Exhibit 10.2

HOTEL

MANAGEMENT AGREEMENT

Between

TRS KCI LOFT, LLC

and

PRESIDIAN DESTINATIONS, LTD.

Dated

December 14, 2016

TABLE OF CONTENTS

 

 

EXHIBIT A -- Hotel Properties and Owners

EXHIBIT A-1 -- Competitive Set

EXHIBIT A-2 -- Accounting Software and Payroll Processes

EXHIBIT A-3 -- List of Operator’s Hotels Within 5 Mile Radius

EXHIBIT B -- Franchise Agreements

HOTEL MANAGEMENT AGREEMENT

This HOTEL MANAGEMENT AGREEMENT is made and entered into effective as of December 14, 2016, by and among TRS KCI LOFT, LLC, a Delaware limited liability company (“Lessee”) and Presidian Destinations, Ltd. (“Operator”), with reference to the following facts:

A.              Lessee leases from the entity described on Exhibit A (“Owner” and collectively, the “Owners”) the hotel property described on Exhibit A (“Hotel”) pursuant to the Master Lease Agreement dated December 14, 2016 (the “Lease” );

B.              Lessee desires to engage Operator to operate and manage the Hotels listed on Exhibit A beginning on the Commencement Date in accordance with the terms of this Agreement;

C.              Operator desires to supply the services and to operate the Hotels beginning on the Commencement Date in accordance with the terms of this Agreement; and

D.              The parties desire that this Agreement, while it controls all of the Hotels collectively, will represent an individual hotel management agreement for each Hotel described on Exhibit A , as it may be amended from time to time.

NOW, THEREFORE, for and in consideration of the mutual covenants, conditions, stipulations, agreements and obligations hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, Lessee and Operator covenant and agree as follows:

ARTICLE 1                           


DEFINITIONS

Section 1.01.                            Definitions.

(a)              As used herein, the following terms shall have the indicated meanings:

“Adjusted Operating Expenses” shall mean Operating Expenses excluding Operator’s Fee, insurance premiums (with the exception of the insurance described in Section 12.02), discretionary employee bonuses (to the extent exclusion is approved by Lessee), and Property real estate and personal property taxes.

“ABC Lease” shall refer to the Alcoholic Beverage Concession and Lease Agreement, dated as of March 15, 2009, as amended by a First Amendment of even date with this Agreement by and between Lessee and LJABC-KS, LLC (the “ABC Tenant”).  ABC Tenant is an affiliate of Operator.

“Affiliate” shall mean (a) any person that, directly or indirectly, controls or is controlled by or is under common control with such person, (b) any person that owns, beneficially, directly or indirectly, ten percent or more of the outstanding capital stock, shares or equity interests of

such person, or (c) any officer, director, employee, partner or trustee of such person or any person controlling, controlled by, or under common control with such person.

“Agreement” shall mean this Hotel Management Agreement and all amendments, modifications, supplements, consolidations, extensions and revisions to this Hotel Management Agreement approved by Lessee and Operator.

“Approved Budget” shall mean the Hotel Operating Budget prepared in accordance with Section 6.01 of this Agreement and approved in writing by Lessee.

“CPI” shall mean the Consumer Price Index, all items for All Urban Consumers, published by the Bureau of Labor Statistics of the United States Department of Labor as reported in The Wall Street Journal.

“Capital Improvements” will mean all expenditures for replacements, substitutions and additions to Hotels and Hotel FF&E, which are required to be capitalized in accordance with generally accepted accounting principles.

“Commencement Date” shall mean December 14, 2016.

“Competitive Set” for each Hotel means the hotels listed on Exhibit_A-1 attached hereto, or such other hotels as may be reasonably agreed upon by Lessee and Operator from time to time during the Term.  The Lessee and Operator shall discuss at least once a year, and upon any major change to the Hotel or an existing hotel in the Competitive Set, the composition of the Competitive Set. Notwithstanding the foregoing to the contrary, the Competitive Set shall at all times consist of hotels in the market areas that are most comparable to the Hotel in quality, price, location and market (with due consideration given to age, quality, size, amenities, amount of meeting space and business mix) (the “ Market Considerations ”), and in the event that any hotel within the then current Competitive Set suffers a material change during any period of a Fiscal Year (including the  cessation of operation for any period exceeding  30 days, a change in the standards of operation of a hotel (including any material brand license change or modification), or the occurrence of Force Majeure, then such hotel shall be excluded during the period that such hotel doesn’t conform to the operations of the Hotel for any purpose that Competitive Set is used in this Agreement. Any changes to a Hotel’s Competitive Set must be approved by Lessee.

“Event(s) of Default” shall mean one or more of the events or occurrences listed in Section 17.01 of this Agreement.

“Fiscal Year” shall mean each twelve (12) month calendar year ending December 31 during the Operating Term, except that the first Fiscal Year and the last Fiscal Year of the Operating Term may not be full calendar years.

“ Force Majeure ” shall mean interruptions in the operation of the Hotel (or in the case of the hotels within the Competitive Set, to any such hotels) or any of its essential services on account of an interruption in any one or more of the utility services servicing the Hotel, or on account of act of God, labor dispute not caused by Operator, shortage of labor or materials, earthquake, hurricane, flood, fire or other casualty, taking by eminent domain, civil commotion, riot, mob violence, insurrection, malicious mischief, sabotage, rebellion, act of public enemy,

invasion, embargo, or any similar cause beyond Operator’s reasonable control, but excluding any changes in economic or market conditions . For purpose of Force Majeure pertaining to one or more hotels within the Competitive Set, the reference to the “Operator” means the respective operator or manager under the Competitive Set hotel that is affected by the interruption.

“Franchisor” shall mean the franchisor under the Franchise Agreements.

“Franchisor Agreement” shall mean the franchise license agreement held by Lessee with respect to the Hotel as described in Exhibit B as it may be amended from time to time.

“GAAP” shall mean generally accepted accounting principles and procedures in the United States.

“Gross Hotel Income” shall mean all income and proceeds of sales received by Operator for guest use, occupancy or enjoyment of the Hotel or for the sale of any goods, services or other items sold on or provided from the Hotel to guests in the ordinary course of the Hotel operation, but excluding the following: (i) any excise, sales or use taxes or similar government charges collected directly from patrons or guests, or as a part of the sales price of any goods, services or displays, such as gross receipts, admission, cabaret or similar or equivalent taxes; (ii) receipts from condemnation awards or sales in lieu of or under threat of condemnation; (iii) proceeds of insurance (other than proceeds from business interruption insurance received by Lessee which shall be allocated by Lessee to any applicable periods); (iv) proceeds of sales of capital assets, furniture and Hotel Operating Equipment; (v) consideration received at the Hotel for hotel accommodations, goods and services to be provided at other hotels although arranged by, for or on behalf of, Operator; (vi) proceeds of any financing; (vii) working capital provided by Lessee; (viii) any funds provided by Lessee to Operator whether for Operating Expenses or otherwise; (ix) interest income and fees, rents and other revenues from telecommunications tower or similar leases or other leases or sub-leases of any part of the Property (x) other income or proceeds resulting other than from guest use or occupancy of the Hotel or the Property, or any part thereof, or other than from the sale of goods, services or other items sold on or provided in connection with guest services at the Hotel in the ordinary course of business; (xi) tips and service charges paid to employees; (xii) interest on accounts; (xiii) value of complimentary rooms, f&b, and services; (xiv) revenues of subtenants, concessionaires, and licensees, but rent and license fees aid to Lessee would be included.  The parties intend that Gross Hotel Income shall be computed in a manner consistent with “room rentals and other hotel services” computation of revenues on the Parent’s audited Consolidated Statements of Operations.

 “Holder” shall mean the holder of any Mortgage and the indebtedness secured thereby, and such holder’s successors and assigns.

“Hotel Capital Budget” shall mean the budget relating to capital expenditures at a Hotel as described in Section 6.01.

“Hotel FF&E” shall mean the furniture, furnishings, wall coverings, fixtures and hotel equipment for a Hotel and which includes equipment required for operation of the kitchens, restaurants and laundry, office equipment, material handling equipment, cleaning and engineering equipment and vehicles.

“Hotel Standards” shall mean the standards established by the respective Franchisor of the Hotel from time to time as well as those identified in section 3.02.

“Hotels” shall mean the hotel properties described in Exhibit A hereto, as it may be amended from time to time by mutual agreement of Lessee and Operator to add hotel properties or to delete hotel properties as a result of termination of this Agreement with respect to one or more hotel properties pursuant to the termination provisions set forth in this Agreement.  “Hotel” shall mean any hotel set forth on Exhibit A as it may be amended from time to time.

“Incentive Fees” shall mean incentive compensation paid by Lessee to Operator for performance above budgeted expectations, achievable to a maximum payout of 2% of Gross Hotel Income. The following will trigger Incentive Fee payouts:

(i)

Fiscal Year 1: Beginning January 1, 2017, Lessee shall pay to Operator an amount equal to 1% of Gross Hotel Income for such Fiscal Year if the Hotel achieves an IR of 8.5 % to 8.99% for such Fiscal Year. Lessee shall pay to Operator an additional amount equal to 1% of Gross Hotel Income for such Fiscal Year if the Hotel achieves an IR of 9.0% or higher for such Fiscal Year.

