJECT TO ARBITRATION PURSUANT
           TO THE FEDERAL ARBITRATION ACT AND/OR Section 15-48-10 OF
               THE SOUTH CAROLINA CODE OF LAWS (1976), AS AMENDED

STATE OF SOUTH CAROLINA   )     MORTGAGE, ASSIGNMENT OF RENTS AND
                          )     LEASES, SECURITY AGREEMENT AND
COUNTY OF HORRY           )     FIXTURE FILING

      THE COLLATERAL SUBJECT TO THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES,
      SECURITY AGREEMENT AND FIXTURE FILING INCLUDES GOODS THAT ARE OR ARE TO
      BECOME FIXTURES.

      THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND
      FIXTURE FILING IS TO BE FILED IN THE REAL PROPERTY RECORDS FOR HORRY
      COUNTY, AND SHALL SERVE AS A FIXTURE FILING FINANCING STATEMENT

      THIS INSTRUMENT IS A CONSTRUCTION MORTGAGE WITHIN THE MEANING OF SECTION
      36-9-334(h) OF THE CODE OF LAWS OF SOUTH CAROLINA, 1976 (Revised 2003), AS
      AMENDED, AND SECURES AN OBLIGATION INCURRED FOR THE CONSTRUCTION OF AN
      IMPROVEMENT UPON LAND.

            THE PROMISSORY NOTE (DEFINED BELOW) SECURED BY THIS INSTRUMENT
            PROVIDES FOR A VARIABLE RATE OF INTEREST ON THE SECURED INDEBTEDNESS
            (DEFINED BELOW).

(This Document Serves as a Fixture Filing under Section 36-9-502 of the South
Carolina Uniform Commercial Code.)

Mortgagor's Organizational Identification Number: 20-0785850

      THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND
FIXTURE FILING (this "Mortgage") is made this 27th day of April 2005, by GRANDE
PALMS, L.L.C., having a notice address 545 E. John Carpenter Freeway, Suite
1300, Irving, Texas 75062-3933 ("Mortgagor"), for the benefit of BANK OF
AMERICA, N.A., having a notice address at 200 Meeting Street, Suite 104,
Charleston, South Carolina 29401, as Administrative Agent under the Loan
Agreement on behalf of the Lenders (as defined in the Loan Agreement) (together
with its successors and assigns, "Mortgagee").

                                    ARTICLE 1

               Definitions: Granting Clauses; Secured Indebtedness

                                        1


      Section 1.1 Principal Secured. This Mortgage secures the aggregate
principal amount of Sixty-Nine Million, Eight Hundred Thousand and No/100
Dollars ($69,800,000.00) plus other obligations as provided herein and such
additional amounts as Mortgagee may from time to time advance pursuant to the
terms and conditions of this Mortgage or for the protection of the lien of this
Mortgage, together with interest thereon.

      Section 1.2 Definitions.

      (a) In addition to other terms defined herein, each of the following terms
shall have the meaning assigned to it, such definitions to be applicable equally
to the singular and the plural forms of such terms and to all genders:

      "Loan Agreement": That certain Construction Loan Agreement by and among
Mortgagor, as Borrower, Mortgagee, as Administrative Agent, and certain Lenders
described therein (the "Lenders").

      "Mortgagee": Bank of America, N.A. as Administrative Agent under the Loan
Agreement for the benefit of the Lender (as defined in the Loan Agreement), its
successors and assigns, whose place of business is 200 Meeting Street, Suite
104, Charleston, South Carolina 29401, Attention: Loan Administration Section,
Real Estate Banking Group, Location Code SC1300-01-03.

      "Mortgagor": Grande Palms, L.L.C., whose address is 545 E. John Carpenter
Freeway, Suite 1300, Irving, Texas 75062-3933 and its permitted successors and
assigns.

      "Promissory Note": means those certain promissory notes designated
"Promissory Note (Name of Lender)" dated of even date herewith made by Mortgagor
and payable to the order of particular Lenders in the aggregate principal face
amount of Sixty-Nine Million, Eight Hundred Thousand and No/100 Dollars
($69,800,000.00), each bearing interest as therein provided, containing a
provision for, among other things, the payment of attorneys' fees (such
promissory notes, as each may hereafter be renewed, extended, supplemented,
increased or modified and in effect from time to time, and all other notes given
in substitution therefor, or in modification, renewal, or extension thereof, in
whole or in part).

      "Swap Transaction": means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swap option currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any form of master agreement (the "Master Agreement") published by the
International Swaps and Derivatives Association, Inc., or any other master
agreement, entered into between Holder (or its affiliates) and Mortgagor,
together with any related schedules, as amended, supplemented, superseded or
replaced from time to time, relating to or governing any or all of the
foregoing.

                                       2


      (b) Any term used or defined in the South Carolina Uniform Commercial
Code, as in effect from time to time, and not defined in this Mortgage has the
meaning given to the term in the South Carolina Uniform Commercial Code, as in
effect from time to time, when used in this Mortgage; provided, however, if a
term is defined in Chapter 9 of the South Carolina Uniform Commercial Code
differently than in another chapter of the South Carolina Uniform Commercial
Code, the term has the meaning specified in Chapter 9.

      Section 1.3 Granting Clause. To secure and enforce the payment and
performance of the following promissory notes, obligations, indebtedness, duties
and liabilities and all renewals, extensions, supplements, increases and
modifications thereof in whole or in part from time to time (collectively, the
"Secured Indebtedness"): (A) the performance and observance by Mortgagor of all
covenants and conditions contained in the Promissory Note, and all other
promissory notes given in substitution therefor or in modification, supplement,
increase, renewal or extension thereof, in whole or in part (such promissory
note or promissory notes whether one or more, as from time to time renewed,
extended, supplemented, increased or modified, being hereinafter called the
"Note" and Mortgagee, or the subsequent holder at the time in question of the
Note or any of the Secured Indebtedness, as hereinafter defined, being herein
collectively called "Holder"), in this Mortgage, and in all other instruments
securing the Note; and (B) all indebtedness, liabilities, duties, covenants,
promises and other obligations whether joint or several, direct or indirect,
fixed or contingent, liquidated or unliquidated, and the collection of all such
amounts, owed by Mortgagor to Holder now or hereafter incurred or arising
pursuant to or permitted by the provisions of the Note, this Mortgage, or any
other document now or hereafter evidencing, governing, guaranteeing, securing or
otherwise executed in connection with the loan evidenced by the Note, including
but not limited to any loan or credit agreement, letter of credit or
reimbursement agreement, tri-party financing agreement, Master Agreement
relating to any Swap Transactions or other agreement between Mortgagor and
Holder, or among Mortgagor, Holder and any other party or parties, pertaining to
the repayment or use of the proceeds of the loan evidenced by the Note (the
Note, this Mortgage, any Master Agreement relating to any Swap Transactions and
such other documents, as they or any of them may have been or may be from time
to time renewed, extended, supplemented, increased or modified, being herein
sometimes collectively called the "Loan Documents"); (C) any and all other loans
made by Holder to Mortgagor and all other debts, obligations and liabilities of
Mortgagor of every kind and character now or hereafter existing in favor of
Holder, whether direct or indirect, primary or secondary, joint or several,
fixed or contingent, secured or unsecured, and whether originally payable to
Holder or to a third party and subsequently acquired by Holder, it being
contemplated that Mortgagor may hereafter become indebted to Holder for such
further debts, obligations and liabilities; provided, however, and
notwithstanding the foregoing provisions of this clause (c), this Mortgage shall
not secure any such other loan, advance, debt, obligation or liability with
respect to which Holder is by applicable law prohibited from obtaining a lien on
real estate nor shall this clause (c) operate or be effective to constitute or
require any assumption or payment by any person, in any way, of any debt of any
other person to the extent that the same would violate or exceed the limit
provided in any applicable usury or other law; and (D) also to secure in
accordance with Section 29-3-50, as amended, Code of Laws of South Carolina
1976, all future advances and readvances that may subsequently be made to
Mortgagor by the Holder, evidenced by the Note, or any other promissory notes,
and all renewals and extensions thereof-, provided, however, that nothing
contained herein shall create an obligation on the part of Holder to make

                                       3


future advances or readvances to Mortgagor, the maximum amount of all
indebtedness outstanding at any one time secured hereby not to exceed twice the
face amount of the Promissory Note, plus interest thereon, all charges and
expenses of collection incurred by Holder, including court costs, and reasonable
attorneys' fees; and (E) also in order to charge the properties, interests and
rights hereinafter described with such payment, performance and observance; and
(F) for and in consideration of the sum of One and No/100 ($1.00) Dollar paid by
Holder to Mortgagor this date, and for other valuable consideration, the receipt
of which is acknowledged, Mortgagor does hereby grant, bargain, sell, alien,
remise, release, convey, assign, transfer, mortgage, hypothecate, pledge,
deliver, set over, warrant and confirm unto Holder, its successors and assigns
forever all right, title and interest of Mortgagor in and to the following: (a)
the real property described in Exhibit A which is attached hereto and
incorporated herein by reference (the "Land") together with: (i) any and all
buildings, structures, improvements, alterations or appurtenances now or
hereafter situated or to be situated on the Land (collectively the
"Improvements"); and (ii) all right, title and interest of Mortgagor, now owned
or hereafter acquired, in and to (1) all streets, roads, alleys, easements,
rights-of-way, licenses, rights of ingress and egress, vehicle parking rights
and public places, existing or proposed, abutting, adjacent, used in connection
with or pertaining to the Land or the Improvements; (2) any strips or gores
between the Land and abutting or adjacent properties; (3) all options to
purchase the Land or the Improvements or any portion thereof or interest
therein, and any greater estate in the Land or the Improvements; and (4) all
water and water rights, timber, crops and mineral interests on or pertaining to
the Land (the Land, Improvements and other rights, titles and interests referred
to in this clause (a) being herein sometimes collectively called the
"Premises"); (b) all fixtures, equipment, systems, machinery, furniture,
furnishings, appliances, inventory, goods, building and construction materials,
supplies, and articles of personal property, of every kind and character,
tangible and intangible (including software embedded therein), now owned or
hereafter acquired by Mortgagor, which are now or hereafter attached to or
situated in, on or about the Land or the Improvements, or used in or necessary
to the complete and proper planning, development, use, occupancy or operation
thereof, or acquired (whether delivered to the Land or stored elsewhere) for use
or installation in or on the Land or the Improvements, and all renewals and
replacements of, substitutions for and additions to the foregoing (the
properties referred to in this clause (b) being herein sometimes collectively
called the "Accessories," all of which are hereby declared to be permanent
accessions to the Land); (c) all (i) plans and specifications for the
Improvements; (ii) Mortgagor's rights, but not liability for any breach by
Mortgagor, under all commitments (including any commitment for financing to pay
any of the Secured Indebtedness, as defined below), insurance policies, (or
additional or supplemental coverage related thereto, including from an insurance
provider meeting the requirements of the Loan Documents or from or through any
state or federal government sponsored program or entity), Swap Transactions (as
hereinbefore defined), contracts and agreements for the design, construction,
operation or inspection of the Improvements and other contracts and general
intangibles (including but not limited to payment intangibles, trademarks, trade
names, goodwill, software and symbols) related to the Premises or the
Accessories or the operation thereof; (iii) deposits and deposit accounts
arising from or related to any transactions related to the Premises or the
Accessories (including but not limited to Mortgagor's rights in tenants'
security deposits, deposits with respect to utility services to the Premises,
and any deposits, deposit accounts or reserves hereunder or under any other Loan
Documents for taxes, insurance or otherwise), rebates or refunds of impact fees
or other taxes, assessments or charges, money, accounts

                                       4


(including deposit accounts), instruments, documents, promissory notes and
chattel paper (whether tangible or electronic) arising from or by virtue of any
transactions related to the Premises or the Accessories and any account or
deposit account from which Mortgagor may from time to time authorize Holder to
debit and/or credit payments due with respect to the Loan or any Swap
Transaction, all rights to the payment of money from Holder under any Swap
Transaction, and all accounts, deposit accounts and general intangibles,
including payment intangibles, described in any Swap Transaction; (iv) permits,
licenses, franchises, certificates, development rights, commitments and rights
for utilities, and other rights and privileges obtained in connection with the
Premises or the Accessories; (v) leases, rents, royalties, bonuses, issues,
profits, revenues and other benefits of the Premises and the Accessories
(without derogation of Article 3 hereof); (vi) as-extracted collateral produced
from or allocated to the Land including, without limitation, oil, gas and other
hydrocarbons and other minerals and all products processed or obtained
therefrom, and the proceeds thereof, and (vii) engineering, accounting, title,
legal, and other technical or business data concerning the Property which are in
the possession of Mortgagor or in which Mortgagor can otherwise grant a security
interest; and (d) all (i) accounts and proceeds (cash or non-cash and including
payment intangibles) of or arising from the properties, rights, titles and
interests referred to above in this Section 1.3, including but not limited to
proceeds of any sale, lease or other disposition thereof, proceeds of each
policy of insurance (or additional or supplemental coverage related thereto,
including from an insurance provider meeting the requirements of the Loan
Documents or from or through any state or federal government sponsored program
or entity) relating thereto (including premium refunds), proceeds of the taking
thereof or of any rights appurtenant thereto, including change of grade of
streets, curb cuts or other rights of access, by condemnation, eminent domain or
transfer in lieu thereof for public or quasi-public use under any law, and
proceeds arising out of any damage thereto; (ii) all letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing) Mortgagor now
has or hereafter acquires relating to the properties, rights, titles and
interests referred to in this Section 1.3; (iii) all commercial tort claims
Mortgagor now has or hereafter acquires relating to the properties, rights,
titles and interests referred to in this Section 1.3; and (iv) other interests
of every kind and character which Mortgagor now has or hereafter acquires in, to
or for the benefit of the properties, rights, titles and interests referred to
above in this Section 1.3 and all property used or useful in connection
therewith, including but not limited to rights of ingress and egress and
remainders, reversions and reversionary rights or interests; and if the estate
of Mortgagor in any of the property referred to above in this Section 1.3 is a
leasehold estate, this conveyance shall include, and the lien and security
interest created hereby shall encumber and extend to, all other or additional
title, estates, interests or rights which are now owned or may hereafter be
acquired by Mortgagor in or to the property demised under the lease creating the
leasehold estate; TO HAVE AND TO HOLD the foregoing rights, interests and
properties, together with all rights, estates, powers, privileges,
hereditaments, easements and appurtenances thereto (herein collectively called
the "Property") to the Holder and the Holder's successors and assigns to secure
the obligations of Grantor under the Note and Loan Documents and all other
indebtedness and matters defined as secured.

      Section 1.4 Security Interest. Mortgagor hereby grants to Holder a
security interest in all of the Property which constitutes personal property or
fixtures, all proceeds and products thereof, and all supporting obligations
ancillary to or arising in any way in connection therewith (herein sometimes
collectively called the "Collateral") to secure the obligations of Mortgagor

                                       5


under the Note and Loan Documents and all other indebtedness and matters defined
as Secured Indebtedness in Section 1.3 of this Mortgage. In addition to its
rights hereunder or otherwise, Holder shall have all of the rights of a secured
party under the South Carolina Uniform Commercial Code, as in effect from time
to time, or under the Uniform Commercial Code in force, from time to time, in
any other state to the extent the same is applicable law. It is intended that as
to the Collateral this Mortgage shall be effective as a financing statement
filed as a fixture filing from the date of its filing for record in the real
estate records of the county in which the Land is located. Information
concerning the security interest created by this instrument may be obtained from
the Holder as secured party or the Mortgagor as debtor at the addresses shown
herein.

                                    ARTICLE 2

                    Representations, Warranties and Covenants

      Section 2.1 Mortgagor represents, warrants, and covenants as follows:

      (a) Payment and Performance. Mortgagor will make due and punctual payment
of the Secured Indebtedness. Mortgagor will timely and properly perform and
comply with all of the covenants, agreements, and conditions imposed upon it by
this Mortgage and the other Loan Documents and will not permit a default to
occur hereunder or thereunder. Time shall be of the essence in this Mortgage.

      (b) Title and Permitted Encumbrances. Mortgagor has, in Mortgagor's own
right, and Mortgagor covenants to maintain, lawful, good and marketable title to
the Property, is lawfully seized and possessed of the Property and every part
thereof, and has the right to convey the same, free and clear of all liens,
charges, claims, security interests, and encumbrances except for (i) the
matters, if any, set forth under the heading "Permitted Encumbrances" in Exhibit
B hereto, which are Permitted Encumbrances only to the extent the same are valid
and subsisting and affect the Property, (ii) the liens and security interests
evidenced by this Mortgage, (iii) statutory liens for real estate taxes and
assessments on the Property which are not yet due and payable, and (iv) other
liens and security interests (if any) in favor of Mortgagee (the matters
described in the foregoing clauses (i), (ii), (iii) and (iv) being herein called
the "Permitted Encumbrances"). Mortgagor, and Mortgagor's successors and
assigns, will warrant generally and forever defend title to the Property,
subject as aforesaid, to Holder and its successors or substitutes and assigns,
against the claims and demands of all persons claiming or to claim the same or
any part thereof. Mortgagor will punctually pay, perform, observe and keep all
covenants, obligations and conditions in or pursuant to any Permitted
Encumbrance and will not modify or permit modification of any Permitted
Encumbrance without the prior written consent of Holder. Inclusion of any matter
as a Permitted Encumbrance does not constitute approval or waiver by Holder of
any existing or future violation or other breach thereof by Mortgagor, by the
Property or otherwise. No part of the Property constitutes all or any part of
the principal residence of Mortgagor if Mortgagor is an individual. If any right
or interest of Holder in the Property or any part thereof shall be endangered or
questioned or shall be attacked directly or indirectly, Holder (whether or not
named as party to legal proceedings with respect thereto), is hereby authorized
and empowered to take such steps as in its discretion may be proper for the
defense of any such legal proceedings or the protection of such right or
interest of Holder, including but not limited

                                       6


to the employment of independent counsel, the prosecution or defense of
litigation, and the compromise or discharge of adverse claims. All expenditures
so made of every kind and character shall be a demand obligation (which
obligation Mortgagor hereby promises to pay) owing by Mortgagor to Holder, and
the Holder shall be subrogated to all rights of the person receiving such
payment.

      (c) Taxes and Other Impositions. Mortgagor will pay, or cause to be paid,
all taxes, assessments and other charges or levies imposed upon or against or
with respect to the Property or the ownership, use, occupancy or enjoyment of
any portion thereof, or any utility service thereto, as the same become due and
payable, including but not limited to all real estate taxes assessed against the
Property or any part thereof, and shall deliver promptly to Holder such evidence
of the payment thereof as Holder may require.

      (d) Insurance. Mortgagor shall obtain and maintain at Mortgagor's sole
expense: (1) mortgagee title insurance issued to Holder covering the Premises as
required by Holder without exception for mechanics' liens; (2) property
insurance with respect to all insurable Property, against loss or damage by
fire, lightning, windstorm, explosion, hail, tornado and such additional hazards
as are presently included in "Special Form" (also known as "all-risk") coverage
and such other insurable hazards as Holder may require (provided, however, that
Administrative Agent has waived the requirement for insurance covering loss from
terrorist acts to the extent such coverage is unavailable without payment of an
additional premium amount), in an amount not less than 100% of the full
replacement cost, including the cost of debris removal, without deduction for
depreciation and sufficient to prevent Mortgagor and Holder from becoming a
coinsurer, such insurance to be in "builder's risk" completed value
(non-reporting) form during and with respect to any construction on the
Premises; (3) if and to the extent any portion of the Improvements is, under the
Flood Disaster Protection Act of 1973 ("FDPA"), as it may be amended from time
to time, in a Special Flood Hazard Area, within a Flood Zone designated A or V
in a participating community, a flood insurance policy in an amount required by
Holder, but in no event less than the amount sufficient to meet the requirements
of applicable law and the FDPA, as such requirements may from time to time be in
effect; (4) general liability insurance, on an "occurrence" basis, against
claims for "personal injury" liability, including bodily injury, death or
property damage liability, for the benefit of Mortgagor as named insured and
Holder as additional insured; (5) statutory workers' compensation insurance with
respect to any work on or about the Premises (including employer's liability
insurance, if required by Holder), covering all employees of Mortgagor and any
contractor; (6) if there is a general contractor, commercial general liability
insurance, including products and completed operations coverage, and in other
respects similar to that described in clause (4) above, for the benefit of the
general contractor as named insured and Mortgagor and Holder as additional
insureds, in addition to statutory workers' compensation insurance with respect
to any work on or about the Premises (including employer's liability insurance,
if required by Holder), covering all employees of the general contractor and any
contractor; and (7) such other insurance on the Property and endorsements as may
from time to time be required by Holder (including but not limited to soft cost
coverage, automobile liability insurance, business interruption insurance or
delayed rental insurance, boiler and machinery insurance, earthquake insurance,
wind insurance, sinkhole coverage, and/or permit to occupy endorsement) and
against other insurable hazards or casualties which at the time are commonly
insured against in the case of premises similarly situated, due regard being
given to

                                       7


the height, type, construction, location, use and occupancy of buildings and
improvements. All insurance policies shall be issued and maintained by insurers,
in amounts, with deductibles, limits and retentions, and in forms satisfactory
to Holder, and shall require not less than ten (10) days' prior written notice
to Holder of any cancellation for nonpayment of premiums, and not less than
thirty (30) days' prior written notice to Holder of any other cancellation or
any change of coverage. All insurance companies must be licensed to do business
in the state in which the Property is located and must have an A.M. Best Company
financial and performance ratings of A-:IX or better. All insurance policies
maintained, or caused to be maintained, by Mortgagor with respect to the
Property, except for general liability insurance, shall provide that each such
policy shall be primary without right of contribution from any other insurance
that may be carried by Mortgagor or Holder and that all of the provisions
thereof, except the limits of liability, shall operate in the same manner as if
there were a separate policy covering each insured. If any insurer which has
issued a policy of title, hazard, liability or other insurance required pursuant
to this Mortgage or any other Loan Document becomes insolvent or the subject of
any petition, case, proceeding or other action pursuant to any Debtor Relief
Law, or if in Holder's reasonable opinion the financial responsibility of such
insurer is or becomes inadequate, Mortgagor shall, in each instance promptly
upon its discovery thereof or upon the request of Holder therefor, and at
Mortgagor's expense, promptly obtain and deliver to Holder a like policy (or, if
and to the extent permitted by Holder, acceptable evidence of insurance) issued
by another insurer, which insurer and policy meet the requirements of this
Mortgage or such other Loan Document, as the case may be. Without limiting the
discretion of Holder with respect to required endorsements to insurance
policies, all such policies for loss of or damage to the Property shall contain
a standard mortgagee clause (without contribution) naming Holder as mortgagee
with loss proceeds payable to Holder notwithstanding (i) any act, failure to act
or negligence of or violation of any warranty, declaration or condition
contained in any such policy by any named or additional insured; (ii) the
occupation or use of the Property for purposes more hazardous than permitted by
the terms of any such policy; (iii) any foreclosure or other action by Holder
under the Loan Documents; or (iv) any change in title to or ownership of the
Property or any portion thereof, such proceeds to be held for application as
provided in the Loan Documents. The originals of each initial insurance policy
(or to the extent permitted by Holder, a copy of the original policy and such
evidence of insurance acceptable to Holder) shall be delivered to Holder at the
time of execution of this Mortgage, with all premiums fully paid current, and
each renewal or substitute policy (or evidence of insurance) shall be delivered
to Holder, with a-11 premiums fully paid current, at least ten (10) days before
the termination of the policy it renews or replaces. Mortgagor shall pay all
premiums on policies required hereunder as they become due and payable and
promptly deliver to Holder evidence satisfactory to Holder of the timely payment
thereof. If any loss occurs at any time when Mortgagor has failed to perform
Mortgagor's covenants and agreements in this paragraph with respect to any
insurance payable because of loss sustained to any part of the Property whether
or not such insurance is required by Holder, Holder shall nevertheless be
entitled to the benefit of all insurance covering the loss and held by or for
Mortgagor, to the same extent as if it had been made payable to Holder. Upon any
foreclosure hereof or transfer of title to the Property in extinguishment of the
whole or any part of the Secured Indebtedness, all of Mortgagor's right, title
and interest in and to the insurance policies referred to in this Section
(including unearned premiums) and all proceeds payable thereunder shall
thereupon vest in the purchaser at foreclosure or other such transferee, to the
extent permissible under such policies. Holder shall have the right (but not the
obligation) to

                                       8


make proof of loss for, settle and adjust any claim under, and receive the
proceeds of, all insurance for loss of or damage to the Property regardless of
whether or not such insurance policies are required by Holder, and the expenses
incurred by Holder in the adjustment and collection of insurance proceeds shall
be a part of the Secured Indebtedness and shall be due and payable to Holder on
demand. Holder shall not be, under any circumstances, liable or responsible for
failure to collect or exercise diligence in the collection of any of such
proceeds or for the obtaining, maintaining or adequacy of any insurance or for
failure to see to the proper application of any amount paid over to Mortgagor.
Any such proceeds received by Holder shall, after deduction therefrom of all
reasonable expenses actually incurred by Holder, including attorneys' fees, at
Holder's option be (1) released to Mortgagor, or (2) applied (upon compliance
with such terms and conditions as may be required by Holder) to repair or
restoration, either partly or entirely, of the Property so damaged, or (3)
applied to the payment of the Secured Indebtedness in such order and manner as
Holder, in its sole discretion, may elect, whether or not due. In any event, the
unpaid portion of the Secured Indebtedness shall remain in full force and effect
and the payment thereof shall not be excused. Mortgagor shall at all times
comply with the requirements of the insurance policies required hereunder and of
the issuers of such policies and of any board of fire underwriters or similar
body as applicable to or affecting the Property.

      (e) Reserved.

      (f) Condemnation. Mortgagor shall notify Holder immediately of any
threatened or pending proceeding for condemnation affecting the Property or
arising out of damage to the Property, and Mortgagor shall, at Mortgagor's
expense, diligently prosecute any such proceedings. Holder shall have the right
(but not the obligation) to participate in any such proceeding and to be
represented by counsel of its own choice. Holder shall be entitled to receive
all sums which may be awarded or become payable to Mortgagor for the
condemnation of the Property, or any part thereof, for public or quasi-public
use, or by virtue of private sale in lieu thereof, and any. sums which may be
awarded or become payable to Mortgagor for injury or damage to the Property.
Mortgagor shall, promptly upon request of Holder, execute such additional
assignments and other documents as may be necessary from time to time to permit
such participation and to enable Holder to collect and receipt for any such
sums. All such sums are hereby assigned to Holder, and shall, after deduction
therefrom of all reasonable expenses actually incurred by Holder, including
attorneys' fees, at Holder's option be (1) released to Mortgagor, or (2) applied
(upon compliance with such terms and conditions as may be required by Holder) to
repair or restoration of the Property so affected, or (3) applied to the payment
of the Secured Indebtedness in such order and manner as Holder, in its sole
discretion, may elect, whether or not due. In any event the unpaid portion of
the Secured Indebtedness shall remain in full force and effect and the payment
thereof shall not be excused. Holder shall not be, under any circumstances,
liable or responsible for failure to collect or to exercise diligence in the
collection of any such sum or for failure to see to the proper application of
any amount paid over to Mortgagor. Holder is hereby authorized, in the name of
Mortgagor, to execute and deliver valid acquittances for, and to appeal from,
any such award, judgment or decree. All costs and expenses (including but not
limited to attorneys' fees) incurred by Holder in connection with any
condemnation shall be a demand obligation owing by Mortgagor (which Mortgagor
hereby promises to pay) to Holder pursuant to this Mortgage.

                                       9


      (g) Compliance with Legal Requirements. The Property and the use,
operation and maintenance thereof and all activities thereon do and shall at all
times comply with all applicable Legal Requirements (hereinafter defined). The
Property is not, and shall not be, dependent on any other property or premises
or any interest therein other than the Property to fulfill any requirement of
any Legal Requirement. Mortgagor shall not, by act or omission, permit any
building or other improvement not subject to the lien of this Mortgage to rely
on the Property or any interest therein to fulfill any requirement of any Legal
Requirement. No improvement upon or use of any part of the Property constitutes
a nonconforming use under any zoning law or similar law or ordinance. Mortgagor
has obtained and shall preserve in force all requisite zoning, utility,
building, health, environmental and operating permits from the governmental
authorities having jurisdiction over the Property.

If Mortgagor receives a notice or claim from any person that the Property, or
any use, activity, operation or maintenance thereof or thereon, is not in
compliance with any Legal Requirement, Mortgagor will promptly furnish a copy of
such notice or claim to Holder. As of the date of this Mortgage, Mortgagor has
received no notice and has no knowledge of any such noncompliance. As used in
this Mortgage: (1) the term "Legal Requirement" means any Law (hereinafter
defined), agreement, covenant, restriction, easement or condition (including,
without limitation of the foregoing, any condition or requirement imposed by any
insurance or surety company), as any of the same now exists or may be changed or
amended or come into effect in the future; and (ii) the term "Law" means any
federal, state or local law, statute, ordinance, code, rule, regulation,
license, permit, authorization, decision, order, injunction or decree, domestic
or foreign.

      (h) Maintenance, Repair and Restoration. Mortgagor will keep the Property
in first class order, repair, operating condition and appearance, causing all
necessary repairs, renewals, replacements, additions and improvements to be
promptly made, and will not allow any of the Property to be misused, abused or
wasted or to deteriorate. Notwithstanding the foregoing, Mortgagor will not,
without the prior written consent of Holder, (1) remove from the Property any
fixtures or personal property encumbered by this Mortgage except such as is
replaced by Mortgagor by an article of equal suitability and value, owned by
Mortgagor, free and clear of any lien or security interest (except that created
by this Mortgage), or (ii) make any structural alteration to the Property or any
other alteration thereto which impairs the value thereof. If any act or
occurrence of any kind or nature (including any condemnation or any casualty for
which insurance was not obtained or obtainable) shall result in damage to or
loss or destruction of the Property, Mortgagor shall give prompt notice thereof
to Holder and Mortgagor shall promptly, at Mortgagor's sole cost and expense and
regardless of whether insurance or condemnation proceeds (if any) shall be
available or sufficient for the purpose, secure the Property as necessary and
commence and continue diligently to completion to restore, repair, replace and
rebuild the Property as nearly as possible to its value, condition and character
immediately prior to the damage, loss or destruction.