(ii)

Fiscal Year 2: Beginning January 1, 2018, Lessee shall pay to Operator an amount equal to 1% of Gross Hotel Income for such Fiscal Year if the Hotel achieves an IR of 9.0% to 9.49% for such Fiscal Year.  Lessee shall pay to Operator an additional amount equal to 1% of Gross Hotel Income for such Fiscal Year if the Hotel achieves an IR of 9.5% or higher for such Fiscal Year.

For Year 1 and Year 2, all Incentive Fees will be paid annually based on the standard Fiscal Year. All Incentive Fees will be paid the first of the month after the respective Fiscal Year end profit and loss statements (P&L’s) are finalized.

(iii)

Year 3: Beginning January 1, 2019 and continuing until the termination of this Agreement, Lessee shall pay to Operator the following amounts, up to a maximum payout of 2% of Gross Hotel Income:

a.	0.5% of Gross Hotel Income if the Hotel achieves budgeted NOI.

b.	25% of any NOI in excess of budgeted NOI for the Hotel.

c.	If the Hotel has achieved its budgeted NOI, 25% of any Gross Hotel Income for the Hotel in excess of budgeted Gross Hotel Income for the Hotel.

“Initial Term” shall have the meaning set forth in Section 2.01.

“Independent CPA” shall mean the firm of independent public accountants, which is selected by Lessee from time to time.

"IR" shall mean Investment Return, which shall be equal to the product obtained by dividing NOI, by the total investment of Lessee in the hotel, including acquisitions price, acquisition costs and any capital expenditures not covered in any year by any FF &E reserve.

“Land” shall mean the real property described in Exhibit A to the Lease.

“Lease” shall have the meaning set forth in the recitals.

“Lessee” shall have the meaning set forth in the recitals.

“Lessee Revenue Account” shall mean the bank accounts opened and maintained in Lessee’s name, or in a name designated by Lessee, with a banking institution selected by Lessee, into which all income, receipts and proceeds included in the definition of Gross Hotel Income (without exclusion of any of the items excluded from the definition of such term) shall be deposited.

“Mortgage” shall mean any deed to secure debt, mortgage or deed of trust, from time to time, encumbering all or any portion of a Property, together with all other instruments evidencing or securing payment of the indebtedness secured by such deed to secure debt, mortgage or deed of trust and all amendments, modifications, supplements, extensions, and revisions of such mortgage, deed of trust and other instruments.

“NOI” shall mean Net Operating Income, which shall be determined by deducting Adjusted Operating Expenses from Gross Hotel Income.

“Operating Account” shall mean the bank account opened and maintained in Operator’s name, or in a name designated by Operator, with a banking institution selected by Lessee, from which disbursements shall be made pursuant to the terms of this Agreement.

“Operating Budget” shall mean the budget relating to the operation of the Hotel as described in Section 6.01.

“Operating Equipment” shall mean linens, chinaware, glassware, silverware, uniforms, utensils and other non-consumable items of similar nature.

“Operating Expenses” shall mean all costs and expenses of maintaining, conducting and supervising the operation of the Property, to the extent set forth in an Approved Budget, incurred pursuant to this Agreement or as otherwise specifically provided herein which are properly attributable to the period under consideration under Lessee’s system of accounting, including without limitation:

(i)	The cost of all food and beverages sold or consumed and of all Hotel Operating Equipment and Hotel Operating Supplies;

(ii)	Salaries and wages of on-site Hotel personnel, including costs of payroll taxes and employee benefits and amounts payable under bonus plans approved by Lessee. The salaries or wages of other employees or executives of Operator, or any Affiliate of Operator shall in no event be Operating Expenses;

(iii)

The cost of all other goods and services obtained by Operator in connection with its operation of the Property including, without limitation, heat and utilities, office supplies and all services performed by third parties, including leasing expenses in connection with telephone and data processing equipment and such other equipment as Lessee shall designate;

(iv)	The cost of repairs to and maintenance of the Property to keep the Property in good condition;

(v)

Insurance premiums for all insurance maintained with respect to the Property, including without limitation, property damage insurance, public liability insurance, workers’ compensation insurance or insurance required by similar employee benefits acts, employment liability practices insurance, and such business interruption or other insurance as may be provided for protection against claim, liabilities and losses arising from the use and operation of the Hotel and losses incurred with respect to deductibles applicable to the foregoing types of insurance;

(vi)	All taxes, assessments and other charges (other than federal, state or local income taxes and franchise taxes or the equivalent) payable by or assessed against Operator or Lessee with respect to the operation of the Hotel, including water and sewer charges;

(vii)

Legal fees relating to Hotel operations (excluding legal fees with respect to employee claims), and real estate tax abatement and appeal services excluding legal fees with respect to employee claims;

(viii)

The costs and expenses of technical consultants and specialized operational experts for specialized services in connection with non-recurring work on operational, functional, decorating, design or construction problems and activities, including reasonable third party fees reasonably deemed necessary by Lessee for the efficient operation of the Hotels;

(ix)	All expenses for marketing and sales, including all expenses of advertising, sales promotion and public relations activities at the Hotels, exclusive of Operator’s marketing manager and similar administrative personnel (which expenses shall be borne by Operator);

(x)	Municipal, county and state license and permit fees;

(xi)	All normal and recurring fees, assessments and charges due and payable under Franchisor Agreements;

(xii)

Centralized Services, such as revenue management, accounting, or other services approved in the operating budget;

(xiii)

Credit card fees, travel agent commissions and other third party reservation fees and charges;

(xiv)

All parking charges and parking rental fees and other expenses associated with revenues received by the Hotels related to parking operations, including valet services, including any related to the option lot;

(xv)	All expenses related to the revenues included in Gross Hotel Income, including without limitation, expenses relating to telephone, vending, television, cable television, pay television and similar services;

(xvi)

The costs of obtaining and keeping in force all licenses or permits (including liquor licenses, if any) necessary for the operation of the Hotel and in complying with governmental laws, rules, regulations, ordinances, orders and requirements;

(xvii)

All reasonable travel expenses of Operator’s supervisory personnel on the next level above hotel manager, to include director of engineering, revenue manager and internal auditors (to the extent approved by Lessee) for visits to the Hotels in the performance of their duties hereunder, but not including travel between Operator’s main office and Operator’s regional offices. Travel shall be limited to economy fares;

(xviii)

The costs to send above property supervisory personnel to brand conferences, which costs shall be reimbursed in proportion to the number of Lessee’s hotels associated with the brand conference out of Operator’s total portfolio of hotels managed associated with the specific brand conference. Such percentage of reimbursable costs shall be pre-approved by Lessee prior to the date of the conference;

(xix)

Other potential operating expenses which are budgeted for and approved by Lessee provided they are disclosed in advance to Lessee’s designated representative; and

(xx)	Operator’s Fee, if any.

Operating Expenses shall not include (a) depreciation and amortization except as otherwise provided in this Agreement; (b) debt service; (c) capital expenditures per the Hotel Capital Budget; (d) lease payments to Lessee; and (e) matters incidental to any exercise of the Seller’s parking lot option; (f) All costs, expenses, salaries, wages or other compensation, and any recruitment costs, of any corporate, regional or other headquarters/corporate level employees of Operator, except to the extent such employees are assigned to the Hotel on a temporary basis for at least five (5) consecutive days (but unless approved by Lessee, not more than ten (10) consecutive days) to fill a vacant Executive Staff position, in which case a fair and equitable cost and expense of the foregoing shall constitute an Operating Expense; (g) Any expenses of

Operator's principal or branch offices; (h) Any part of Operator's capital expenses; (i) Operator's overhead or general expenses, including but not limited to duplicating, stationery and postage expenses incurred at Operator's principal or branch offices, and Operator's own fidelity, liability, errors and omissions and casualty insurance, except as may be expressly assumed by Lessee pursuant to the terms of this Agreement; (j) (k) Any expenses for advertising or promotional materials that feature Operator's name or activities but which do not promote the Hotel, unless and to the extent approved in advance by Lessee to be an Operating Expense; (l) Any travel expenses of Operator, other than those described in clause (xvi) of the definition of Operating Expenses; (m) Any interest or penalty payment with respect to an imposition or lien upon the Hotel imposed on Lessee by reason of (1) the failure of Operator to make a payment required to be made by Operator under this Agreement when the funds therefor were available, or (2) the funds therefor were not available and Operator failed to so notify Lessee; provided, however, that interest or penalty payments for the first five (5) such failures in a Fiscal Year and interest or penalty payments incurred as a result of a good faith decision to contest the imposition or lien, which could not be contested without incurrence thereof, shall be Operating Expenses; (n) Any cost for which Operator is liable under any indemnification or any other provision of this Agreement; and (o) Political or charitable contributions made by Operator on its own behalf.