      (i) No Other Liens. Mortgagor will not, without the prior written consent
of Holder, create, place or permit to be created or placed, or through any act
or failure to act, acquiesce in the placing of, or allow to remain, any
mortgage, voluntary or involuntary lien, whether statutory, constitutional or
contractual, security interest, encumbrance or charge, or conditional sale or
other title retention document, against or covering the Property, or any part
thereof, other

                                       10


than the Permitted Encumbrances, regardless of whether the same are expressly or
otherwise subordinate to the lien or security interest created in this Mortgage,
and should any of the foregoing become attached hereafter in any manner to any
part of the Property without the prior written consent of Holder, Mortgagor will
cause the same to be promptly discharged and released. Mortgagor will own all
parts of the Property and will not acquire any fixtures, equipment or other
property (including software embedded therein) forming a part of the Property
pursuant to a lease, license, security agreement or similar agreement, whereby
any party has or may obtain the right to repossess or remove same, without the
prior written consent of Holder. If Holder consents to the voluntary grant by
Mortgagor of any mortgage, lien, security interest, or other encumbrance
(hereinafter called "Subordinate Lien") covering any of the Property or if the
foregoing prohibition is determined by a court of competent jurisdiction to be
unenforceable as to a Subordinate Lien, any such Subordinate Lien shall contain
express covenants to the effect that: (1) the Subordinate Lien is
unconditionally subordinate to this Mortgage and all Leases (hereinafter
defined); (2) if any action (whether judicial or pursuant to a power of sale)
shall be instituted to foreclose or otherwise enforce the Subordinate Lien, no
tenant of any of the Leases (hereinafter defined) shall be named as a party
defendant, and no action shall be taken that would terminate any occupancy or
tenancy without the prior written consent of Holder; (3) Rents (hereinafter
defined), if collected by or for the holder of the Subordinate Lien, shall be
applied first to the payment of the Secured Indebtedness then due and expenses
incurred in the ownership, operation and maintenance of the Property in such
order as Holder may determine, prior to being applied to any indebtedness
secured by the Subordinate Lien; (4) written notice of default under the
Subordinate Lien and written notice of the commencement of any action (whether
judicial or pursuant to a power of sale) to foreclose or otherwise enforce the
Subordinate Lien or to seek the appointment of a receiver for all or any part of
the Property shall be given to Holder with or immediately after the occurrence
of any such default or commencement; and (5) neither the holder of the
Subordinate Lien, nor any purchaser at foreclosure thereunder, nor anyone
claiming by, through or under any of them shall succeed to any of Mortgagor's
rights hereunder without the prior written consent of Holder.

      (j) Operation of Property. Mortgagor will operate the Property in a good
and workmanlike manner and in accordance with all Legal Requirements and will
pay all fees or charges of any kind in connection therewith. Mortgagor will keep
the Property occupied so as not to impair the insurance carried thereon.
Mortgagor will not use or occupy or conduct any activity on, or allow the use or
occupancy of or the conduct of any activity on, the Property in any manner which
violates any Legal Requirement or which constitutes a public or private nuisance
or which makes void, voidable or cancelable, or increases the premium of, any
insurance then in force with respect thereto. Mortgagor will not initiate or
permit any zoning reclassification of the Property or seek any variance under
existing zoning ordinances applicable to the Property or use or permit the use
of the Property in such a manner which would result in such use becoming a
nonconforming use under applicable zoning ordinances or other Legal Requirement.
Mortgagor will not impose any easement, restrictive covenant or encumbrance upon
the Property, execute or file any subdivision plat or condominium declaration
affecting the Property or consent to the annexation of the Property to any
municipality, without the prior written consent of Holder. Mortgagor will not do
or suffer to be done any act whereby the value of any part of the Property may
be lessened. Mortgagor will preserve, protect, renew, extend and retain all
material rights and privileges granted for or applicable to the Property.
Without the

                                       11


prior written consent of Holder, there shall be no drilling or exploration for
or extraction, removal or production of any mineral, hydrocarbon, gas, natural
element, compound or substance (including sand and gravel) from the surface or
subsurface of the Land regardless of the depth thereof or the method of mining
or extraction thereof Mortgagor will cause all debts and liabilities of any
character (including without limitation all debts and liabilities for labor,
material and equipment (including software embedded therein) and all debts and
charges for utilities servicing the Property) incurred in the construction,
maintenance, operation and development of the Property to be promptly paid.

      (k) Financial Matters. Mortgagor is solvent after giving effect to all
borrowings contemplated by the Loan Documents and no proceeding under any Debtor
Relief Law (hereinafter defined) is pending (or, to Mortgagor's knowledge,
threatened) by or against Mortgagor, or any affiliate of Mortgagor, as a debtor.
All reports, statements, plans, budgets, applications, agreements and other data
and information heretofore furnished or hereafter to be furnished by or on
behalf of Mortgagor to Holder in connection with the loan or loans evidenced by
the Loan Documents (including, without limitation, all financial statements and
financial information) are and will be true, correct and complete in all
material respects as of their respective dates and do not and will not omit to
state any fact or circumstance necessary to make the statements contained
therein not misleading. No material adverse change has occurred since the dates
of such reports, statements and other data in the financial condition of
Mortgagor or, to Mortgagor's knowledge, of any tenant under any lease described
therein. For the purposes of this paragraph, "Mortgagor" shall also include any
person liable directly or indirectly for the Secured Indebtedness or any part
thereof and any joint venturer or general partner of Mortgagor.

      (l) Status of Mortgagor; Suits and Claims; Loan Documents. If Mortgagor is
a corporation, partnership, limited liability company, or other legal entity,
Mortgagor is and will continue to be (1) duly organized, validly existing and in
good standing under the laws of its state of organization, (ii) authorized to do
business in, and in good standing in, each state in which the Property is
located, and (iii) possessed of all requisite power and authority to carry on
its business and to own and operate the Property. Each Loan Document executed by
Mortgagor has been duly authorized, executed and delivered by Mortgagor, and the
obligations thereunder and the performance thereof by Mortgagor in accordance
with their terms are and will continue to be within Mortgagor's power and
authority (without the necessity of joinder or consent of any other person), are
not and will not be in contravention of any Legal Requirement or any other
document or agreement to which Mortgagor or the Property is subject, and do not
and will not result in the creation of any encumbrance against any assets or
properties of Mortgagor, or any other person liable, directly or indirectly, for
any of the Secured Indebtedness, except as expressly contemplated by the Loan
Documents. There is no suit, action, claim, investigation, inquiry, proceeding
or demand pending (or, to Mortgagor's knowledge, threatened) against Mortgagor
or against any other person liable directly or indirectly for the Secured
Indebtedness or which affects the Property (including, without limitation, any
which challenges or otherwise pertains to Mortgagor's title to the Property) or
the validity, enforceability or priority of any of the Loan Documents. There is
no judicial or administrative action, suit or proceeding pending (or, to
Mortgagor's knowledge, threatened) against Mortgagor, or against any other
person liable directly or indirectly for the Secured Indebtedness, except as has
been disclosed in writing to Holder in connection with the loan evidenced by the
Note. The Loan Documents constitute

                                       12


legal, valid and binding obligations of Mortgagor enforceable in accordance with
their terms, except as the enforceability thereof may be limited by Debtor
Relief Laws (hereinafter defined) and except as the availability of certain
remedies may be limited by general principles of equity. Mortgagor is not a
"foreign person" within the meaning of the Internal Revenue Code of 1986, as
amended, Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate as
those terms are defined therein and in any regulations promulgated thereunder).
The loan evidenced by the Note is solely for business and/or investment
purposes, and is not intended for personal, family, household or agricultural
purposes. Mortgagor further warrants that the proceeds of the Note shall be used
for commercial purposes and stipulates that the loan evidenced by the Note shall
be construed for all purposes as a commercial loan. Mortgagor's exact legal name
is correctly set forth at the end of this Mortgage. If Mortgagor is not an
individual, Mortgagor is an organization of the type and (if not an unregistered
entity) is incorporated in or organized under the laws of the state specified in
the introductory paragraph of this Mortgage. If Mortgagor is an unregistered
entity (including, without limitation, a general partnership) it is organized
under the laws of the state specified in the introductory paragraph of this
Mortgage. Mortgagor will not cause or permit any change to be made in its name,
identity (including its trade name or names), or corporate or partnership
structure, unless Mortgagor shall have notified Holder in writing of such change
at least 30 days prior to the effective date of such change, and shall have
first taken all action required by Holder for the purpose of further perfecting
or protecting the lien and security interest of Holder in the Property. In
addition, Mortgagor shall not change its corporate or partnership structure
without first obtaining the prior written consent of Holder. Mortgagor's
principal place of business and chief executive office, and the place where
Mortgagor keeps its books and records, including recorded data of any kind or
nature, regardless of the medium of recording including, without limitation,
software, writings, plans, specifications and schematics concerning the
Property, has for the preceding four months (or, if less, the entire period of
the existence of Mortgagor) been and will continue to be (unless Mortgagor
notifies Holder of any change in writing at least 30 days prior to the date of
such change) the address of Mortgagor set forth at the end of this Mortgage. If
Mortgagor is an individual, Mortgagor's principal residence has for the
preceding four months been and will continue to be (unless Mortgagor notifies
Holder of any change in writing at least 30 days prior to the date of such
change) the address of the principal residence of Mortgagor set forth at the end
of this Mortgage. Mortgagor's organizational identification number, if any,
assigned by the state of incorporation or organization is correctly set forth on
the first page of this Mortgage. Mortgagor shall promptly notify Holder (i) of
any change of its organizational identification number, or (ii) if Mortgagor
does not now have an organization identification number and later obtains one,
of such organizational identification number.

      (m) Certain Environmental Matters. Mortgagor shall comply with the terms
and covenants of that certain Environmental Indemnity Agreement dated of even
date herewith (the "Environmental Agreement").

      (n) Further Assurances. Mortgagor will, promptly on request of Holder, (i)
correct any defect, error or omission which may be discovered in the contents,
execution or acknowledgment of this Mortgage or any other Loan Document; (ii)
execute, acknowledge, deliver, procure and record and/or file such further
documents (including, without limitation, further mortgages, security
agreements, and assignments of rents or leases) and do such further

                                       13


acts as may be necessary, desirable or proper to carry out more effectively the
purposes of this Mortgage and the other Loan Documents, to more fully identify
and subject to the liens and security interests hereof any property intended to
be covered hereby (including specifically, but without limitation, any renewals,
additions, substitutions, replacements, or appurtenances to the Property) or as
deemed advisable by Holder to protect the lien or the security interest
hereunder against the rights or interests of third persons; and (iii) provide
such certificates, documents, reports, information, affidavits and other
instruments and do such further acts as may be necessary, desirable or proper in
the reasonable determination of Holder to enable Holder to comply with the
requirements or requests of any agency having jurisdiction over Holder or any
examiners of such agencies with respect to the indebtedness secured hereby,
Mortgagor or the Property. Mortgagor shall pay all costs connected with any of
the foregoing, which shall be a demand obligation owing by Mortgagor (which
Mortgagor hereby promises to pay) to Holder pursuant to this Mortgage.

      (o)   Fees and Expenses. Without limitation of any other provision of this
Mortgage or of any other Loan Document and to the extent not prohibited by
applicable law, Mortgagor will pay, and will reimburse to Holder on demand to
the extent paid by Holder: (1) all appraisal fees, filing, registration and
recording fees, recordation, transfer and other taxes, brokerage fees and
commissions, abstract fees, title search or examination fees, title policy and
endorsement premiums and fees, uniform commercial code search fees, judgment and
tax lien search fees, escrow fees, attorneys' fees, architect fees, engineer
fees, construction consultant fees, environmental inspection fees, survey fees,
and all other costs and expenses of every character incurred by Mortgagor or
Holder in connection with the preparation of the Loan Documents, the evaluation,
closing and funding of the loan evidenced by the Loan Documents, and any and all
amendments and supplements to this Mortgage, the Note or any other Loan
Documents or any approval, consent, waiver, release or other matter requested or
required hereunder or thereunder, or otherwise attributable or chargeable to
Mortgagor as owner of the Property; and (ii) all costs and expenses, including
attorneys' fees and expenses, incurred or expended in connection with the
exercise of any right or remedy, or the defense of any right or remedy or the
enforcement of any obligation of Mortgagor, hereunder or under any other Loan
Document.

      (p)   Indemnification.

            (i) Mortgagor will indemnify and hold harmless Holder from and
against, and reimburse it on demand for, any and all Indemnified Matters
(hereinafter defined). For purposes of this paragraph (p), the term "Holder"
shall include Holder, and any persons owned or controlled by, owning or
controlling, or under common control or affiliated with Holder and the
directors, officers, partners, employees, attorneys, agents and representatives
of Holder. Without limitation, the foregoing indemnities shall apply to each
indemnified person with respect to matters, which in whole or in part are caused
by or arise out of the negligence of such (and/or any other) indemnified person.
However, such indemnities shall not apply to a particular indemnified person to
the extent that the subject of the indemnification is caused by or arises out of
the gross negligence or willful misconduct of that indemnified person. Any
amount to be paid under this paragraph (p) by Mortgagor to Holder shall be a
demand obligation owing by Mortgagor (which Mortgagor hereby promises to pay) to
Holder pursuant to this Mortgage. Nothing in this paragraph, elsewhere in this
Mortgage or in any other Loan Document shall limit or impair any rights or
remedies of Holder (including without limitation any rights of

                                       14


contribution or indemnification) against Mortgagor or any other person under any
other provision of this Mortgage, any other Loan Document, any other agreement
or any applicable Legal Requirement.

            (ii) As used herein, the term "Indemnified Matters" means any and
all claims, demands, liabilities (including strict liability), losses, damages
(including consequential damages), causes of action, judgments, penalties,
fines, costs and expenses (including without limitation, reasonable fees and
expenses of attorneys and other professional consultants and experts, and of the
investigation and defense of any claim, whether or not such claim is ultimately
defeated, and the settlement of any claim or judgment including all value paid
or given in settlement) of every kind, known or unknown, foreseeable or
unforeseeable, which may be imposed upon, asserted against or incurred or paid
by Holder at any time and from time to time, whenever imposed, asserted or
incurred, because of, resulting from, in connection with, or arising out of any
transaction, act, omission, event or circumstance in any way connected with the
Property or with this Mortgage or any other Loan Document, including but not
limited to any bodily injury or death or property damage occurring in or upon or
in the vicinity of the Property through any cause whatsoever at any time on or
before the Release Date (hereinafter defined) any act performed or omitted to be
performed hereunder or under any other Loan Document, any breach by Mortgagor of
any representation, warranty, covenant, agreement or condition contained in this
Mortgage or in any other Loan Document, any default as defined herein, any claim
under or with respect to any Lease (hereinafter defined) or arising under the
Environmental Agreement. The term "Release Date" as used herein means the
earlier of the following two dates: (1) the date on which the indebtedness and
obligations secured hereby have been paid and performed in full and this
Mortgage has been released, or (ii) the date on which the lien of this Mortgage
is fully and finally foreclosed or a conveyance by deed in lieu of such
foreclosure is fully and finally effective, and possession of the Property has
been given to the purchaser or grantee free of occupancy and claims to occupancy
by Mortgagor and Mortgagor's heirs, devisees, representatives, successors and
assigns; provided, that if such payment, performance, release, foreclosure or
conveyance is challenged, in bankruptcy proceedings or otherwise, the Release
Date shall be deemed not to have occurred until such challenge is rejected,
dismissed or withdrawn with prejudice. The indemnities in this paragraph (p)
shall not terminate upon the Release Date or upon the release, foreclosure or
other termination of this Mortgage but will survive the Release Date,
foreclosure of this Mortgage or conveyance in lieu of foreclosure, the repayment
of the Secured Indebtedness, the termination of any and all Swap Transactions,
the discharge and release of this Mortgage and the other Loan Documents, any
bankruptcy or other debtor relief proceeding, and any other event whatsoever.

      (q)   Records and Financial Reports. Mortgagor will keep accurate books
and records in accordance with sound accounting principles in which full, true
and correct entries shall be promptly made with respect to the Property and the
operation thereof, and will permit all such books and records, and all recorded
data of any kind or nature, regardless of the medium of recording including,
without limitation, all software, writings, plans, specifications and schematics
to be inspected and copied, and the Property to be inspected and photographed,
by Holder and its representatives during normal business hours and at any other
reasonable times. Without limitation of other or additional requirements in any
of the other Loan Documents, Mortgagor will furnish to Holder such financial
information and statements as are set forth in the

                                       15


Loan Agreement. Mortgagor will furnish to Holder at Mortgagor's expense all
evidence, which Holder may from time to time reasonably request as to compliance
with all provisions of the Loan Documents. Any inspection or audit of the
Property or the books and records, including recorded data of any kind or
nature, regardless of the medium of recording including, without limitation,
software, writings, plans, specifications and schematics of Mortgagor, or the
procuring of documents and financial and other information, by or on behalf of
Holder shall be for Holder's protection only, and shall not constitute any
assumption of responsibility to Mortgagor or anyone else with regard to the
condition, construction, maintenance or operation of the Property nor Holder's
approval of any certification given to Holder nor relieve Mortgagor of any of
Mortgagor's obligations. Holder may from time to time assign or grant
participations in the Secured Indebtedness and Mortgagor consents to the
delivery by Holder to any acquirer or prospective acquirer of any interest or
participation in or with respect to all or part of the Secured Indebtedness such
information as Holder now or hereafter has relating to the Property, Mortgagor,
any party obligated for payment of any part of the Secured Indebtedness, any
tenant or guarantor under any lease affecting any part of the Property and any
agent or guarantor under any management agreement affecting any part of the
Property.

      (r) Taxes on Note or Mortgage. Mortgagor will promptly pay all income,
franchise and other taxes owing by Mortgagor and any stamp, documentary,
recordation and transfer taxes or other taxes (unless such payment by Mortgagor
is prohibited by law) which may be required to be paid with respect to the Note,
this Mortgage or any other instrument evidencing or securing any of the Secured
Indebtedness. In the event of the enactment after this date of any law of any
governmental entity applicable to Holder, the Note, the Property or this
Mortgage deducting from the value of property for the purpose of taxation any
lien or security interest thereon, or imposing upon Holder the payment of the
whole or any part of the taxes or assessments or charges or liens herein
required to be paid by Mortgagor, or changing in any way the laws relating to
the taxation of mortgages or security agreements or debts secured by mortgages
or security agreements or the interest of the mortgagee or secured party in the
property covered thereby, or the manner of collection of such taxes, so as to
affect this Mortgage or the Secured Indebtedness or Holder, then, and in any
such event, Mortgagor, upon demand by Holder, shall pay such taxes, assessments,
charges or liens, or reimburse Holder therefor; provided, however, that if in
the opinion of counsel for Holder (1) it might be unlawful to require Mortgagor
to make such payment or (ii) the making of such payment might result in the
imposition of interest beyond the maximum amount permitted by law, then and in
such event, Holder may elect, by notice in writing given to Mortgagor, to
declare all of the Secured Indebtedness to be and become due and payable sixty
(60) days from the giving of such notice.

      (s) Statement Concerning Note or Mortgage. Mortgagor shall at any time and
from time to time furnish within seven (7) days of request by Holder a written
statement in such form as may be required by Holder stating that (i) the Note,
this Mortgage and the other Loan Documents are valid and binding obligations of
Mortgagor, enforceable against Mortgagor in accordance with their terms; (ii)
the unpaid principal balance of the Note; (iii) the date to which interest on
the Note is paid; (iv) the Note, this Mortgage and the other Loan Documents have
not been released, subordinated or modified; and (v) there are no offsets or
defenses against the enforcement of the Note, this Mortgage or any other Loan
Document. If any of the foregoing

                                       16


statements in clauses (i), (iv) and (v) are untrue, Mortgagor shall,
alternatively, specify the reasons therefor.

      Section 2.2 Performance by Holder on Mortgagor's Behalf. Mortgagor agrees
that, if Mortgagor fails to perform any act or to take any action which under
any Loan Document Mortgagor is required to perform or take, or to pay any money
which under any Loan Document Mortgagor is required to pay, and whether or not
the failure then constitutes a default hereunder or thereunder, and whether or
not there has occurred any default or defaults hereunder or the Secured
Indebtedness has been accelerated, Holder, in Mortgagor's name or its own name,
may, but shall not be obligated to, perform or cause to be performed such act or
take such action or pay such money, and any expenses so incurred by Holder and
any money so paid by Holder shall be a demand obligation owing by Mortgagor to
Holder (which obligation Mortgagor hereby promises to pay), shall be a part of
the indebtedness secured hereby, and Holder, upon making such payment, shall be
subrogated to all of the rights of the person, entity or body politic receiving
such payment. Holder and its designees shall have the right to enter upon the
Property at any time and from time to time for any such purposes. No such
payment or performance by Holder shall waive or cure any default or waive any
right, remedy or recourse of Holder. Any such payment may be made by Holder in
reliance on any statement, invoice or claim without inquiry into the validity or
accuracy thereof. Each amount due and owing by Mortgagor to Holder pursuant to
this Mortgage shall bear interest, from the date such amount becomes due until
paid, at the rate per annum provided in the Note for interest on past due
principal owed on the Note but never in excess of the maximum nonusurious amount
permitted by applicable law, which interest shall be payable to Holder on
demand; and all such amounts, together with such interest thereon, shall
automatically and without notice be a part of the indebtedness secured hereby.
The amount and nature of any expense by Holder hereunder and the time when paid
shall be fully established by the certificate of Holder or any of Holder's
officers or agents.

      Section 2.3 Absence of Obligations of Holder with Respect to Property.
Notwithstanding anything in this Mortgage to the contrary, including, without
limitation, the definition of "Property" and/or the provisions of Article 3
hereof, (i) to the extent permitted by applicable law, the Property is composed
of Mortgagor's rights, title and interests therein but not Mortgagor's
obligations, duties or liabilities pertaining thereto, (ii) Holder neither
assumes nor shall have any obligations, duties or liabilities in connection with
any portion of the items described in the definition of "Property" herein,
either prior to or after obtaining title to such Property, whether by
foreclosure sale, the granting of a deed in lieu of foreclosure or otherwise,
and (iii) Holder may, at any time prior to or after the acquisition of title to
any portion of the Property as above described, advise any party in writing as
to the extent of Holder's interest therein and/or expressly disaffirm in writing
any rights, interests, obligations, duties and/or liabilities with respect to
such Property or matters related thereto. Without limiting the generality of the
foregoing, it is understood and agreed that Holder shall have no obligations,
duties or liabilities prior to or after acquisition of title to any portion of
the Property, as lessee under any lease or purchaser or seller under any
contract or option unless Holder elects otherwise by written notification.

      Section 2.4 Authorization to File Financing Statements; Power of Attorney.
Mortgagor hereby authorizes Holder at any time and from time to time to file any
initial financing statements, amendments thereto and continuation statements as
authorized by

                                       17


applicable law, required by Holder to establish or maintain the validity,
perfection and priority of the security interests granted in this Mortgage. For
purposes of such filings, Mortgagor agrees to furnish any information requested
by Holder promptly upon request by Holder. Mortgagor also ratifies its
authorization for Holder to have filed any like initial financing statements,
amendments thereto or continuation statements if filed prior to the date of this
Mortgage. Mortgagor hereby irrevocably constitutes and appoints Holder and any
officer or agent of Holder, with full power of substitution, as its true and
lawful attorneys-in-fact with full irrevocable power and authority in the place
and stead of Mortgagor or in Mortgagor's own name to execute in Mortgagor's name
any such documents and to otherwise carry out the purposes of this Section 2.4,
to the extent that Mortgagor's authorization above is not sufficient. To the
extent permitted by law, Mortgagor hereby ratifies all acts said
attorneys-in-fact shall lawfully do, have done in the past or cause to be done
in the future by virtue hereof. This power of attorney is a power coupled with
an interest and shall be irrevocable.

                                    ARTICLE 3

                         Assignment of Rents and Leases

      Section 3.1 Assignment. Mortgagor hereby assigns to Holder all Rents
(hereinafter defined) and all of Mortgagor's rights in and under all Leases
(hereinafter defined). So long as no Default (hereinafter defined) has occurred,
Mortgagor shall have a license (which license shall terminate automatically and
without further notice upon the occurrence of a Default) to collect, but not
prior to accrual, the Rents under the Leases and, where applicable, subleases,
such Rents to be held in trust for Holder and to otherwise deal with all Leases
as permitted by this Mortgage. Each month, provided no Default has occurred,
Mortgagor may retain such Rents as were collected that month and held in trust
for Holder; provided, however, that all Rents collected by Grantor shall be
applied solely to the ordinary and necessary expenses of owning and operating
the Property or paid to Holder. Upon the revocation of such license, all Rents
shall be paid directly to Holder and not through Grantor, all without the
necessity of any further action by Holder, including, without limitation, any
action to obtain possession of the Land, Improvements or any other portion of
the Property or any action for the appointment of a receiver. Mortgagor hereby
authorizes and directs the tenants under the Leases to pay Rents to Holder upon
written demand by Holder, without further consent of Mortgagor, without any
obligation of such tenants to determine whether a Default has in fact occurred
and regardless of whether Holder has taken possession of any portion of the
Property, and the tenants may rely upon any written statement delivered by
Holder to the tenants. Any such payments to Holder shall constitute payments to
Mortgagor under the Leases, and Mortgagor hereby irrevocably appoints Holder as
its attorney-in-fact to do all things, after a Default, which Mortgagor might
otherwise do with respect to the Property and the Leases thereon, including,
without limitation, (1) collecting Rents with or without suit and applying the
same, less expenses of collection, to any of the obligations secured hereunder
or to expenses of operating and maintaining the Property (including reasonable
reserves for anticipated expenses), at the option of the Holder, all in such
manner as may be determined by Holder, or at the option of Holder, holding the
same as security for the payment of all Secured Indebtedness, (ii) leasing, in
the name of Mortgagor, the whole or any part of the Property which may become
vacant, and (iii) employing agents therefor and paying such agents reasonable
compensation for their services. The curing of such Default,

                                       18


unless other Defaults also then exist, shall entitle Mortgagor to recover its
aforesaid license to do any such things which Mortgagor might otherwise do with
respect to the Property and the Leases thereon and to again collect such Rents.
The powers and rights granted in this paragraph shall be in addition to the
other remedies herein provided for upon the occurrence of a Default and may be
exercised independently of or concurrently with any of said remedies. Nothing in
the foregoing shall be construed to impose any obligation upon Holder to
exercise any power or right granted in this paragraph or to assume any liability
under any Lease of any part of the Property and no liability shall attach to
Holder for failure or inability to collect any Rents under any such Lease. The
assignment contained in this Section shall become null and void upon the release
of this Mortgage. As used herein: (i) "Lease" means each existing or future
lease, sublease (to the extent of Mortgagor's rights thereunder), or other
agreement under the terms of which any person has or acquires any right to
occupy or use the Property, or any part thereof, or interest therein, and each
existing or future guaranty of payment or performance thereunder, and all
extensions, renewals, modifications and replacements of each such lease,
sublease, agreement or guaranty; and (ii) "Rents" means all of the rents,
revenue, income, profits and proceeds derived and to be derived from the
Property or arising from the use or enjoyment of any portion thereof or from any
Lease, including but not limited to the proceeds from any negotiated lease
termination or buyout of such lease, liquidated damages following default under
any such Lease, all proceeds payable under any policy of insurance covering loss
of rents resulting from untenantability caused by damage to any part of the
Property, all of Mortgagor's rights to recover monetary amounts from any tenant
in bankruptcy including, without limitation, rights of recovery for use and
occupancy and damage claims arising out of Lease defaults, including rejections,
under any applicable Debtor Relief Law (hereinafter defined), together with any
sums of money that may now or at any time hereafter be or become due and payable
to Mortgagor by virtue of any and all royalties, overriding royalties, bonuses,
delay rentals and any other amount of any kind or character arising under any
and all present and all future oil, gas, mineral and mining leases covering the
Property or any part thereof, and all proceeds and other amounts paid or owing
to Mortgagor under or pursuant to any and all contracts and bonds relating to
the construction or renovation of the Property.