The parties intend that Operating Expenses shall be computed in a manner consistent with “Hotel and property operations expenses” computation of expenses on the Parent’s Audited Consolidated Statements of Operations.

“Operating Loss” shall mean for any period the amount by which Operating Expenses exceed Gross Hotel Income.

“Operating Supplies” shall mean paper supplies, cleaning materials and similar consumable items.

“Operating Term” shall mean, with respect to any Hotel, the term of this Agreement as set forth in Section 2.01.

“Operator” shall have the meaning set forth in the recitals.

“Operator’s Fee” shall mean a monthly fee equal to 3% of Gross Hotel Income.

“Owners” shall mean the entities described on Exhibit A as it may be amended from time to time as the owners of the Hotels. “Owner” shall mean any entity described on Exhibit A as it may be amended from time to time.

“Parent” shall mean Condor Hospitality Trust, Inc.

“Property” shall mean the Land, the Hotel, all real and personal property now or hereafter situated upon the Land and all appurtenant rights and easements thereto.

“Renewal Term” shall have the meaning set forth in Section 2.01.

“RevPAR” shall mean Hotel occupancy percentage multiplied by average daily rate.

“RevPAR Benchmark” means the Hotel’s RevPAR Index for the trailing 12-months ending on the Commencement Date.

“RevPAR Index”   means the RevPAR Index included in the Smith Travel Research Report (“STR Report”).

“STR Report” shall mean Smith Travel Research Report produced for the Hotel by Smith Travel Research or, if Smith Travel Research no longer is in existence, the successor of Smith Travel Research or such other industry resource that is equally as reputable as Smith Travel Research will be substituted, in order to obtain substantially the same result as would be obtained if Smith Travel Research has not ceased to be in existence.

“Unrelated Persons” shall have the meaning set forth in Section 21.09.

“Working Capital Amount” shall be $15,000, which will be distributed among two separate accounts.

(b)              Terms with initial capital letters which appear within the foregoing definitions are defined in this Article I or as indicated in this Agreement.  Dollars are denominated in U.S. Dollars.

ARTICLE 2                               


TERM OF AGREEMENT

Section 2.01.                            Term.

The term of this Agreement shall commence on the Commencement Date and shall terminate at midnight on December 31, 2019 (the “Initial Term”), subject to earlier termination or extension as set forth herein.  This Agreement shall automatically renew for additional two (2) terms of one (1) year each (each, a “Renewal Term”) unless either party gives the other party written notice of termination at least ninety (90) days prior to the end of the Initial Term or the then-current Renewal Term.

ARTICLE 3                               


OPERATION OF THE HOTELS

Section 3.01.                            Representations by Lessee and Operator; Engagement of Operator.

Lessee hereby represents and warrants that any authorization or acts, which it does or grants, are specifically authorized by the Owner under the Lease. Lessee further warrants that it has the requisite power and authority to perform its obligations under this Agreement and Lessee shall notify Operator immediately if the Lease terminates or is no longer in effect.

Operator hereby represents that Operator (i) is experienced and capable and will remain experienced and capable in the management and operation of the hotel in the regions it manages hotels, (ii) has reviewed and understands the terms and provisions of the Lease and the Franchise

Agreements and the Hotel Standards, and (iii) will, on the effective date of this Agreement, meet the requirements to be an “eligible independent contractor” under Section 856(d)(9) of the Internal Revenue Code. In reliance on the foregoing representations, Lessee hereby engages Operator to manage and operate the Hotels during the Operating Term and Operator agrees to manage and operate the Hotels during the Operating Term, in accordance with this Agreement. Operator will provide all property management, financial accounting, reporting, marketing and other operational services for the Hotel, including the services of regional operations and regional sales support as necessary for the Hotel and will use commercially reasonable efforts to maximize the operating profitability thereof. Lessee and Operator acknowledge that it is the intention of the parties that the Hotels be operated in a profitable manner and in a manner for comparable hotels operated by a national operator within the Hotel’s market segment, all in accordance with the Hotel Standards. Operator shall diligently pursue all commercially reasonable measures to enable the Hotel to adhere to the Approved Budget.

Section 3.02.                            Standards of Operation.

Without limiting the generality of the foregoing, Operator's engagement under this Agreement shall include the responsibility and authority (subject to the limitations on Operator’s authority set forth in this Agreement), to do the following, at all times in material compliance with the Annual Plan, the Franchise Agreement, the Lease Agreement, Mortgage, if any, Legal Requirements and the Hotel Standards:

(a)

Train, supervise, discharge and determine and pay the compensation, fringe benefits, 401(k) retirement plans and other policies and terms of employment of all personnel as may be reasonably required to provide proper operation, supervision, and management of the Hotel in a professional manner suitable to the character of the Hotel;

(b)	Determine the terms for guest admittance to the Hotel and establish all prices, price schedules, rates and rate schedules for rooms, and other amenities and services provided at or in connection with the Hotel;

(c)

Develop, revise, and implement all prudent policies and practices relating to all aspects of the Hotel, which shall be set forth in one or more policy manuals or other writings, and train and supervise all Hotel employees for compliance with all such policies and practices, including policies and practices relating to:  (i) terms and conditions of employment, applicant screening, background checks, selection, hiring, training, supervision, compensation, employee benefits, discipline, dismissal, transfer and replacement;  (ii) compliance with laws, including but not limited to anti-discrimination, sexual harassment and Environmental Laws; and (iii) safety procedures, including those relating to the handling of hazardous and other dangerous materials;

(d)

Select, purchase and install all Inventories and Operating Equipment and Supplies for the Hotel, and to the extent set forth in the Approved Capital Budget, but subject to the requirement to obtain Lessee’s specific authorization for expenditures in the Approved Capital Budget exceeding $10,000, or otherwise requested by Lessee, FF&E and other items on the Approved Capital Budget.  Without limiting the generality of the foregoing, Operator agrees to maintain the levels of Inventories and Operating Supplies at standards consistent with past practice and the requirements of the Operating Standard through the date of termination of this Agreement, including the period after a notice of termination of this Agreement has been given by Lessee or Operator;

(e)

Negotiate and enter into service contracts on Lessee’s behalf which are necessary or desirable in the ordinary course of business in operating the Hotel, including, without limitation, contracts for provision of electricity, gas, water, telephone and other utility services, cleaning services, security services, vermin extermination, trash removal, elevator and boiler maintenance, air conditioning maintenance, master television service, laundry and dry cleaning, entertainment satellite systems and other services necessary for operation of the Hotel in accordance with this Agreement.  Unless Lessee otherwise elects, all such service contracts shall be entered into in the Lessee’s or Affiliate of Lessee’s or the Hotel name;

(f)	Establish all credit policies, and enter into agreements with credit card companies, in connection with the Hotel;

(g)	Apply for, and obtain and maintain in the name of Lessee or Operator, as required by Legal Requirements and this Agreement, all Permits required of Lessee or Operator in connection with the management and operation of the Hotel;

(h)

Institute and defend in the name of Operator or Lessee (or both), utilizing legal counsel selected by Lessee, any and all legal actions or proceedings (i) involving routine collection litigation and similar matters respecting ordinary day-to-day operations of the Hotel where the amount in controversy is less than $10,000; and (ii) which Lessee shall deem necessary or proper in connection with the operation of the Hotel and requests Operator to institute or defend;

(i)

Establish, supervise and implement a sales and marketing program for the Hotel consistent with the Marketing Plan, and in conjunction therewith, plan, prepare, arrange and contract for all advertising, publicity and promotional activities for the Hotel, including advertising and promotional activities in conjunction with other hotels owned, operated or franchised by Operator and its Affiliates, and all discount and complimentary policies with respect to bona fide travel agents, tourist officials, airline representatives, and employees of Lessee, Lessor, Operator and their Affiliates in accordance with the customary practices of the travel industry;

(j)	Engage such persons, on behalf of Lessee, as have been approved by Lessee (in Lessee’s sole discretion) for providing services of a specialist nature (such as legal counsel and independent accountants) related to matters within Operator's responsibility under this Agreement;

(k)

Perform (or cause to be performed and supervised) such maintenance and repairs to the Hotel as shall be required to maintain the Hotel in all material respects in accordance with the Operating Standard.  Without limiting the generality of the foregoing Operator agrees to perform (or cause to be performed and supervised) all necessary or scheduled repair and maintenance through the date of termination of this Agreement, including the period after a notice of termination of this Agreement has been given by Lessee or Operator;

(l)	Perform any obligations of Lessee under the Lease Agreement and any Mortgage which are applicable to the operation and management of the Hotel, to the extent Lessee specifically notifies Operator of the same in writing, and upon request of Lessee;

(m)	Pay all Operating Expenses, including but not limited to Impositions and insurance premiums (whether for insurance maintained in accordance with this Agreement by Lessee, Lessor or Operator);

(n)	Pay all gross receipts, transient occupancy and similar taxes;

(o)	Comply with all Legal Requirements and the requirements of insurance companies which are applicable to the operation and management of the Hotel;

(p)	Perform each and all of the obligations of Lessee and Operator under the Franchise Agreement, communicate directly with Franchisor and provide copies of all written communication between Operator and Franchisor to Lessee;

(q)

Operate and/or lease to third parties selected by Lessee gift and sundry shops, concessions, food and beverage, banquet and room service facilities of the Hotel, provided, that Lessee shall seek Operator’s approval of any such lease, which approval which may be withheld only if Operator can demonstrate that the third party operator is unable to manage the space or facility in a manner consistent with the Operating Standard;

(r)	Do any and all other acts and things as Operator may deem necessary and appropriate to carry out its responsibilities under this Agreement; and

(s)	Comply with the provisions of any covenants, conditions and restrictions recorded against the Hotel.

Section 3.03 Limitations on Operator’s Authority

Operator shall have no authority to do any of the following without Lessee’s prior written approval in each instance, which may be withheld in Lessee’s sole and absolute discretion:

(a)                Borrow money, guaranty the debts of any third person, or mortgage, pledge, grant a security interest in or otherwise encumber all or any part of the Hotel;

(b)              Enter into any lease for the use of any item of FF&E or other property, except as may be otherwise specifically provided in this Agreement;

(c)              Enter into any agreement, lease, license or concession agreement for office, retail, lobby or other commercial space at the Hotel, except as may be otherwise specifically provided in this Agreement;

(d)              Incur any liabilities or obligations to third parties which are unrelated to the operation, maintenance and security of the Hotel or to the performance of Operator's responsibilities under this Agreement;

(e)              Engage in collective bargaining with the bargaining representative or representatives of Hotel employees, enter into collective bargaining agreements, or modify or renew existing Union Agreements, or approve across-the-board wage increases affecting any class of Hotel Employees;

(f)              Enter into any contract or other arrangement (or series of related contracts or arrangements) if (i) the contract or other arrangement would, or are reasonably anticipated to, exceed $25,000 in the aggregate, (ii) the term of such contract or other arrangement is in excess of one year, or (iii) the contract or other arrangement is not terminable by Lessee or Operator without payment or penalty upon not less than thirty (30) days’ notice, or (iv) if the contract is for the employment of any member of the Executive Staff or other Hotel Employee;

(g)              Settle any casualty and insurance claims which involve, or which are reasonably estimated to involve, amounts in excess of $10,000, and any condemnation awards regardless of amount;

(h)              Institute or defend any Legal Proceedings with respect to the Hotel, other than as required by Section 3.02 (h) ;

(i)              Employ any professional firm for more than $10,000 in the aggregate except as set forth in the Annual Plan, or enter into any arrangement for the employment of any attorney or accountant;

(j)              Prosecute or settle any tax claims or appeals;

(k)              Purchase goods, supplies and services from itself or any Affiliate of Operator, or enter into any other transaction with an Affiliate of Operator, unless (i) such purchase from or other transaction with Operator or any Affiliate of Operator is disclosed in the Annual Plan or (ii) prior to the consummation of such transaction all of the prices and other terms thereof and the identity of the vendor and its relationship to Operator shall have been disclosed to and approved by Lessee, which may be withheld in Lessee’s sole discretion.  Lessee may require that the supplier of any goods, supplies or services for the Hotel be selected through competitive bidding by qualified independent third parties, with the transaction being awarded to the lowest bidder.  Except to the extent disclosed to Lessee in advance and approved by Lessee in its sole and absolute discretion, neither Operator nor any Affiliate of Operator shall charge or receive any mark-up, profit or purchasing fee on the purchase by or for the Hotel of any goods, supplies or services.  Operator shall ensure that the prices and terms of goods and services purchased under such contracts are competitive with the prices and terms of goods and services of equal quality available from others.  Operator shall use its best efforts to obtain the maximum available discounts and rebates on purchases and the most favorable terms available.  Any allowances, credits, rebates, discounts and the like received with respect to any such purchases shall be for the account of Lessee, and if received by Operator or any of its Affiliates, shall be turned over to Lessee;

(l)              Provide complimentary rooms or services to any guests, employees or other persons except in accordance with Operator’s policies approved by Lessee or for which the business purpose for the benefit of the Hotel is properly documented;

(m)              Acquire on behalf of Lessee any land or any interest therein;

(n)              Consent to any condemnation or participate in any condemnation proceeding relating to the Hotel, the Site or any portion thereof;

(o)              Sell, transfer or otherwise dispose of all or any portion of the Hotel or any capital assets of the Hotel or other interest therein, except for dispositions of FF&E to the extent expressly provided for in the Annual Plan;

(p)              Perform any alterations to the Hotel or any portion thereof except to the extent Operator's performance of any such alteration shall be expressly provided for in the Annual Plan;

(q)              Take any other action which, under the terms of this Agreement, is prohibited or requires the approval of Lessee;

(r)              Lease or rent any one or more of the Hotel's ballroom, bar or restaurant for periods in excess of two (2) consecutive weeks; and

(s)              Do or take any other action that shall be contrary to any written directions of Lessee or limitations on Operator’s authority imposed by Lessee pursuant to any other provision of this Agreement.

Section 3.04. Reservations Services and Revenue Management.

Operator shall use, among other things, the respective Franchisors’ sales and reservations systems and will encourage the use of the Hotel by all recognized sources of hotel business.  Operator must employ at least one employee responsible for revenue management of the Hotel, with certification by a governing body reasonably acceptable to Lessee or use Franchiser’s Regional Manager services, which costs will be approved through the Operating Budget.

Section 3.05. Marketing.

(a)              Operator shall maintain a sales staff dedicated to the Hotels to arrange, contract for and carry out such marketing, advertising, national trade show attendance, and promotion of the Hotel as Operator shall deem advisable and consistent with the Approved Budget and in accordance with the Hotel Standards.  Operator will use reasonable effort to ensure that the Hotel shall receive an equitable share of the benefit of the cooperative advertising and promotion reasonably commensurate with its contribution to the costs thereof.  The costs thereof shall be equitably allocated by Operator between the Hotel and other participating hotels. Upon Lessee’s request, Operator shall provide reasonable documentation to support such allocations.  Operator shall provide Lessee with detailed monthly reports of its marketing, advertising and promotional activities through standard monthly reporting.  Each property shall be visited at least once every three (3) months by a member of Operator’s sales leadership team if in approved budget.

(b)              Operator may, consistent with the Approved Budget, and otherwise, with the consent of Lessee, cause the Hotel to participate in sales and promotional campaigns and activities involving complimentary rooms, food and beverages, consistent with customary

practices in the travel industry.  Operator shall not provide rooms or Hotel facilities at no cash charge or at a discounted cash rate in trade for non-cash consideration or services without the consent of Lessee.

Section 3.06. Consultations Between Lessee and Operator.

When requested by Lessee, Operator shall, from time to time, render advice and assistance to Lessee and Owner in the negotiation and prosecution of all claims for the reduction of real estate or other taxes or assessments affecting the Hotel and for any award for taking by condemnation or eminent domain affecting the Hotel.

Section 3.07. Transactions with Affiliates and Other Relationships.

(a)              Except as reflected in the Annual Plan, Operator shall obtain the prior written consent of Lessee (which Lessee may withhold in Lessee’s sole and absolute discretion) prior to contracting with any Affiliate (or companies in which Operator has an ownership or other economic interest if such interest is not sufficient to make such a company an Affiliate) to provide goods and/or services to the Hotel.

(b)              Prior to entering into any contract, agreement or arrangement with respect to one or more of the Hotels pursuant to which Operator may receive rebates, credit card rebates, cash incentives, administration fees, concessions, profit participations, stock or stock options, investment rights or similar payments or economic consideration from or in, as applicable, vendors or suppliers of goods or services (collectively, “Rebates”), Operator shall promptly disclose to Lessee in writing the fact of and the estimated amount of such Rebates, and the charges and other amounts expected to be incurred in connection with any such contracts or agreements (which shall not exceed prevailing market rates with respect to such goods or services).  All Rebates associated with the Hotel will accrue to the benefit of Lessee and will be applied against Operating Expenses.

Section 3.08. Regional Manager.

Operator shall provide the services of one of its experienced management employees to oversee and manage the operations of the Hotels (the “Regional Manager”).  Lessee shall have the right to approve the Regional Manager and any successor provided that such approval shall not be unreasonably withheld.  The Regional Manager shall initially be Chip Young.  The Regional Manager shall meet telephonically with the designated representatives of Lessee at least monthly to discuss operations at the Hotels and consult with Lessee to answer any questions Lessee may have, and to address any concerns of Lessee.  Lessee’s representatives shall have the right to meet with the COO of Operator or his/her mutually acceptable alternative on a semi-annual basis to review hotel performance.

Section 3.09. Certain Expenses.