      Section 3.2 Covenants, Representations and Warranties Concerning Leases
and Rents. Mortgagor covenants, represents and warrants that: (a) Mortgagor has
good title to, and is the owner of the entire landlord's interest in, the Leases
and Rents hereby assigned and authority to assign them; (b) all Leases are valid
and enforceable, and in full force and effect, and are unmodified except as
stated therein; (c) neither Mortgagor nor any tenant in the Property is in
default under its Lease (and no event has occurred which with the passage of
time or notice or both would result in a default under its Lease) or is the
subject of any bankruptcy, insolvency or similar proceeding; (d) unless
otherwise stated in a Permitted Encumbrance, no Rents or Leases have been or
will be assigned, mortgaged, pledged or otherwise encumbered and no other person
has or will acquire any right, title or interest in such Rents or Leases; (e) no
Rents have been waived, released, discounted, set off or compromised; (f) except
as stated in the Leases, Mortgagor has not received any funds or deposits from
any tenant for which credit has not already been made on account of accrued
Rents; (g) Mortgagor shall perform all of its obligations under the Leases and
enforce the tenants' obligations under the Leases to the extent enforcement is
prudent under the circumstances; (h) Mortgagor will not without the prior
written consent of Holder, enter into any Lease after the date hereof, or waive,
release, discount, set off,

                                       19


compromise, reduce or defer any Rent, receive or collect Rents more than one (1)
month in advance, grant any rent-free period to any tenant, reduce any Lease
term or waive, release or otherwise modify any other material obligation under
any Lease, renew or extend any Lease except in accordance with a right of the
tenant thereto in such Lease, approve or consent to an assignment of a Lease or
a subletting of any part of the premises covered by a Lease, or settle or
compromise any claim against a tenant under a Lease in bankruptcy or otherwise;
(i) Mortgagor will not, without the prior written consent of Holder, terminate
or consent to the cancellation or surrender of any Lease having an unexpired
term of one (1) year or more unless promptly after the cancellation or surrender
a new Lease of such premises is made with a new tenant having a credit standing,
in Holder's judgment, at least equivalent to that of the tenant whose Lease was
canceled, on substantially the same terms as the terminated or canceled Lease;
(j) Mortgagor will not execute any Lease except in accordance with the Loan
Documents and for actual occupancy by the tenant thereunder; (k) Mortgagor shall
give prompt notice to Holder, as soon as Mortgagor first obtains notice, of any
claim, or the commencement of any action, by any tenant or subtenant under or
with respect to a Lease regarding any claimed damage, default, diminution of or
offset against Rent, cancellation of the Lease, or constructive eviction,
excluding, however, notices of default under residential Leases, and Mortgagor
shall defend, at Mortgagor's expense, any proceeding pertaining to any Lease,
including, if Holder so requests, any such proceeding to which Holder is a
party; (1) Mortgagor shall as often as requested by Holder, within ten (10) days
of each request, deliver to Holder a complete rent roll of the Property in such
detail as Holder may require and financial statements of the tenants, subtenants
and guarantors under the Leases to the extent available to Mortgagor, and
deliver to such of the tenants and others obligated under the Leases specified
by Holder written notice of the assignment in Section 3.1 hereof in form and
content satisfactory to Holder; (m) promptly upon request by Holder, Mortgagor
shall deliver to Holder executed originals of all Leases and copies of all
records relating thereto; (n) there shall be no merger of the leasehold estates,
created by the Leases, with the fee estate of the Land without the prior written
consent of Holder; and (o) Holder may at any time and from time to time by
specific written instrument intended for the purpose, unilaterally subordinate
the lien of this Mortgage to any Lease, without joinder or consent of, or notice
to, Mortgagor, any tenant or any other person, and notice is hereby given to
each tenant under a Lease of such right to subordinate. No such subordination
shall constitute a subordination to any lien or other encumbrance, whenever
arising, or improve the right of any junior lienholder; and nothing herein shall
be construed as subordinating this Mortgage to any Lease.

      Section 3.3 Estoppel Certificates. All Leases shall require the tenant to
execute and deliver to Holder an estoppel certificate in form and substance
acceptable to Holder within ten (10) days after notice from the Holder.

      Section 3.4 No Liability of Holder. Holder's acceptance of this assignment
shall not be deemed to constitute Holder a "mortgagee in possession," nor
obligate Holder to appear in or defend any proceeding relating to any Lease or
to the Property, or to take any action hereunder, expend any money, incur any
expenses, or perform any obligation or liability under any Lease, or assume any
obligation for any deposit delivered to Mortgagor by any tenant and not as such
delivered to and accepted by Holder. Holder shall not be liable for any injury
or damage to person or property in or about the Property, or for Holder's
failure to collect or to exercise diligence in collecting Rents, but shall be
accountable only for Rents that it shall actually

                                       20


receive. Neither the assignment of Leases and Rents nor enforcement of Holder's
rights regarding Leases and Rents (including collection of Rents) nor possession
of the Property by Holder nor Holder's consent to or approval of any Lease (nor
all of the same), shall render Holder liable on any obligation under or with
respect to any Lease or constitute affirmation of, or any subordination to, any
Lease, occupancy, use or option.

If Holder seeks or obtains any judicial relief regarding Rents or Leases, the
same shall in no way prevent the concurrent or subsequent employment of any
other appropriate rights or remedies nor shall same constitute an election of
judicial relief for any foreclosure or any other purpose. Holder neither has nor
assumes any obligations as lessor or landlord with respect to any Lease. The
rights of Holder under this Article 3 shall be cumulative of all other rights of
Holder under the Loan Documents or otherwise.

                                    ARTICLE 4

                                     Default

      Section 4.1 Events of Default. The occurrence of any one of the following
shall be a default under this Mortgage ("default" or "Default"):

      (a)   Failure to Pay Indebtedness. Any of the Secured Indebtedness is not
paid when due (subject to any applicable cure period contained in the Loan
Documents), regardless of how such amount may have become due.

      (b)   Nonperformance of Covenants. Any covenant, agreement or condition
herein or in any other Loan Document (other than covenants otherwise addressed
in another paragraph of this Section, such as covenants to pay the Secured
Indebtedness) is not fully and timely performed, observed or kept, and such
failure is not cured within the applicable notice and cure period (if any)
provided for herein or in such other Loan Document.

      (c)   Default Under Other Loan Documents. The occurrence of a Default
under any other Loan Document, including an Early Termination Event as defined
in any Master Agreement relating to any Swap Transaction.

      (d)   Representations. Any statement, representation or warranty in any of
the Loan Documents, or in any financial statement or any other writing
heretofore or hereafter delivered to Holder in connection with the Secured
Indebtedness is false, misleading or erroneous in any material respect on the
date hereof or on the date as of which such statement, representation or
warranty is made.

      (e)   Bankruptcy or Insolvency. The Mortgagor or any owner of the
Property:

            (i) (A) Executes an assignment for the benefit of creditors, or
takes any action in furtherance thereof-, or (B) admits in writing its inability
to pay, or fails to pay, its debts generally as they become due; or (C) as a
debtor, files a petition, case, proceeding or other action pursuant to, or
voluntarily seeks the benefit or benefits of, Title 11 of the United States Code
as now or hereafter in effect or any other federal, state or local law, domestic
or foreign, as now or

                                       21


hereafter in effect relating to bankruptcy, insolvency, liquidation,
receivership, reorganization, arrangement, composition, extension or adjustment
of debts, or similar laws affecting the rights of creditors (Title 11 of the
United States Code and such other laws being herein called "Debtor Relief
Laws"), or takes any action in furtherance thereof; or (D) seeks the appointment
of a receiver, trustee, custodian or liquidator of the Property or any part
thereof or of any significant portion of its other property; or

            (ii) Suffers the filing of a petition, case, proceeding or other
action against it as a debtor under any Debtor Relief Law or seeking appointment
of a receiver, trustee, custodian or liquidator of the Property or any part
thereof or of any significant portion of its other property, and (A) admits,
acquiesces in or fails to contest diligently the material allegations thereof,
or (B) the petition, case, proceeding or other action results in entry of any
order for relief or order granting relief sought against it, or (C) in a
proceeding under Debtor Relief Laws, the case is converted from one chapter to
another, or (D) fails to have the petition, case, proceeding or other action
permanently dismissed or discharged on or before the earlier of trial thereon or
sixty (60) days next following the date of its filing; or

            (iii) Conceals, removes, or permits to be concealed or removed, any
part of its property, with intent to hinder, delay or defraud its creditors or
any of them, or makes or suffers a transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or makes
any transfer of its property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or suffers or permits,
while insolvent, any creditor to obtain a lien (other than as described in
subparagraph (iv) below) upon any of its property through legal proceedings
which are not vacated and such lien discharged prior to enforcement thereof and
in any event within sixty (60) days from the date thereof; or

            (iv) Fails to have discharged within a period often (10) days any
attachment, sequestration, or similar writ levied upon any of its property; or

            (v) Fails to pay immediately any final and unappealable money
judgment against it.

      (f)   Transfer of the Property. Any sale, lease, conveyance, assignment,
pledge, encumbrance, or transfer of all or any part of the Property or any
interest therein, voluntarily or involuntarily, whether by operation of law or
otherwise, except: (i) sales or transfers of items of the Accessories which have
become obsolete or worn beyond practical use and which have been replaced by
adequate substitutes, owned by Mortgagor, having a value equal to or greater
than the replaced items when new; and (ii) the grant, in the ordinary course of
business, of a leasehold interest in a part of the Improvements to a tenant for
occupancy, not containing a right or option to purchase and not in contravention
of any provision of this Mortgage or of any other Loan Document. Holder may, in
its sole discretion, waive a default under this paragraph, but it shall have no
obligation to do so, and any waiver may be conditioned upon such one or more of
the following (if any) which Holder may require: the grantee's integrity,
reputation, character, creditworthiness and management ability being
satisfactory to Holder in its sole judgment and grantee executing, prior to such
sale or transfer, a written assumption agreement containing such terms as Holder
may require, a principal paydown on the Note, an increase in the rate of
interest payable under the Note, a transfer fee, a modification of the term of
the Note, and any other

                                       22


modification of the Loan Documents which Holder may require. NOTICE - THE DEBT
SECURED HEREBY IS SUBJECT TO CALL IN FULL AND ANY AND ALL SWAP TRANSACTIONS ARE
SUBJECT TO TERMINATION, OR THE TERMS THEREOF BEING MODIFIED IN THE EVENT OF SALE
OR CONVEYANCE OF THE PROPERTY, other than the sale of Units as contemplated in
the Loan Agreement.

      (g) Transfer of Assets. Any sale, lease, conveyance, assignment, pledge,
encumbrance, or transfer of all or any part of the other assets of Mortgagor,
excluding the Property, voluntarily or involuntarily, whether by operation of
law or otherwise, except: (i) sales or transfers in the ordinary course of
Mortgagor's business; and (ii) sales or transfers for which Mortgagor receives
consideration substantially equivalent to the fair market value of the
transferred asset.

      (h) Transfer of Ownership of Mortgagor. The sale, pledge, encumbrance,
assignment or transfer, voluntarily or involuntarily, whether by operation of
law or otherwise, of any interest in Mortgagor (if Mortgagor is not a natural
person but is a corporation, partnership, limited liability company, trust or
other legal entity), without the prior written consent of Holder (including,
without limitation, if Mortgagor is a partnership or joint venture, the
withdrawal from or admission into it of any general partner or joint venturer)
which consent shall not be unreasonably withheld.

      (i) Grant of Easement, Etc. Without the prior written consent of Holder,
Mortgagor grants any easement or dedication, files any plat, condominium
declaration, or restriction, or otherwise encumbers the Property, or seeks or
permits any zoning reclassification or variance, unless such action is expressly
permitted by the Loan Documents or does not affect the Property.

      (j) Abandonment. The owner of the Property abandons any of the Property.

      (k) Default Under Other Lien. A default or event of default occurs under
any lien, security interest or assignment covering the Property or any part
thereof (whether or not Holder has consented, and without hereby implying
Holder's consent, to any such lien, security interest or assignment not created
hereunder), or the holder of any such lien, security interest or assignment
declares a default or institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder.

      (1) Destruction. The Property is so demolished, destroyed or damaged that,
in the reasonable opinion of Holder, it cannot be restored or rebuilt with
available funds from any source to a profitable condition within a reasonable
period of time and in any event, prior to the final maturity date of the Note.

      (m) Condemnation. (i) Any governmental authority shall require, or
commence any proceeding for, the demolition of any building or structure
comprising a part of the Premises, or (ii) there is commenced any proceeding to
condemn or otherwise take pursuant to the power of eminent domain, or a contract
for sale or a conveyance in lieu of such a taking is executed which provides for
the transfer of, a material portion of the Premises, including but not limited
to the taking (or transfer in lieu thereof) of any portion which would result in
the blockage or

                                       23


substantial impairment of access or utility service to the Improvements or which
would cause the Premises to fail to comply with any Legal Requirement.

      (n) Liquidation, Etc. The liquidation, termination, dissolution, merger,
consolidation or failure to maintain good standing in the State of South
Carolina and/or the state of incorporation or organization, if different, of the
Mortgagor.

      (o) Material, Adverse Change. In Holder's reasonable opinion, the prospect
of payment by Mortgagor or Guarantor of all or any part of the Secured
Indebtedness has been impaired because of a material, adverse change in the
financial condition, results of operations, business or properties of the
Mortgagor.

      (p) Enforceability; Priority. Any Loan Document shall for any reason
without Holder's specific written consent cease to be in full force and effect,
or shall be declared null and void or unenforceable in whole or in part, or the
validity or enforceability thereof, in whole or in part, shall be challenged or
denied by any party thereto other than Holder; or the liens, mortgages or
security interests of Holder in any of the Property become unenforceable in
whole or in part, or cease to be of the priority herein required, or the
validity or enforceability thereof, in whole or in part, shall be challenged or
denied by Mortgagor or any person obligated to pay any part of the Secured
Indebtedness.

      (q) [Reserved].

      (r) Other Indebtedness. A default or event of default occurs under any
document executed and delivered in connection with any other indebtedness (to
Mortgagee or any other person or entity) of Mortgagor.

      Section 4.2 Notice and Cure. If any provision of this Mortgage or any
other Loan Document provides for Holder to give to Mortgagor any notice
regarding a default or incipient default, then if Holder shall fail to give such
notice to Mortgagor as provided, the sole and exclusive remedy of Mortgagor for
such failure shall be to seek appropriate equitable relief to enforce the
agreement to give such notice and to have any acceleration of the maturity of
the Note and the Secured Indebtedness postponed or revoked and foreclosure
proceedings in connection therewith delayed or terminated pending or upon the
curing of such default in the manner and during the period of time permitted by
such agreement, if any, and Mortgagor shall have no right to damages or any
other type of relief not herein specifically set out against Holder, all of
which damages or other relief are hereby waived by Mortgagor. Nothing herein or
in any other Loan Document shall operate or be construed to add on or make
cumulative any cure or grace periods specified in any of the Loan Documents.

                                   ARTICLE 5

                                    Remedies

      Section 5.1 Certain Remedies. If a Default shall occur, Holder may (but
shall have no obligation to) exercise any one or more of the following remedies,
without notice (unless notice is required by applicable statute):

                                       24


      (a) Acceleration. Holder may at any time and from time to time declare any
or all of the Secured Indebtedness immediately due and payable and may terminate
any and all Swap Transactions. Upon any such declaration, such Secured
Indebtedness shall thereupon be immediately due and payable, and such Swap
Transactions shall immediately terminate, without presentment, demand, protest,
notice of protest, notice of acceleration or of intention to accelerate or any
other notice or declaration of any kind, all of which are hereby expressly
waived by Mortgagor. Without limitation of the foregoing, upon the occurrence of
a default described in clauses (A), (C) or (D) of subparagraph (i) of paragraph
(d) of Section 4.1, hereof, all of the Secured Indebtedness shall thereupon be
immediately due and payable, without presentment, demand, protest, notice of
protest, declaration or notice of acceleration or intention to accelerate, or
any other notice, declaration or act of any kind, all of which are hereby
expressly waived by Mortgagor.

      (b) Enforcement of Assignment of Rents. In addition to the rights of
Holder under Article 3 hereof, prior or subsequent to taking possession of any
portion of the Property or taking any action with respect to such possession,
Holder may: (1) collect and/or sue for the Rents in Holder's own name, give
receipts and releases therefor, and after deducting all expenses of collection,
including attorneys' fees and expenses, apply the net proceeds thereof to the
Secured Indebtedness in such manner and order as Holder may elect and/or to the
operation and management of the Property, including the payment of management,
brokerage and attorney's fees and expenses; and (2) require Mortgagor to
transfer all security deposits and records thereof to Holder together with
original counterparts of the Leases.