Operator shall not be entitled to charge Lessee for any of its costs and expenses, except as follows:

(a)              Operator shall not charge tuition for training courses provided by Operator for employees employed at the Hotels or for course materials but shall be reimbursed the cost of course materials developed by third party companies, subject to approval in the Operating Budget.  Reasonable travel and housing expenses of trainees shall be included in Operating Expenses, subject to approval in the Operating Budget.

(b)              Travel expenses described in (xvi) of “Operating Expenses” above.

Operator shall be solely responsible and shall reimburse Lessee and Owner for
re-inspection and/or penalty fees charged by Franchisors following a “failure” or its equivalent in any quality inspection report or brand required score standards unless the failure is for a Capital Improvement that has been previously brought to the attention of the Owner or Lessee and Owner or Lessee has not corrected at the time of the inspection or if the Operator has met the required brand guest service scores in which case the penalty fees will be paid by Lessee.

ARTICLE 4                               


INDEPENDENT CONTRACTOR

Section 4.01.                            Operator Status.

In the performance of its duties in the administration, management and operation of the Hotel, Operator shall act solely as an independent contractor. Nothing herein shall constitute or be construed to be or create a partnership or joint venture between Lessee and Operator, or be construed to create a lease by Operator of the Hotel or the Property and Operator shall not constitute a tenant or subtenant of Lessee or Owner. Operator’s rights under this Agreement shall be those of an agent only and shall not constitute an interest in real property. It is expressly covenanted that this Agreement is no more than an agreement for the rendering of services by Operator on behalf of Lessee in the operation and management of the Hotels.

Section 4.02.                            Employees.

Operator agrees that Lessee will have the right to review, interview, approve, or override, the hiring of Hotel General Manager and Director of Sales. Operator will use all methods at their disposal to find qualified candidates for the above listed positions. If Operator presents three (3) qualified applicants, Lessee must approve one of the three. Operator agrees that if termination of either General Manager or Director of Sales occurs, Operator will put temporary or task force help in those vacated positions to insure continued smooth running operations of Hotel.

(a)              Each Hotel employee shall be the employee of Operator, or an affiliate company of Operator, and not of Lessee, and every person performing services in connection with this Agreement shall be acting as the employee of Operator (except for any independent contractors engaged by Operator, in accordance with this Agreement), but their salaries and other related expenses shall be an Operating Expense.

(b)              Operator shall provide evidence to Lessee of statutory Worker’s Compensation Insurance and Employer’s Liability Insurance for each such employee. The insurance coverages (including, without limitation, the carrier, policy limits of each and waiver of subrogation endorsements) must be in form, substance and amount satisfactory to Lessee in all respects. Upon request of Lessee, Operator will deliver to Lessee waiver of subrogation endorsements in favor of Lessee and Owner.

(c)              The hiring policies and the discharge of employees at the Hotel shall in all respects comply with all applicable laws and regulations, and Operator shall comply with all laws, regulations and ordinances regarding the employment and payment of persons engaged in the operation of each Hotel.

(d)              Lessee shall have the right to participate in any negotiations with labor unions representing employees at the Hotel, and Operator shall not sign any union contracts or card check neutrality agreements covering such employees at the Hotel, which have not been previously approved in writing by Lessee.

Section 4.03.                            Employee Expenses.

(a)              All costs of every nature and reasonably available pertaining to all employees at the Hotel, including, without limitation, salaries, benefits, EPLI coverage, the terms of any bonus plan or arrangement, costs incurred in connection with governmental laws and regulations and insurance rules, shall be set forth in the Approved Budget as an Operating Expense.

(b)              Compensation, overhead costs and other expenses of Operator and its Affiliates not specifically provided for herein shall not be Operating Expenses and shall not be payable or reimbursable by Lessee; provided, however, Operator may include in the calculation of Operating Expenses the salary of any of Operator’s employees which have been temporarily transferred to a Hotel to serve that Hotel exclusively; provided, further, that Operator may only include in Operating Expenses that portion of that employee’s salary which is not to exceed 10% of the normal rate charged for that employment position. Operator may also include in the calculation of Operating Expenses reasonable travel costs associated with Operator’s employees located at the Operator’s corporate headquarters which have been temporarily transferred to a Hotel to serve that Hotel exclusively. Lessee shall have the right to approve temporary travel schedule.

Section 4.04.                            Employee Benefit Plans.

Operator shall enroll employees at the Hotel in medical and health, life insurance and employee benefit plans which are approved by Lessee, with such approval not to be unreasonably withheld.  Operator’s contributions to such plans, reasonable administrative fees, at cost, which may be expended in connection therewith, and reasonable expenses for such plans will be estimated and disclosed to Lessee in advance and provided for in the Approved Budget and will be an Operating Expense.   Except as otherwise provided in Section 6.03, all costs referenced in Section 4.03 and this Section 4.04 will be the responsibility of Lessee only to the extent the same are provided for in the Approved Budget.  Operator will provide a 401(k) plan as an employee benefit plan.  All costs incurred by Operator pursuant to actions taken by Operator at Lessee’s direction will be Operating Expenses.

Section 4.05.                            Execution of Agreements.

(a)              Except as provided in Section 4.05(b), Operator shall execute as agent of Lessee leases and other agreements relating to equipment and/or services provided to each Hotel, all of which, unless otherwise approved in writing in advance by Lessee, shall either be a term of one year or less or be cancelable upon not more than thirty (30) days’ written notice by Operator or Lessee without the payment of a penalty or fee. Notwithstanding the foregoing, without the prior written approval of Lessee, Operator shall not enter into any agreement (i) which provides for the payment of sums not authorized by Lessee in an Approved Budget, (ii) which would give rise to a lien upon all or any part of the Property, (iii) which would result in liability to Lessee for sums other than as set forth in the applicable Approved Budget, (iv) to lease any part of any Property, (v) relating to alterations to the exterior, interior or structural design of the Hotel, (vi) which requires an unbudgeted payment of more than $5,000, or in the case of a repair of any payment of more than $1,500 (vii) which is not cancelable by Lessee upon 30 days’ notice or less unless the term of said agreement is one year or less, (viii) which provides for any automatic renewal terms greater than thirty (30) days; or (ix)contracts for multiple rooms and / or multiple days that (a) exceed a 1-year term and / or (b) exceed 40% of  the hotel’s room inventory for a period of 14 days or more, or (c) exceed 50 room nights and have a negotiated net rate of $40 or less for economy properties, and  $59 or less for midscale and above, this includes promoting such rates online, in print ads such as coupons.  If Operator desires to enter into any agreements requiring the consent of Lessee, Operator shall first send written notice of intent to enter into such agreement to Lessee, and Lessee shall either approve or disapprove within five (5) business days of receipt of such notice.  Lessee’s failure to timely respond to said request shall be deemed approval.

(b)              Subject to Lessee’s prior approval of the same and upon Lessee’s request, Operator shall execute, as agent for Lessee, (i) all leases, as sub-lessor, of any space at any Property, and (ii) equipment rental and/or lease agreements which cannot be terminated upon thirty (30) days notice or less without the payment of a penalty or fee. Operator shall exercise its best efforts to obtain in each equipment agreement a right on the part of the lessee of such equipment to terminate the same on thirty (30) days notice or less without the payment of a penalty fee. Notwithstanding anything in this Section 4.05 to the contrary, Lessee reserves the right, exercisable at Lessee’s option, to execute any lease or other agreement relating to equipment and/or services being provided to the Hotel.

ARTICLE 5                           


INDEMNIFICATION

Section 5.01.                            Indemnification by Operator.

Operator shall indemnify and hold Lessee harmless against all claims, demands, actions, liabilities, losses, damages, lawsuits and other proceedings at law or in equity, judgments, awards, commissions, fees, costs and expenses (including, without limitation, attorneys’ fees and expenses), of every kind and nature whatsoever to or of any party connected with, or arising out of, or by reason of any gross negligent act or omission, breach of contract (but not a contract involving Lessee or an Affiliate of Lessee), willful misconduct, or intentional tortious actions by Operator, or any Affiliate of Operator, or any officer or employee, agent, or other person or entity working for Operator or any Affiliate of Operator and any employment related claims by Operator’s employees.  The indemnification provisions of this Section 5.01 are subject to the limitations set forth in Section 5.02.

Section 5.02.                            Limitations on Indemnification.

None of the indemnifications set forth in Section 5.01 shall be applicable to (1) liability resulting from the design or construction of the Hotel, or (2) that portion of a liability which is covered and paid for by insurance maintained for the Hotel. The standard of performance of which Operator is to be responsible under this Agreement shall be that, reasonably and diligently exercised, of a professional hotel operator. Settlement of a third party claim shall not be prima facie evidence that a party has triggered an indemnification obligation hereunder.  Notwithstanding the provisions of Section 5.01 above, or Section 5.02 below, neither Lessee nor Operator will assert against the other and each does hereby waive with respect to the other any claims for any losses, damages, liabilities and expenses (including lawyers’ fees and disbursements) incurred or sustained by that party as a result or damage or injury to persons or property arising out of the ownership, operation or management of the Hotels, to the extent that the damage and injury are covered by insurance and the proceeds are actually recovered from the insurer. Lessee and Operator agree to indemnify and hold harmless the other against any and all claims, demands, actions, liabilities, losses, damages, lawsuits and other proceedings at law or in equity, judgment, awards, commissions, fees, costs and expenses (including, without limitation, attorneys’ fees and expenses) or every kind and nature whatsoever to or of any party connected with, or arising out of, or by reason of the failure of such party to maintain (and, as to Lessee, its failure to cause Owner to maintain) in full force and effect those insurance coverages required by this Agreement and/or to list the other party as an Additional Insured as and to the extent required by this Agreement.

Section 5.03.                            Indemnification by Lessee.

Lessee shall indemnify and hold Operator harmless against all claims, demands, actions, liabilities, losses, damages, lawsuits and other proceedings at law or in equity, judgments, awards, commissions, fees, costs and expenses (including, without limitation, attorneys’ fees and expenses), of every kind and nature whatsoever to or of any party connected with or arising out of, or by reason of any gross negligent act or omission, breach of contract, willful misconduct, or tortious actions by Lessee or any Affiliate of Lessee, or any officer, employee, agent, contractor, subcontractor, or other person or entity working for Lessee or any Affiliate of Lessee. The indemnification provisions of this Section 5.03 are subject to the limitations set forth in Section 5.02.  Lessee will indemnify and hold Operator harmless from all costs, expenses, claims, damages and liabilities, including without limitation, lawyers’ fees and disbursements, arising or resulting from Lessee’s failure following the expiration or earlier termination (for whatever cause) of this Agreement to provide all of the services contracted for in connection with the business booked on commercially reasonable terms for the Hotels on or prior to the date of such expiration or termination.  The provisions of this Section will survive any expiration or termination of this Agreement and will be binding upon Lessee and its successors and assigns, including any successor or assign that becomes the beneficial or legal owner of the Hotels after the effective date of any such expiration or termination.

Section 5.04.                            Survival of Indemnity.

The provisions of this Article 5 shall survive the expiration or sooner termination of this Agreement with respect to matters arising out of facts or circumstances occurring during the period prior to such expiration or termination.

ARTICLE 6                               


BUDGETS AND POLICY MEETINGS

Section 6.01.                            Budgets.

(a)              No later than October 1 of each year, Operator will prepare and submit (following discussions with Lessee) to Lessee an annual capital budget for each Fiscal Year for each Hotel (the “Hotel Capital Budget”).  Notwithstanding the foregoing, for the Fiscal Year in which this Agreement is executed Operator shall manage the Hotels in accordance with the then existing Hotel Capital Budget, which is subject to force majeure.  The Hotel Capital Budget will set forth all projected Capital Improvements for such Fiscal Year, which budget shall also be month-to-month as well as annual. The Hotel Capital Budget will be subject to the approval of Lessee, in their sole and absolute discretion.  No later than November 1 of each year, Operator shall prepare and submit (following discussions with Lessee) to Lessee an annual operating budget and business plan for the operation of each Hotel for the forthcoming Fiscal Year containing detailed projections of Gross Hotel Income and budgets of Operating Expenses (the “Hotel Operating Budget”).  Notwithstanding the foregoing, for the Fiscal Year in which this Agreement is executed Operator shall manage the Hotels in accordance with the then existing Hotel Operating Budget.  The Hotel Operating Budget shall be month-to-month as well as annual and shall be in the form designated by Lessee, and approved by Operator, which approval of the form shall not be unreasonably withheld.  The Hotel Operating Budget and the Hotel Capital Budget shall provide for operating, equipping and maintaining the Hotel in accordance with the Hotel Standards. Contemporaneously with the submission of the Hotel Capital Budget, Operator shall submit to Lessee monthly budgeted occupancy, average daily rate and RevPAR statistics for each hotel. The Hotel Operating Budget and the monthly budgeted hotel operating statistics shall contain Operator’s reasonable good faith estimates of the amounts set forth therein. Operator shall provide Lessee, upon request, all details, information and assumptions used in preparing the Hotel Capital Budget and the Hotel Operating Budget.  Lessee shall be responsible for implementing the Hotel Capital Budget and may, in Lessee’s sole discretion, increase, decrease, delete or modify in any respect any capital expenditure in any Hotel Capital Budget.

(b)              Operator shall review the Hotel Capital Budget and the Hotel Operating Budget with Lessee, and upon Lessee’s written approval of the Budget, it shall constitute the Approved Budget for the succeeding Fiscal Year and shall be implemented by Operator.  In the event Lessee does not provide Operator with written objections to the Hotel Capital Budget and Hotel Operating Budget within 30 days following Lessee’s receipt of the same, they shall be deemed approved.  If Lessee objects to any portion of the Hotel Capital Budget or the Hotel Operating Budget within 30 days after receipt of the same, or to any portion of the revisions within 20 days after submission of the revisions by Operator to Lessee, the parties hereto will call a special budget meeting to resolve the points of disagreement.  In the event that Lessee and Operator are unable to agree on the Hotel Operating Budget for a Hotel prior to the commencement of the applicable Fiscal Year, an interim operating budget shall be implemented which will reflect CPI increases for expenses and RevPAR increases based on the appropriate previous 12-month RevPAR growth percentage for the sector in which the Hotel is included, as published by Smith Travel Research, for revenue growth over the prior year’s actual amounts, including automatic increases of any necessary expenses such as Real Estate Tax, franchise fees or insurance.

Section 6.02.                            Budget Meetings.

Budget meetings between Lessee and Operator will be held at times as reasonably scheduled by Lessee.  At each budget meeting and at any additional meetings during a Fiscal Year called by Lessee, Operator shall consult with Lessee on matters of policy concerning management, sales, room rates, wage scales, personnel, general overall operating procedures, economics and operation and any other matters affecting the operation of the Hotel as requested by Lessee.

ARTICLE 7                               


OPERATING EXPENSES

Section 7.01.                            Payment of Operating Expenses.

(a)            In performing its authorized duties hereunder, Operator shall promptly pay all Operating Expenses, except that if requested by Lessee certain Operating Expenses shall be paid by Operator directly to Lessee for payment by Lessee to the appropriate lender, taxing authority, insurer or other party so identified by Lessee to Operator.

(b)            Subject to Article 5, all reasonable third party Operating Expenses incurred by Operator in performing its authorized duties shall be reimbursed or borne by Lessee; provided that such Operating Expenses are incurred pursuant to and within the limits set forth in an Approved Budget or otherwise pursuant to the terms of this Agreement.

(c)            Notwithstanding anything to the contrary contained herein, (i) Operator is authorized to spend up to an additional ten (10%) percent for any budgeted line item in an Approved Budget for a period not exceeding in the aggregate five percent (5%) of the total Approved Budget, (ii) if there is an increase in revenue over the budgeted line items for revenue in the Approved Budget, the budgeted line items in the Approved Budget for discretionary expenses shall be increased by a corresponding and proportional amount, and (iii) if there is a decrease in revenue under the budgeted line items for revenue in the Approved Budget, the budgeted line items in the Approved Budget for discretionary expenses shall be decreased by a corresponding and proportional amount.

Section 7.02.                            Operating Expenses Not an Obligation of Operator.

Operator shall in no event, be required to advance any of its own funds for Operating Expenses of the Hotel, nor to incur any liability in connection therewith unless Lessee shall have furnished Operator with funds as required of Lessee under the terms of this Agreement. However, if Lessee has provided funds required of Lessee hereunder, Operator shall advance such funds necessary to pay expenses incurred by Operator in performing its duties and obligations hereunder. Unless agreed to by Lessee in this Agreement, in the Hotel Operating Budget or otherwise in writing in advance, compensation, overhead costs, and other expenses of Operator and its Affiliates shall not be reimbursable to Operator by Lessee.

ARTICLE 8                                   


BANK ACCOUNTS

Section 8.01.                            Lessee Revenue Account.

  All income, receipts, and proceeds included in the definition of Gross Hotel Income shall be deposited into Lessee Revenue Account.

Section 8.02. Operating Account

Operator shall establish and maintain one or more separate segregated operating accounts (collectively, the " Operating Account ") at a FDIC insured bank designated by Operator (except to the extent any Lender requires that the Operating Account be held with Lender as part of a cash management system) for the collection and disbursement of monies in connection with the management and operation of the Hotel.   From the Operating Account, Operator shall pay all Operating Expenses, and other costs and expenses relating to the operation of the Hotel (subject to Lessee’s performance of its obligations herein to fund the Operating Account for such Operating Expenses) as permitted or required to be paid by Operator in accordance with this Agreement before any penalty or interest accrues thereon.  The Operating Account shall be a segregated account and at all times shall be in Operator’s name; provided that Hotel Employees and Home Office Employees designated by Operator from time to time which shall be bonded or otherwise insured shall be authorized signatories of such account, as shall be representatives of Lessee.  All interest earned or accrued on amounts invested from the Operating Account shall be added to the Operating Account.