      (c) Foreclosure. Upon failure to pay the Secured Indebtedness in full at
any stated or accelerated maturity, the Holder may foreclose the lien of this
Mortgage and sell, as an entirety or in separate lots or parcels, the Property,
under the judgment or decree of a court or courts of competent jurisdiction.
Holder shall take action either by such proceedings or by the exercise of its
powers with respect to entry or taking possession, or both, as the Holder may
determine. Holder, at its option, is authorized to foreclose this Mortgage
subject to the rights of any tenants of the Property and the failure to make any
such tenants parties defendant to any such foreclosure proceedings and to
foreclose their rights will not be, nor be asserted by Mortgagor to be, a
defense to any proceedings instituted by Holder to collect the sums secured
hereby or to collect any deficiency remaining unpaid after the foreclosure sale
of the Property.

      (d) Purchase by Holder. Upon any such foreclosure sale, Holder may bid for
and purchase the Premises and, upon compliance with the terms of sale, may hold,
retain and possess and dispose of such property in its own absolute right
without further accountability. Upon any such foreclosure sale, Holder may, if
permitted by law, after allowing for the proportion of the total purchase price
required to be paid in cash and for the costs and expenses of the sale,
compensation and other charges, in paying the purchase price apply any portion
of or all sums due to Holder under the Note, this Mortgage or any other
instrument securing the Note, in lieu of cash, to the amount which shall, upon
distribution of the net proceeds of such sale, be payable thereon.

      (e) Uniform Commercial Code. Without limitation of Holder's rights of
enforcement with respect to the Collateral or any part thereof in accordance
with the procedures for foreclosure of real estate, Holder may exercise its
rights of enforcement with respect to the

                                       25


Collateral or any part thereof under the South Carolina Uniform Commercial Code,
as in effect from time to time (or under the Uniform Commercial Code in force,
from time to time, in any other state to the extent the same is applicable law),
and in conjunction with, in addition to or in substitution for those rights and
remedies: (1) Holder may enter upon Mortgagor's premises to take possession of,
assemble and collect the Collateral or, to the extent and for those items of the
Collateral permitted under applicable law, to render it unusable; (2) Holder may
require Mortgagor to assemble the Collateral and make it available at a place
Holder designates which is mutually convenient to allow Holder to take
possession or dispose of the Collateral; (3) written notice mailed to Mortgagor
as provided herein at least five (5) days prior to the date of public sale of
the Collateral or prior to the date after which private sale of the Collateral
will be made shall constitute reasonable notice; provided that, if Holder fails
to comply with this clause (3) in any respect, its liability for such failure
shall be limited to the liability (if any) imposed on it as a matter of law
under the South Carolina Uniform Commercial Code, as in effect from time to time
(or under the Uniform Commercial Code, in force from time to time, in any other
state to the extent the same is applicable law); (4) any sale made pursuant to
the provisions of this paragraph shall be deemed to have been a public sale
conducted in a commercially reasonable manner if held contemporaneously with and
upon the same notice as required for the sale of the Property under power of
sale as provided in paragraph (c) above in this Section 5.1; (5) in the event of
a foreclosure sale, the Collateral and the other Property may, at the option of
Holder, be sold as a whole; (6) it shall not be necessary that Holder take
possession of the Collateral or any part thereof prior to the time that any sale
pursuant to the provisions of this Section is conducted and it shall not be
necessary that the Collateral or any part thereof be present at the location of
such sale; (7) with respect to application of proceeds from disposition of the
Collateral under Section 5.2 hereof, the costs and expenses incident to
disposition shall include the reasonable expenses of retaking, holding,
preparing for sale or lease, selling, leasing and the like and the reasonable
attorneys' fees and legal expenses (including, without limitation, the allocated
costs for in-house legal services) incurred by Holder; (8) any and all
statements of fact or other recitals made in any bill of sale or assignment or
other instrument evidencing any foreclosure sale hereunder as to nonpayment of
the Secured Indebtedness or as to the occurrence of any default, or as to Holder
having declared all of such indebtedness to be due and payable, or as to notice
of time, place and terms of sale and of the properties to be sold having been
duly given, or as to any other act or thing having been duly done by Holder,
shall be taken as prima facie evidence of the truth of the facts so stated and
recited; (9) Holder may appoint or delegate any one or more persons as agent to
perform any act or acts necessary or incident to any sale held by Holder,
including the sending of notices and the conduct of the sale, but in the name
and on behalf of Holder; (10) Holder may comply with any applicable state or
federal law or regulatory requirements in connection with a disposition of the
Collateral, and such compliance will not be considered to affect adversely the
commercial reasonableness of any sale of the Collateral; (11) Holder may sell
the Collateral without giving any warranties as to the Collateral, and
specifically disclaim all warranties including, without limitation, warranties
relating to title, possession, quiet enjoyment and the like, and all warranties
of quality, merchantability and fitness for a specific purpose, and this
procedure will not be considered to affect adversely the commercial
reasonableness of any sale of the Collateral; (12) Mortgagor acknowledges that a
private sale of the Collateral may result in less proceeds than a public sale;
and (13) Mortgagor acknowledges that the Collateral may be sold at a loss to
Mortgagor, and that, in such event, Holder shall have no liability or
responsibility to Mortgagor for such loss.

                                       26


      (f) Lawsuits. Holder may proceed by a suit or suits in equity or at law,
whether for collection of the indebtedness secured hereby, the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for any foreclosure hereunder or for
the sale of the Property under the judgment or decree of any court or courts of
competent jurisdiction.

      (g) Entry on Property. Holder is authorized, prior or subsequent to the
institution of any foreclosure proceedings, to the fullest extent permitted by
applicable law, to enter upon the Property, or any part thereof, and to take
possession of the Property and all books and records, and all recorded data of
any kind or nature, regardless of the medium of recording including, without
limitation, all software, writings, plans, specifications and schematics
relating thereto, and to exercise without interference from Mortgagor any and
all rights which Mortgagor has with respect to the management, possession,
operation, protection or preservation of the Property. Holder shall not be
deemed to have taken possession of the Property or any part thereof except upon
the exercise of its right to do so, and then only to the extent evidenced by its
demand and overt act specifically for such purpose. All costs, expenses and
liabilities of every character incurred by Holder in managing, operating,
maintaining, protecting or preserving the Property shall constitute a demand
obligation of Mortgagor (which obligation Mortgagor hereby promises to pay) to
Holder pursuant to this Mortgage. If necessary to obtain the possession provided
for above, Holder may invoke any and all legal remedies to dispossess Mortgagor.
In connection with any action taken by Holder pursuant to this Section, Holder
shall not be liable for any loss sustained by Mortgagor resulting from any
failure to let the Property or any part thereof, or from any act or omission of
Holder in managing the Property unless such loss is caused by the willful
misconduct and bad faith of Holder, nor shall Holder be obligated to perform or
discharge any obligation, duty or liability of Mortgagor arising under any lease
or other agreement relating to the Property or arising under any Permitted
Encumbrance or otherwise arising. Mortgagor hereby assents to, ratifies and
confirms any and all actions of Holder with respect to the Property taken under
this Section.

      (h) Receiver. Holder shall as a matter of right be entitled to the
appointment of a receiver or receivers for all or any part of the Property,
whether such receivership be incident to a proposed foreclosure of such property
or otherwise, and without regard to the value of the Property or the solvency of
any person or persons liable for the payment of the indebtedness secured hereby,
and Mortgagor does hereby irrevocably consent to the appointment of such
receiver or receivers, waives notice of such appointment, of any request
therefor or hearing in connection therewith, and any and all defenses to such
appointment, agrees not to oppose any application therefor by Holder, and agrees
that such appointment shall in no manner impair, prejudice or otherwise affect
the rights of Holder to application of Rents as provided in this Mortgage.
Nothing herein is to be construed to deprive Holder of any other right, remedy
or privilege it may have under the law to have a receiver appointed. Any money
advanced by Holder in connection with any such receivership shall be a demand
obligation (which obligation Mortgagor hereby promises to pay) owing by
Mortgagor to Holder pursuant to this Mortgage.

      (i) Termination of Commitment to Lend. Holder may terminate any commitment
or obligation to lend or disburse funds under any Loan Document or enter into
any other credit arrangement to or for the benefit of Mortgagor.

                                       27


      (j) Other Rights and Remedies. Holder may exercise any and all other
rights and remedies which Holder may have under the Loan Documents, or at law or
in equity or otherwise.

      Section 5.2 Proceeds of Foreclosure. The proceeds of any sale in
foreclosure of the liens and security interests evidenced hereby shall be
applied in accordance with the requirements of applicable laws and to the extent
consistent therewith, FIRST, to the payment of all necessary costs and expenses
incident to such foreclosure sale, including but not limited to all attorneys'
fees and legal expenses, advertising costs, auctioneer's fees, costs of title
rundowns and lien searches, inspection fees, appraisal costs, fees for
professional services, environmental assessment and remediation fees, all court
costs and charges of every character, and to the payment of the other Secured
Indebtedness, including specifically without limitation the principal, accrued
interest and attorneys' fees due and unpaid on the Note and the amounts due and
unpaid and owed to Holder under this Mortgage and the amounts due and unpaid and
owed to Holder (or its affiliates) under any Swap Transaction, the order and
manner of application to the items in this clause FIRST to be in Holder's sole
discretion; and SECOND, the remainder, if any there shall be, shall be paid to
Mortgagor, or to Mortgagor's heirs, devisees, representatives, successors or
assigns, or such other persons (including the holder or beneficiary of any
inferior lien) as may be entitled thereto by law; provided, however, that if
Holder is uncertain which person or persons are so entitled, Holder may
interplead such remainder in any court of competent jurisdiction, and the amount
of any attorneys' fees, court costs and expenses incurred in such action shall
be a part of the Secured Indebtedness and shall be reimbursable (without
limitation) from such remainder.

      Section 5.3 Holder as Purchaser. Holder shall have the right to become the
purchaser at any sale by any receiver or public officer or at any public sale,
and Holder shall have the right to credit upon the amount of Holder's successful
bid, to the extent necessary to satisfy such bid, all or any part of the Secured
Indebtedness in such manner and order as Holder may elect.

      Section 5.4 Foreclosure as to Matured Debt. Upon the occurrence of a
Default, Holder shall have the right to proceed with foreclosure of the liens
and security interests hereunder without declaring the entire Secured
Indebtedness due, and in such event any such foreclosure sale may be made
subject to the unmatured part of the Secured Indebtedness; and any such sale
shall not in any manner affect the unmatured part of the Secured Indebtedness,
but as to such unmatured part this Mortgage shall remain in full force and
effect just as though no sale had been made. The proceeds of such sale shall be
applied as provided in Section 5.2 hereof except that the amount paid under
Clause FIRST thereof shall be only the matured portion of the Secured
Indebtedness and any proceeds of such sale in excess of those provided for in
Clause FIRST (modified as provided above) shall be applied to the prepayment
(without penalty) of any other Secured Indebtedness in such manner and order and
to such extent as Holder deems advisable, and the remainder, if any, shall be
applied as provided in clause SECOND of Section 5.2 hereof. Several sales may be
made hereunder without exhausting the right of sale for any unmatured part of
the Secured Indebtedness.

      Section 5.5 Remedies Cumulative. All rights and remedies provided for
herein and in any other Loan Document are cumulative of each other and of any
and all other rights and remedies existing at law or in equity, and Holder
shall, in addition to the rights and remedies provided herein or in any other
Loan Document, be entitled to avail itself of all such other rights

                                       28


and remedies as may now or hereafter exist at law or in equity for the
collection of the Secured Indebtedness and the enforcement of the covenants
herein and the foreclosure of the liens and security interests evidenced hereby,
and the resort to any right or remedy provided for hereunder or under any such
other Loan Document or provided for by law or in equity shall not prevent the
concurrent or subsequent employment of any other appropriate right or rights or
remedy or remedies.

      Section 5.6 Discretion as to Security. Holder may resort to any security
given by this Mortgage or to any other security now existing or hereafter given
to secure the payment of the Secured Indebtedness, in whole or in part, and in
such portions and in such order as may seem best to Holder in its sole and
uncontrolled discretion, and any such action shall not in anywise be considered
as a waiver of any of the rights, benefits, liens or security interests
evidenced by this Mortgage.

      Section 5.7 Mortgagor's Waiver of Certain Rights. To the full extent
Mortgagor may do so, Mortgagor agrees that Mortgagor will not at any time insist
upon, plead, claim or take the benefit or advantage of any law now or hereafter
in force providing for any appraisement, valuation, stay, extension or
redemption, homestead, moratorium, reinstatement, marshaling or forbearance, and
Mortgagor, for Mortgagor, Mortgagor's heirs, devisees, representatives,
successors and assigns, and for any and all persons ever claiming any interest
in the Property, to the extent permitted by applicable law, hereby waives and
releases all rights of redemption, valuation, appraisement, stay of execution,
notice of intention to mature or declare due the whole of the Secured
Indebtedness, notice of election to mature or declare due the whole of the
Secured Indebtedness and all rights to a marshaling of assets of Mortgagor,
including the Property, or to a sale in inverse order of alienation in the event
of foreclosure of the liens and/or security interests hereby created. Mortgagor
shall not have or assert any right under any statute or rule of law pertaining
to the marshaling of assets, sale in inverse order of alienation, the exemption
of homestead, the administration of estates of decedents, or other matters
whatsoever to defeat, reduce or affect the right of Holder under the terms of
this Mortgage to a sale of the Property for the collection of the Secured
Indebtedness without any prior or different resort for collection, or the right
of Holder under the terms of this Mortgage to the payment of the Secured
Indebtedness out of the proceeds of sale of the Property in preference to every
other claimant whatsoever. Mortgagor waives any right or remedy, which Mortgagor
may have or be able to assert pursuant to any provision of South Carolina law
pertaining to the rights and remedies of sureties. If any law referred to in
this Section and now in force, of which Mortgagor or Mortgagor's heirs,
devisees, representatives, successors or assigns or any other persons claiming
any interest in the Property might take advantage despite this Section, shall
hereafter be repealed or cease to be in force, such law shall not thereafter be
deemed to preclude the application of this Section.

      Section 5.8 Delivery of Possession After Foreclosure In the event there is
a foreclosure sale hereunder and at the time of such sale, Mortgagor or
Mortgagor's heirs, devisees, representatives, or successors as owners of the
Property are occupying or using the Property, or any part thereof, each and all
shall immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day to day, terminable at the will of purchaser, at a
reasonable rental per day based upon the value of the property occupied, such
rental to be due daily to the purchaser; and to the extent permitted by
applicable law, the purchaser at such sale shall, notwithstanding any language
herein apparently to the contrary, have the sole option to

                                       29


demand immediate possession following the sale or to permit the occupants to
remain as tenants at will. After such foreclosure, any Leases to tenants or
subtenants that are subject to this Mortgage (either by their date, their
express terms, or by agreement of the tenant or subtenant) shall, at the sole
option of Holder or any purchaser at such sale, either (i) continue in full
force and effect, and the tenant(s) or subtenant(s) thereunder will, upon
request, attom to and acknowledge in writing to the purchaser or purchasers at
such sale or sales as landlord thereunder, or (ii) upon notice to such effect
from Holder, or any purchaser or purchasers, terminate within thirty (30) days
from the date of sale. In the event the tenant fails to surrender possession of
the Property upon demand, the purchaser shall be entitled to institute and
maintain a summary action for possession of the Property (such as an action for
forcible detainer) in any court having jurisdiction.