Section 8.03. Ownership of Accounts

Lessee shall furnish information necessary for the printing of all Operating Account checks, which will bear the name of the Hotel.  All bank accounts (including the Operating Account), bank balances, bank statements, advice, paid checks, blank checks and other related records established in connection with operation of the Hotel or the ownership of the Property shall be the sole property of Operator and/or any designee of Operator. Upon request by Lessee, Operator shall provide access to or any and all information relating to the Operating Account maintained by Operator.

Section 8.04. Exculpation of Operator

All expenses incurred by Operator in performing its obligations under this Agreement shall be borne by Lessee and, to the extent funds are available, paid out of the Operating Account by Operator.  All debts and liabilities to third parties which Operator incurs as Operator under this Agreement, whether incurred in the name of Lessee, Operator or the name of the Hotel or any variation of such name used as a trade name, are and shall be the obligations of Lessee, and Operator shall not be liable for any such obligations by reason of its management, supervision and operation of the Hotel.  In the event that funds are not available in the Operating Account to pay any such expenses, debts or liabilities, Lessee shall promptly upon request from Operator, deposit funds in the Operating Account sufficient to pay such expense, debts or liabilities.

Section 8.05. Reimbursement of Operator

Operator shall be reimbursed for all Out-of-Pocket Expenses and Travel Expenses incurred in rendering services to the Hotel or Lessee to the extent such Out-of-Pocket Expenses and Travel Expenses are provided for in the Annual Budget, required or permitted by this Agreement or otherwise approved by Lessee, which approval shall not be unreasonably withheld, conditioned or delayed.  Nothing in this Agreement, however, shall require Operator to advance or otherwise expend any of its own funds in connection with the operation of the Hotel or ownership of the Property.  If Operator pays any amount for which Lessee is responsible under this Agreement, Operator shall be entitled to reimbursement thereof by Lessee.  Operator may pay to itself the Out- of-Pocket Expenses and Travel Expenses or other reimbursements from the Operating Account, with Lessee’s approval. The Out-of-Pocket Expenses and Travel Expenses shall be payable to Operator monthly, in arrears.  Operator shall also be reimbursed for all reasonable costs and expenses incurred in taking over management of the Hotel in accordance with the pre-opening budget, such reimbursement to be paid within fifteen (15) days after Operator delivers and invoice therefore.

Section 8.06. Working Capital Funds

Lessee further agrees to provide funds to Operator sufficient to maintain a cash balance in the Operating Account equal to or greater than the Working Capital Amount, which amount shall be used by Operator solely in connection with operation of the Hotel and performance of the responsibilities of Operator under this Agreement.  If Operator notifies Lessee that funds in the Operating Account are less than the Working Capital Amount, Lessee shall promptly, but in no event later than five (5) Business Days after receipt of such notice from Operator, provide sufficient funds to bring the balance of the Operating Account up to the Working Capital Amount.

ARTICLE 9                               


BOOKS, RECORDS AND STATEMENTS

Section 9.01.                            Books and Records.

(a)              Operator shall keep full and adequate books of account and other records reflecting the results of operation of the Hotel on an accrual basis, all in accordance with GAAP.

(b)              Except for the books and records which may be kept in Operator’s home office or other location approved by Lessee the books of account and all other records relating to or reflecting the operation of the Hotel shall be kept at the Hotel. All such books and records pertaining to the Hotel, including, without limitation, books of account, guest records and front office records, at all times shall be the property of Lessee and, except for books of account, accounts payable invoices, night audit packages, deposit records and similar documents which may be sent to Operator’s accounting department shall not be removed from any Hotel by Operator without Lessee’s written approval and consent. All books and records pertaining to the Hotel and of Operator (including all budgetary records of Operator), wherever kept, shall be available to Lessee and its representatives at all reasonable times for examination, audit, inspection, transcription and copying. Operator shall not remove, destroy or delete any books and records of the Hotels without the prior written consent of Lessee. Upon any termination of this Agreement, all of such books and records pertaining to the Hotel forthwith shall be turned over to Lessee so as to ensure the orderly continuance of the operation of the Hotel, but such books and records shall be available to Operator for a period of five (5) years at all reasonable times for inspection, audit, examination, and transcription of particulars relating to the period in which Operator managed the Hotel.

Section 9.02.                            Statements.

(a)              Operator shall deliver to Lessee by the eighth (8 ^th ) business day following the last day of each month, for each Hotel, a monthly report of the state of the business and affairs of the operation of the Hotel for the immediately preceding month and for the Fiscal Year to date. Such reports shall include at least (i) a balance sheet account reconciliation including all intercompany accounts, (ii) a profit and loss statement, comparing current month and Fiscal Year-to-date profit, loss, and operating expenses to the Approved Budget and the prior year and comparing current month, quarter and Fiscal Year-to-date average daily rate, occupancy and RevPAR to the Approved Budget and the prior year, (iii) a statement which details the computation of all fees payable to Operator for the month and quarter, (iv) the balance of all bank accounts, and (v) an adjusting statement showing the actual cash position of the Hotel for the month, quarter and Fiscal Year-to-date. Additionally, Operator shall deliver to Lessee fifteen (15) business days following the end of each month and fifteen (15) business days following the end of each quarter a written narrative discussing any of the aforementioned reports and year-to-date variances from the Approved Budget, without thereby implying Lessee’s approval of such variance.

(b)              Such reports and statements (i) shall be in form and in detail satisfactory to Lessee as reasonably requested by Lessee and consistent with standard hotel reporting procedures, (ii) shall be taken from the books and records maintained by Operator in the manner hereinabove specified, and (iii) if requested by Lessee, shall be in electronic form.

(c)              Within sixty (60) days after the end of each Fiscal Year, Operator shall deliver to Lessee reviewed financial statements for Operator, and, if requested by Lessee, within thirty (30) days after the end of each quarter of each Fiscal Year, Operator shall deliver to Lessee unaudited financial statements for Operator.

(d)              In addition, Operator shall timely deliver to Lessee a copy of (i) a monthly STAR report from Smith Travel Research for each Hotel, where available (which Operator hereby agrees to order with respect to each Hotel and provide to Lessee), (ii) each Guest Satisfaction report, (iii) upon receipt, each Franchisor inspection report, and (iv) such other reports or information in such form as may be reasonably requested by Lessee.  Any out-of-pocket costs incurred by Operator to generate such reports will be included in Operating Expenses

(e)              Operator agrees to annually have accounting and operations practices reviewed by a certified person or entity in order to provide Lessee with verification of a Type 2 SOC 1 Report, Report on Controls at a Service Organization Relevant to User Entities’ Internal Control over Financial Reporting . This report is to be prepared under Statement on Standards for Attest Engagements 16 (SSAE 16) as promulgated by the AICPA. If the standards of the AICPA change, the operator agrees to comply with revisions of these standards.

(f)              Operator shall use the accounting software and payroll processor specified in Exhibit A-2 .

ARTICLE 10                               


OPERATOR’S FEE AND TRANSFERS TO LESSEE

Section 10.01.                                          Payment of Operator’s Fee.

Within three (3) business days after the delivery to Lessee of the monthly report required by Section 9.02, Operator shall be paid the Operator’s Fee by Lessee for the immediately prior month, based upon Gross Hotel Income for the immediately prior month, as determined from the books and records referred to in Article 9.

ARTICLE 11                               


REPAIRS AND MAINTENANCE

Subject to the provisions of the Approved Budget, Operator shall from time to time make such expenditures for repairs and maintenance as are necessary to keep the Hotel in good operating condition in accordance with the Hotel Standards. If any repairs or maintenance shall be made necessary by any condition against the occurrence of which Operator, Lessee or Owner has received the guaranty or warranty of any contractor for the building of the Hotel or of any supplier of labor or materials for the construction of the Hotel, then Operator shall, on Lessee’s request, cooperate with Lessee and Owner in invoking such guarantees or warranties. Notwithstanding the Approved Budget, Lessee may from time to time at its expense make such alterations, additions, or improvements (including structural changes or repairs) in or to the Hotel as they deem desirable, in their sole discretion and responsibility, for the efficient operation of the Hotels.

ARTICLE 12                               


INSURANCE

Section 12.01.                                          General.

Lessee shall or cause Owner to maintain insurance policies with respect to the Hotels as set forth below.  Operator agrees to cooperate with Lessee in obtaining any such insurance. Operator further agrees to provide Lessee with detailed summaries of their Worker’s Compensation, Auto Liability, Cyber and Employment Practices Liability insurance policies and endorsements upon renewal.

Section 12.02.                                          Workers’ Compensation and Other Employment Insurance.

Operator shall obtain, and the Hotel Operating Budget shall include, as an Operating Expense, Workers’ Compensation, in compliance with state law in the state of operation of each Hotel, including Employers’ Liability with minimum limits of $1,000,000 each accident. Such policy shall include an Alternate Employer Endorsement naming Lessee, and shall provide for a Waiver of Subrogation in favor of Lessee.