                                    ARTICLE 6

                                 Miscellaneous

      Section 6.1 Scope of Mortgage. This Mortgage is a mortgage of both real
and personal property, a security agreement, an assignment of rents and leases,
a financing statement and a collateral assignment, and also covers proceeds and
fixtures.

      Section 6.2 Effective as a Financing Statement. This Mortgage shall be
effective as a financing statement filed as a fixture filing with respect to all
fixtures included within the Property and is to be filed for record in the real
estate records of each county where any part of the Property (including said
fixtures) is situated. This Mortgage shall also be effective as a financing
statement covering as-extracted collateral (including oil and gas), accounts and
general intangibles under the South Carolina Uniform Commercial Code, as in
effect from time to time, and the Uniform Commercial Code, as in effect from
time to time, in any other state where the Property is situated which will be
financed at the wellhead or minehead of the wells or mines located on the
Property and is to be filed for record in the real estate records of each county
where any part of the Property is situated. This Mortgage shall also be
effective as a financing statement covering any other Property and may be filed
in any other appropriate filing or recording office. The mailing address of
Mortgagor and the Holder are set forth at the end of this Mortgage. A carbon,
photographic or other reproduction of this Mortgage or of any financing
statement relating to this Mortgage shall be sufficient as a financing statement
for any of the purposes referred to in this Section.

      Section 6.3 Notice to Account Debtors. In addition to the rights granted
elsewhere in this Mortgage, Holder may at any time notify the account debtors or
obligors of any accounts, chattel paper, general intangibles, negotiable
instruments or other evidences of indebtedness included in the Collateral to pay
Holder directly.

      Section 6.4 Waiver by Holder. Holder may at any time and from time to time
by a specific writing intended for the purpose: (a) waive compliance by
Mortgagor with any covenant herein made by Mortgagor to the extent and in the
manner specified in such writing; (b) consent to Mortgagor's doing any act which
hereunder Mortgagor is prohibited from doing, or to Mortgagor's failing to do
any act which hereunder Mortgagor is required to do, to the extent and in the
manner specified in such writing; (c) release any part of the Property or any
interest

                                       30


therein from the lien and security interest of this Mortgage; or (d) release any
party liable, either directly or indirectly, for the Secured Indebtedness or for
any covenant herein or in any other Loan Document, without impairing or
releasing the liability of any other party. No such act shall in any way affect
the rights or powers of Holder hereunder except to the extent specifically
agreed to by Holder in such writing.

      Section 6.5 No Impairment of Security. The lien, security interest and
other security rights of Holder hereunder or under any other Loan Document shall
not be impaired by any indulgence, moratorium or release granted by Holder
including, but not limited to, any renewal, extension or modification which
Holder may grant with respect to any Secured Indebtedness, or any surrender,
compromise, release, renewal, extension, exchange or substitution which Holder
may grant in respect of the Property, or any part thereof or any interest
therein, or any release or indulgence granted to any endorser, guarantor or
surety of any Secured Indebtedness. The taking of additional security by Holder
shall not release or impair the lien, security interest or other security rights
of Holder hereunder or affect the liability of Mortgagor or of any endorser,
guarantor or surety, or improve the right of any junior lienholder in the
Property (without implying hereby Holder's consent to any junior lien).

      Section 6.6 Acts Not Constituting Waiver by Holder. Holder may waive any
default without waiving any other prior or subsequent default. Holder may remedy
any default without waiving the default remedied. Neither failure by Holder to
exercise, nor delay by Holder in exercising, nor discontinuance of the exercise
of any right, power or remedy (including but not limited to the right to
accelerate the maturity of the Secured Indebtedness or any part thereof) upon or
after any default shall be construed as a waiver of such default or as a waiver
of the right to exercise any such right, power or remedy at a later date. No
single or partial exercise by Holder of any right, power or remedy hereunder
shall exhaust the same or shall preclude any other or further exercise thereof,
and every such right, power or remedy hereunder may be exercised at any time and
from time to time. No modification or waiver of any provision hereof nor consent
to any departure by Mortgagor therefrom shall in any event be effective unless
the same shall be in writing and signed by Holder and then such waiver or
consent shall be effective only in the specific instance, for the purpose for
which given and to the extent therein specified. No notice to nor demand on
Mortgagor in any case shall of itself entitle Mortgagor to any other or further
notice or demand in similar or other circumstances. Remittances in payment of
any part of the Secured Indebtedness other than in 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 Holder 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 practice of the collecting bank or banks.
Acceptance by Holder of any payment in an amount less than the amount then due
on any Secured Indebtedness shall be deemed an acceptance on account only and
shall not in any way excuse the existence of a default hereunder notwithstanding
any notation on or accompanying such partial payment to the contrary.

      Section 6.7 Mortgagor's Successors. If the ownership of the Property or
any part thereof becomes vested in a person other than Mortgagor, Holder may,
without notice to Mortgagor, deal with such successor or successors in interest
with reference to this Mortgage and to the Secured Indebtedness in the same
manner as with Mortgagor, without in any way vitiating

                                       31


or discharging Mortgagor's liability hereunder or for the payment of the
indebtedness or performance of the obligations secured hereby. No transfer of
the Property, no forbearance on the part of Holder, and no extension of the time
for the payment of the Secured Indebtedness given by Holder shall operate to
release, discharge, modify, change or affect, in whole or in part, the liability
of Mortgagor hereunder for the payment of the indebtedness or performance of the
obligations secured hereby or the liability of any other person hereunder for
the payment of the indebtedness secured hereby. Each Mortgagor agrees that it
shall be bound by any modification of this Mortgage or any of the other Loan
Documents made by Holder and any subsequent owner of the Property, with or
without notice to such Mortgagor, and no such modifications shall impair the
obligations of such Mortgagor under this Mortgage or any other Loan Document.
Nothing in this Section or elsewhere in this Mortgage shall be construed to
imply Holder's consent to any transfer of the Property.

      Section 6.8 Place of Payment; Forum; Waiver of Jury Trial. All Secured
Indebtedness which may be owing hereunder at any time by Mortgagor shall be
payable at the place designated in the Note (or if no such designation is made,
at the address of Holder indicated at the end of this Mortgage). Mortgagor
hereby irrevocably submits generally and unconditionally for itself and in
respect of its property to the non-exclusive jurisdiction of any South Carolina
state court, or any United States federal court, sitting in the county in which
the Secured Indebtedness is payable, and to the non-exclusive jurisdiction of
any state or United States federal court sitting in-the state in which any of
the Property is located, over any suit, action or proceeding arising out of or
relating to this Mortgage or the Secured Indebtedness. Mortgagor hereby
irrevocably waives, to the fullest extent permitted by law, any objection that
Mortgagor may now or hereafter have to the laying of venue in any such court and
any claim that any such court is an inconvenient forum. Mortgagor hereby agrees
and consents that, in addition to any methods of service of process provided for
under applicable law, all service of process in any such suit, action or
proceeding in any South Carolina state court, or any United States federal
court, sitting in the state in which the Secured Indebtedness is payable may be
made by certified or registered mail, return receipt requested, directed to
Mortgagor at its address stated at the end of this Mortgage, or at a subsequent
address of Mortgagor of which Holder received actual notice from Mortgagor in
accordance with this Mortgage, and service so made shall be complete five (5)
days after the same shall have been so mailed. Nothing herein shall affect the
right of Mortgagee to serve process in any manner permitted by law or limit the
right of Mortgagee to bring proceedings against Mortgagor in any other court or
jurisdiction. TO THE FULLEST EXTENT PERMITTED BY LAW, MORTGAGOR WAIVES THE RIGHT
TO TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT OR OTHER PROCEEDING ARISING
OUT OF OR RELATING TO THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT.

      Section 6.9 Subrogation to Existing Liens; Vendor's Lien. To the extent
that proceeds of the Note are used to pay indebtedness secured by any
outstanding lien, security interest, charge or prior encumbrance against the
Property, such proceeds have been advanced by Holder at Mortgagor's request, and
Holder shall be subrogated to any and all rights, security interests and liens
owned by any owner or holder of such outstanding liens, security interests,
charges or encumbrances, however remote, irrespective of whether said liens,
security interests, charges or encumbrances are released, and all of the same
are recognized as valid and subsisting and are renewed and continued and merged
herein to secure the Secured Indebtedness, but the terms and

                                       32


provisions of this Mortgage shall govern and control the manner and terms of
enforcement of the liens, security interests, charges and encumbrances to which
Holder is subrogated hereunder. It is expressly understood that, in
consideration of the payment of such indebtedness by Holder, Mortgagor hereby
waives and releases all demands and causes of action for offsets and payments in
connection with the said indebtedness. If all or any portion of the proceeds of
the loan evidenced by the Note or of any other secured indebtedness has been
advanced for the purpose of paying the purchase price for all or a part of the
Property, no vendor's lien is waived; and Holder shall have, and is hereby
granted, a vendor's lien on the Property as cumulative additional security for
the Secured Indebtedness. Holder may foreclose under this Mortgage or under the
vendor's lien without waiving the other or may foreclose under both.

      Section 6.10 Application of Payments to Certain Indebtedness. If any part
of the Secured Indebtedness cannot be lawfully secured by this Mortgage or if
any part of the Property cannot be lawfully subject to the lien and security
interest hereof to the full extent of such indebtedness, then all payments made
shall be applied on said indebtedness first in discharge of that portion thereof
which is not secured by this Mortgage.

      Section 6.11 Nature of Loan; Compliance with Usury Laws. The loan
evidenced by the Note is being made solely for the purpose of carrying on or
acquiring a business or commercial enterprise. It is the intent of Mortgagor and
Holder and all other parties to the Loan Documents to conform to and contract in
strict compliance with applicable usury law from time to time in effect. All
agreements between Holder and Mortgagor (or any other party liable with respect
to any indebtedness under the Loan Documents) are hereby limited by the
provisions of this Section, which shall override and control all such
agreements, whether now existing or hereafter arising. In no way, nor in any
event or contingency (including but not limited to prepayment, default, demand
for payment, or acceleration of the maturity of any obligation), shall the
interest taken, reserved, contracted for, charged, chargeable, or received under
this Mortgage, the Note or any other Loan Document or otherwise, exceed the
maximum nonusurious amount permitted by applicable law (the "Maximum Amount").
If, from any possible construction of any document, interest would otherwise be
payable in excess of the Maximum Amount, any such construction shall be subject
to the provisions of this Section and such document shall ipso facto be
automatically reformed and the interest payable shall be automatically reduced
to the Maximum Amount, without the necessity of execution of any amendment or
new document.. If Holder shall ever receive anything of value which is
characterized as interest under applicable law and which would apart from this
provision be in excess of the Maximum Amount, an amount equal to the amount
which would have been excessive interest shall, without penalty, be applied to
the reduction of the principal amount owing on the Secured Indebtedness in the
inverse order of its maturity and not to the payment of interest, or refunded to
Mortgagor or the other payor thereof if and to the extent such amount which
would have been excessive exceeds such unpaid principal. The right to accelerate
maturity of the Note or any other Secured Indebtedness does not include the
right to accelerate any interest, which has not otherwise accrued on the date of
such acceleration, and Holder does not intend to charge or receive any unearned
interest in the event of acceleration. All interest paid or agreed to be paid to
Holder shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term (including any renewal or
extension) of such indebtedness so that the amount of interest on account of
such indebtedness does not exceed the Maximum Amount As used in this

                                       33


Section, the term "applicable law" shall mean the laws of the State of South
Carolina or the federal laws of the United States applicable to this
transaction, whichever laws allow the greater interest, as such laws now exist
or may be changed or amended or come into effect in the future.

      Section 6.12 Releases.

      (a) Release of Mortgage. If all of the Secured Indebtedness be paid as the
same becomes due and payable and all of the covenants, warranties, undertakings
and agreements made in this Mortgage are kept and performed, and all
obligations, if any, of Holder for further advances have been terminated, then,
and in that event only, all rights under this Mortgage shall terminate (except
to the extent expressly provided herein with respect to indemnifications,
representations and warranties and other rights which are to continue following
the release hereof) and the Property shall become wholly clear of the liens,
security interests, conveyances and assignments evidenced hereby, and such liens
and security interests shall be released by Holder in due form at Mortgagor's
cost. Without limitation, all provisions herein for indemnity of Holder shall
survive discharge of the Secured Indebtedness, the termination of any and all
Swap Transactions and any foreclosure, release or termination of this Mortgage.

      (b) Partial Releases; No Release in Default. Partial releases of the lien
of this Mortgage shall be made in accordance with the terms and provisions of
Exhibit C attached hereto and by this reference made a part hereof, or in
accordance with such other terms and conditions as may subsequently be agreed to
by Holder. If no such Exhibit C is attached hereto, then there are no terms and
provisions for partial releases, to which Holder and Mortgagor have agreed at
this time. In any event, no partial release shall be sought, requested or
required if any Default has occurred which has not been cured.

      (c) Effect of Partial Release. Holder may, regardless of consideration,
cause the release of any part of the Property from the lien of this Mortgage
without in any manner affecting or impairing the lien or priority of this
Mortgage as to the remainder of the Property.

      (d) Release Fee. If permitted by applicable law Mortgagor shall pay to
Holder, at the time of each partial or complete release of the lien of this
Mortgage, a release fee in the amount of. Twenty-Five and No/100 Dollars
($25.00) if the release instrument is delivered to Holder for execution or Fifty
and No/100 Dollars ($50.00), if Holder is required to prepare the release
instrument.

      Section 6.13 Notices. All notices, requests, consents, demands and other
communications required or which any party desires to give hereunder or under
any other Loan Document shall be in writing and, unless otherwise specifically
provided in such other Loan Document, shall be deemed sufficiently given or
furnished if delivered by personal delivery, by nationally recognized overnight
courier service, or by registered or certified United States mail, postage
prepaid, addressed to the party to whom directed at the addresses specified in
this Mortgage (unless changed by similar notice in writing given by the
particular party whose address is to be changed) or by facsimile. Any such
notice or communication shall be deemed to have been given either at the time of
personal delivery or, in the case of courier or mail, as of the date of first
attempted delivery at the address and in the manner provided herein, or, in the
case of facsimile, upon receipt. Notwithstanding the foregoing, no notice of
change of address shall

                                       34


be effective except upon receipt. This Section shall not be construed in any way
to affect or impair any waiver of notice or demand provided in any Loan Document
or to require giving of notice or demand to or upon any person in any situation
or for any reason.

      Section 6.14 Invalidity of Certain Provisions. A determination that any
provision of this Mortgage is unenforceable or invalid shall not affect the
enforceability or validity of any other provision and the determination that the
application of any provision of this Mortgage to any person or circumstance is
illegal or unenforceable shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.

      Section 6.15 Gender; Titles; Construction. Within this Mortgage, words of
any gender shall be held and construed to include any other gender, and words in
the singular number shall be held and construed to include the plural, unless
the context otherwise requires. Titles appearing at the beginning of any
subdivisions hereof are for convenience only, do not constitute any part of such
subdivisions, and shall be disregarded in construing the language contained in
such subdivisions. The use of the words "herein," "hereof," "hereunder" and
other similar compounds of the word "here" shall refer to this entire Mortgage
and not to any particular Article, Section, paragraph or provision. The term
"person" and words importing persons as used in this Mortgage shall include
firms, associations, partnerships (including limited partnerships), joint
ventures, trusts, corporations, limited liability companies and other legal
entities, including public or governmental bodies, agencies or
instrumentalities, as well as natural persons.

      Section 6.16 Reporting Compliance. Mortgagor agrees to comply with any and
all reporting requirements applicable to the transaction evidenced by the Note
and secured by this Mortgage which are set forth in any law, statute, ordinance,
rule, regulation, order or determination of any governmental authority,
including but not limited to The International Investment Survey Act of 1976,
The Agricultural Foreign Investment Disclosure Act of 1978, The Foreign
Investment in Real Property Tax Act of 1980 and the Tax Reform Act of 1984 and
further agrees upon request of Holder to furnish Holder with evidence of such
compliance.

      Section 6.17 Holder's Consent. Except where otherwise expressly provided
herein, in any instance hereunder where the approval, consent or the exercise of
judgment of Holder is required or requested, (a) the granting or denial of such
approval or consent and the exercise of such judgment shall be within the sole
discretion of Holder, and Holder shall not, for any reason or to any extent, be
required to grant such approval or consent or exercise such judgment in any
particular manner, regardless of the reasonableness of either the request or
Holder's judgment, and (b) no approval or consent of Holder shall be deemed to
have been given except by a specific writing intended for the purpose and
executed by an authorized representative of Holder.

      Section 6.18 Mortgagor. Unless the context clearly indicates otherwise, as
used in this Mortgage, "Grantor" means the Mortgagor named in Section 1.2 hereof
The obligations of Mortgagor hereunder shall be joint and several. If any
Mortgagor, or any signatory who signs on behalf of any Mortgagor, is a
corporation, partnership or other legal entity, Mortgagor and any such
signatory, and the person or persons signing for it, represent and warrant to
Holder that this instrument is executed, acknowledged and delivered by
Mortgagor's duly authorized

                                       35


representatives. If Mortgagor is an individual, no power of attorney granted by
Mortgagor herein shall terminate on Mortgagor's disability.

      Section 6.19 Execution; Recording. This Mortgage has been executed in
several counterparts, all of which are identical, and all of which counterparts
together shall constitute one and the same instrument. The date or dates
reflected in the acknowledgments hereto indicate the date or dates of actual
execution of this Mortgage, but such execution is as of the date shown on the
first page hereof, and for purposes of identification and reference the date of
this Mortgage shall be deemed to be the date reflected on the first page hereof.
Mortgagor will cause this Mortgage and all amendments and supplements thereto
and substitutions therefor and all financing statements and continuation
statements relating thereto to be recorded, filed, re-recorded and refiled in
such manner and in such places as Holder shall reasonably request and will pay
all such recording, filing, re-recording and refiling taxes, fees and other
charges.

      Section 6.20 Successors and Assigns. The terms, provisions, covenants and
conditions hereof shall be binding upon Mortgagor, and the heirs, devisees,
representatives, successors and assigns of Mortgagor, and shall inure to the
benefit of Holder and shall constitute covenants running with the Land. All
references in this Mortgage to Mortgagor shall be deemed to include all such
heirs, devisees, representatives, successors and assigns of Mortgagor.

      Section 6.21 Modification or Termination. The Loan Documents may only be
modified or terminated by a written instrument or instruments intended for that
purpose and executed by the party against which enforcement of the modification
or termination is asserted. Any alleged modification or termination which is not
so documented shall not be effective as to any party.

      Section 6.22 No Partnership, Etc.. The relationship between Holder and
Mortgagor is solely that of lender and borrower. Holder has no fiduciary or
other special relationship with Mortgagor. Nothing contained in the Loan
Documents is intended to create any partnership, joint venture, association or
special relationship between Mortgagor and Holder or in any way make Holder a
co-principal with Mortgagor with reference to the Property. All agreed
contractual duties between or among Holder and Mortgagor are set forth herein
and in the other Loan Documents and any additional implied covenants or duties
are hereby disclaimed. Any inferences to the contrary of any of the foregoing
are hereby expressly negated.

      Section 6.23 Applicable Law. THIS MORTGAGE, AND ITS VALIDITY, ENFORCEMENT
AND INTERPRETATION, SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED
IN ACCORDANCE WITH AND PURSUANT TO THE LAWS OF THE STATE OF SOUTH CAROLINA
(WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES
FEDERAL LAW. IN THE EVENT THAT THE "CHOICE OF LAW" RULES OF THE STATE OF SOUTH
CAROLINA CAN BE CONSTRUED OR INTERPRETED TO REQUIRE THE LAWS OF ANOTHER
JURISDICTION TO GOVERN, THE "CHOICE OF LAW" RULES OF THE STATE OF SOUTH CAROLINA
SHALL NOT APPLY.

      Section 6.24 Execution Under Seal. Mortgagor agrees that this instrument
is executed under seal. If Mortgagor is a corporation, the designation ("SEAL")
on this instrument shall be as effective as the affixing of Mortgagor's
corporate seal physically to this instrument.

                                       36


      Section 6.25 Entire Agreement. The Loan Documents constitute the entire
understanding and agreement between Mortgagor and Holder with respect to the
transactions arising in connection with the Secured Indebtedness and supersede
all prior written or oral understandings and agreements between Mortgagor and
Holder with respect to the matters addressed in the Loan Documents. Mortgagor
hereby acknowledges that, except as incorporated in writing in the Loan
Documents, there are not, and were not, and no persons are or were authorized by
Holder to make, any representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the matters addressed in the Loan
Documents.

      Section 6.26 Greater Estate. In the event that Mortgagor is the owner of a
leasehold estate with respect to any portion of the Property and, prior to the
satisfaction of the indebtedness and the cancellation of this Mortgage of
record, Mortgagor obtains a fee estate in such portion of the Property, then,
such fee estate shall automatically, and without further action of any kind on
the part of Mortgagor, be and become subject to the security lien of this
Mortgage.

      Section 6.27 Covenants of Guarantors. As apart of the inducement to Holder
to make the loan evidenced by the Note, Mortgagor may have caused certain other
persons, firms or corporations to enter into certain guaranty agreements with
Holder pertaining to the financing and payment for construction of improvements
on the Land. In such event, Mortgagor covenants and agrees that such persons,
firms or corporations shall fully perform, comply with and abide by such
agreements. It is further understood and agreed by Mortgagor that such
representations and agreements by the other persons shall constitute, for the
purpose of its obligations hereunder, covenants on behalf of Mortgagor.

      Section 6.28 Certain Obligations Secured. TO THE EXTENT PERMITTED IN THE
LOAN DOCUMENTS, THE SECURED INDEBTEDNESS MAY INCLUDE INTEREST WHICH IS DEFERRED,
ACCRUED OR CAPITALIZED.

      Section 6.29 Arbitration. This Mortgage is subject to arbitration as
provided in the Promissory Note.

                                       37


      Section 6.30 Waiver of Appraisal Rights . The laws of South Carolina
provide that in any real estate foreclosure proceeding a defendant against whom
a personal judgment is taken or asked may within thirty days after the sale of
the Property apply to the court for an order of appraisal. The statutory
appraisal value as approved by the court would be substituted for the high bid
and may decrease the amount of any deficiency owing in connection with the
transaction. THE MORTGAGOR HEREBY WAIVES AND RELINQUISHES THE STATUTORY
APPRAISAL RIGHTS WHICH MEANS THE HIGH BID AT THE JUDICIAL FORECLOSURE SALE WILL
BE APPLIED TO THE DEBT REGARDLESS OF ANY APPRAISED VALUE OF THE PROPERTY.

      IN WITNESS WHEREOF, Mortgagor has executed this instrument under seal as
of the date first written on page 1 hereof.

                                                 Mortgagor:
Signed, sealed and
delivered in the                                 GRANDE PALMS, L.L.C.
presence of:

/s/ [ILLEGIBLE]
- ----------------------------
Witness                                          By: /s/ CHARLES N. NYE
                                                     --------------------------
                                                 Name: CHARLES N. NYE
/s/ [ILLEGIBLE]                                  Title: VICE PRESIDENT
- ----------------------------
Witness

                                                       [CORPORATE SEAL]

                                       38


STATE OF TEXAS        )
                      )          ACKNOWLEDGMENT
COUNTY OF DALLAS      )

      THE FOREGOING INSTRUMENT was acknowledged before me this 27th day of April
2005, by Grande Palms, L.L.C., by CHARLES N. NYE, its VICE PRESIDENT.

/s/ Jean S Yarborough          (SEAL)
- -----------------------------
Notray Public for TEXAS

My Commission Expires: April 9, 2008                        [STAMP]

                                       39


                                  EXHIBIT "A"

                              PROPERTY DESCRIPTION

      ALL AND SINGULAR that certain piece, parcel, tract of land, lying, and
being in Little River Township, Horry County, South Carolina, consisting 3.99 +
acres, and being more particularly shown and delineated as "3.99 + AC" on a plat
by Atlantic Land Surveying Company, dated February 22, 2005, and recorded April
25, 2005, in Plat Book 204 at Page 217, records of Horry County, South Carolina
("Plat") ("Construction Parcel").

      BOUNDED as shown upon the Plat by Lot 89, Lot 91, and Lot 92 to the
Northwest; Kingston Road and Grantor (the latter hereinafter referred to as
"Construction parcel"); to the Northeast and Southeast; and Kingston Plantation,
North Hampton, and Richmond Park, Phase XIV to the Southwest, and more
particularly described as follows:

      Beginning at a 5/8 inch iron old, the most northeasterly point of a 50
foot ingress and egress easement, which is a common corner for lot 89 Arcadian
Shores (now or formerly owned by J. Thayer Coggin) and the Kingston Road
(private) 70 foot right-of-way.

      THENCE South 35 degrees 45 minutes 21 seconds East for a distance of 75.51
feet to a Y2 inch iron pipe old;

      THENCE South 35 degrees 48 minutes 21 seconds East for a distance of
299.75 feet to a Y2 inch iron pipe old;

      THENCE South 35 degrees 30 minutes 05 seconds East for a distance of 65.19
feet to a Y2 inch iron pipe old;

      THENCE South 35 degrees 44 minutes 39 seconds East for a distance of
345.66 feet to a '/2 inch iron pipe old;

      THENCE South 35 degrees 46 minutes 16 seconds East for a distance of
126.11 feet to a point;

      THENCE South 54 degrees 17 minutes 18 seconds West for a distance of
500.82 feet to a point;

      THENCE North 35 degrees 44 minutes 31 seconds West for a distance of
185.34 feet to a Y2 inch iron pipe old;

      THENCE North 35 degrees 44 minutes 31 seconds West for a distance of
286.34 feet to a 'h inch iron pipe old;

      THENCE North 35 degrees 47 minutes 49 seconds West for a distance of
364.85 feet to a '/2 inch iron pipe old;

      THENCE North 35 degrees 42 minutes 43 second West for a distance of 74.93
feet to a '/2 inch iron pipe old;

      THENCE-North 54 degrees 12 minutes 06 seconds East for a distance of
500.91 feet to a 5/8 inch iron new, the point of beginning.

      DERIVATION: This being the identical property conveyed to Mortgagor by
deed of Myrtle Beach Hotels, L.L.C., dated April 27, 2005, recorded
simultaneously herewith ("Derivation Deed").

      TOGETHER WITH, the right and easement to construct water, sewer, electric,
and other utility lines and facilities, and drainage systems and facilities, and
to construct such lines, systems, and facilities to water, sewer, electric, and
other utility lines and facilities, and/or drainage systems and facilities on
the above property, such construction and connections to be made at such
locations as all agreed upon by Myrtle Beach Hotels, L.L.C. and Mortgagor, from
time to time, as provided in the Derivation Deed.

      THE WITHIN conveyance is subject to restrictions of record, easement of
record, and on, over, and under the ground, as set out in the Derivation Deed,
and to that certain Agreement of Cooperation and Use between Mortgagor and
Myrtle Beach Hotels, L.L.C. of even date herewith, recorded in Deed Book ASNZ at
Page _____, records of Horry County, South Carolina.

      AND ALSO, subject to that certain Declaration of Covenants, Conditions and
Restrictions for Kingston Shores, dated April 26, 2005, and recorded April 29
2005, in Deed Book 2402 at Page 961, records of Horry County, South
Carolina.

                                       40


                                   EXHIBIT B

                             PERMITTED ENCUMBRANCES

                    Those title encumbrances as set forth in

 Title Insurance Commitment No. 18681-53495 Grande Palms/Bank of America, N.A.

                    issued by Stewart Title Guaranty Company.

                                       41


                                EXHIBIT C PARTIAL

                                     RELEASE

      Upon payment of the Release Fee for each Unit (as defined in the Loan
Agreement) and provided that there is no default or condition that with the
passage of time or the giving of notice or both would constitute a default under
any Loan Document, Holder, at the request and expense of Mortgagor, will
promptly release from the lien, legal effect and operation of the Mortgage and
to reconvey to Mortgagor, any one or more of the individual Units (as defined in
the Loan Agreement) contained within the Land.

      The sum paid to Holder for partial releases shall be applied to Holder's
option either to accrued and unpaid interest, to the outstanding principal
balance of the Note or to such other amounts as may be outstanding under the
Note.

                                       42

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Thomas J. Corcoran, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of FelCor Lodging Trust Incorporated;
2.	Based on my knowledge, this quarterly 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 quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;
4.	The registrant’s other certifying officers 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 quarterly report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly 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
d)	disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s first 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 officers 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 registrant’s board of directors (or persons performing the equivalent function):

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.

Date: August 4, 2005

/s/ Thomas J. Corcoran, Jr.

Thomas J. Corcoran, Jr.

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Richard A. Smith, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of FelCor Lodging Trust Incorporated;
2.	Based on my knowledge, this quarterly 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 quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;
4.	The registrant’s other certifying officers 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 quarterly report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly 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
d)	disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s first 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 officers 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 registrant’s board of directors (or persons performing the equivalent function):

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.

Date: August 4, 2005

/s/ Richard A. Smith

Richard A. Smith

Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of FelCor Lodging Trust Incorporated (the “Registrant”) on Form 10-Q for the three and six months ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report), the undersigned hereby certifies, in the capacity as indicated below and pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The 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 the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

August 4, 2005	/s/Thomas J. Corcoran, Jr.
	Thomas J. Corcoran, Jr.
	Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of FelCor Lodging Trust Incorporated (the “Registrant”) on Form 10-Q for the three and six months ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report), the undersigned hereby certifies, in the capacity as indicated below and pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The 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 the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

August 4, 2005	/s/Richard A. Smith
	Richard A. Smith
	Chief Financial Officer