Section 12.03.                                          Approval of Companies and Cost by Owner and Lessee.

All insurance provided by Owner or Lessee shall be with such insurance company or companies as may be selected by Lessee. Lessee will obtain all insurance but, upon the request of Lessee not less than one hundred twenty (120) days prior to the coverage date, Operator will obtain such insurance, subject to Lessee’s approval of the insurance companies and coverages.  Comprehensive general liability insurance and such other liability insurance as may be obtained or afforded shall be in the name of Owner and Lessee, and shall name Operator as an additional named insured as respects liability arising from the operation, maintenance and use of the Hotel and operations incidental thereto. All property insurance policies shall be endorsed specifically to the effect that the proceeds of any building, contents or business interruption insurance shall be made payable to Lessee. Operator shall provide proper evidence of insurance required by Operator to Lessee annually. Such policies shall require a minimum of 30 days’ notice to Lessee in the case of cancellation, for any reason, if allowed by insurance carrier.

Section 12.04.                                          Maintenance of Coverages.

Lessee shall hold all insurance policies obtained hereunder, and certificates of such policies, if any, shall be delivered to each of Lessee and Operator.

Section 12.05.                                          Waiver of Subrogation.

To the extent obtainable from carriers and to the extent that endorsement forms are approved by the Insurance Commissioner (or comparable office or department) of the state in which the Hotel is located, all policies of property insurance shall provide that the insurance companies will have no rights to subrogation against Lessee or Operator or the agents or employees thereof.

Section 12.06.                                          Blanket Coverage.

Lessee reserves the right to provide any insurance referenced in this Article 12 by one or more so-called “blanket” or “umbrella” policies of insurance. Operator further acknowledges that the insurance coverage of the Hotel may be part of the general insurance plan of Lessee or of any of their affiliates. Lessee may elect to obtain any of the insurance coverages set forth in this Article 12 with a “deductible loss” clause providing for per occurrence deductibles.

Section 12.07.

Employment Practice Liability

Operator shall obtain EPL coverage insuring against potential claims against Operator by Operator’s employees, for employment related claims. Such coverage shall have a minimum limit of $2,000,000, and shall name Owner/Lessee as additional insured.

Section 12.08.

Cyber/Network/Privacy Liability.

Lessee shall obtain Cyber/Network/Privacy insurance against potential claims against Operator and Lessee by third parties or a governmental authority arising from unauthorized access, unauthorized use, theft of data, virus transmission, denial of service, internet liability and failure to protect privacy and intellectual property in connection with and arising out of the design, development and use of any systems utilized to operate and maintain the services, premises and operations of the Hotels, with minimum limits of $1,000,000 per occurrence/aggregate.

Section 12.09.

Liquor Liability.

Where a liquor license is held in Operator’s name, Operator shall obtain Liquor Legal Liability insurance against potential claims by third parties arising out of the serving of such.  Coverages shall be in amount of minimum limits of $1,000,000 per occurrence, and shall include Lessee as additional insured.

Section 12.10.

Automobile Liability.

(a)  Lessee shall obtain Automobile Liability insuring against third party liability claims arising from the use of Lessee owned automobiles, with minimum limits of $1,000,000 each accident.  Such coverage shall include the Operator as Additional Insured as respects liability arising from the use of such automobiles in connection with the Hotel and operations incidental thereto.  Coverage shall include a Waiver of Subrogation in favor of Operator.

(b)  Operator shall obtain Operator-Owned, Non-Owned and Hired Automobile Liability and Physical Damage insuring against third party liability and damage of such vehicles, when such vehicles are used hired or rented by employees of Operator, with minimum limits of liability $1,000,000 each accident. Coverage shall include a Waiver of Subrogation in favor of Owner and Lessee.

Section 12.11.

General Liability.

Lessee shall obtain General Liability insuring against third party liability claims with minimum limits of $1,000,000 each occurrence/$2,000,000 aggregate. Such coverage shall include the Operator as Additional Insured as respects liability arising from the operation, maintenance, and use of the Hotel and operations incidental thereto. Owner/Lessee also agree to maintain Umbrella Liability Policy with a minimum limit of $10,000,000.00.

Section 12.12.

Property.

Lessee shall obtain Property insurance and Business Interruption insurance insuring the Hotel properties, as determined appropriate by Lessee. Coverage shall include a Waiver of Subrogation in favor of Operator.

Section 12.13.

Crime.

Lessee shall obtain Crime coverage insuring against the dishonest acts & theft of Lessee’s and Lessee’s customers personal property by Operator’s employees.

ARTICLE 13                               


PROPERTY TAXES, LOCAL TAXES, LEVIES AND OTHER ASSESSMENTS

Section 13.01.                                          Property Taxes.

At Lessee’s request, Operator shall pay from the Hotel Operating Account prior to the dates the same become delinquent, with the right upon Lessee’s request to pay the same in installments to the extent permitted by law, all real and personal property taxes levied against the Property or any of its component parts.

Section 13.02.                                          Lessee’s Right to Contest.

Notwithstanding the foregoing, Lessee or Owner may contest the validity or the amount of any real or personal tax or assessment. Operator agrees to cooperate with Lessee and Owner and execute any documents or pleadings required for such purpose.

ARTICLE 14                               


DAMAGE OR DESTRUCTION - CONDEMNATION

Section 14.01.                                          Damage.

If at any time during the Operating Term the Hotel or any portion thereof should be damaged or destroyed, Owner and Lessee shall have the respective rights and obligations provided in the Lease with respect to damage or destruction. In the event the Hotel is not repaired, rebuilt or replaced, Lessee may terminate this Agreement by written notice to Operator, effective as of the date sent and the parties shall treat such termination as if it were in connection with the sale of the Hotel in accordance with Section 16.03.

Section 14.02.                                          Condemnation.

If at any time during the Operating Term the whole or any part of the Property shall be taken or condemned in any eminent domain, condemnation, compulsory acquisition or like proceeding or sale in lieu thereof by any competent authority, or if such a portion thereof shall be taken or condemned as to make it imprudent or unreasonable to use the remaining portion as a hotel of the type and class immediately preceding such taking or condemnation, then the parties shall treat such termination as if it were in connection with the sale of Hotel in accordance with Section 16.03. Operator shall have no right to the award from the taking or condemning authority in any such proceeding; provided, however, that this shall not prevent Operator from making a separate claim against the condemning authority for loss of its business or profits.

ARTICLE 15                               


USE OF NAME

During the term of this Agreement, each Hotel shall at all times be known by such name as from time to time may be selected by Lessee.

ARTICLE 16                               


TERMINATION

Section 16.01.                                          Inspection Failure.

If Operator fails two consecutive Franchisor’s quality inspections (“Inspection”), for reasons other than capital related issues, Lessee may terminate this Agreement and such termination shall be by delivery of written notice  by Lessee to Operator not less than  sixty (60) days prior to the effective date of termination. Additionally, Lessee reserves the right, at its sole and absolute discretion, to request an extra Inspection on the Hotel after Operator has failed an Inspection, for reasons other than capital related items, and if Operator fails the extra Inspection this will qualify as two consecutive fails of Inspections and Lessee may terminate this Agreement and such termination shall be by delivery of written notice by Lessee to Operator not less than thirty (30) days prior to the effective date of termination. Lessee will be responsible for any additional fee required by Franchisor for said extra Inspection.

(a)	Performance Failure.

(a)              If a Hotel fails to achieve as of the end of any Fiscal Year (i) actual NOI of at least 90% of the budgeted NOI, and (ii)  90%  of such Hotel’s previous years running (12) month RevPAR index (as measured by STR) for such Fiscal Year (collectively, an “Individual Hotel Performance Failure”), subject to the cure periods below, Lessee may terminate this Agreement with respect to such Hotel upon sixty (60) days prior written notice to Operator. The effectiveness of any such notice of termination, however, shall be stayed until completion of the following applicable cure periods.

If  the Hotel Performance Failure occurs with respect to a Fiscal Year, but the Hotel achieves as of the end of the immediately following three (3) months actual NOI of at least 100% of the budgeted NOI for such Hotel for such three (3) months, and 100% of such Hotel’s previous years running (3) month RevPAR index (as measured by STR), then the Individual Hotel Performance Failure shall be deemed cured and Lessee shall have no right to terminate for such Individual Hotel Performance Failure (and any notice of termination with respect thereto shall be deemed null and void).

(b)              If the Hotel, after the Operator has managed the Hotel for a consecutive twelve (12) month period, at any point, has a negative RevPAR change versus its competitive set, as of the date here of, as measured by the monthly STR Report of greater than 10% for a running (12) month period (“Negative RevPAR Individual Hotel Performance Failure”), subject to the cure periods below, Lessee may terminate this Agreement with respect to the individual Hotel upon sixty (60) days prior written notice to Operator. The effectiveness of such notice of termination however, shall be stayed until completion of the following applicable cure period.

If  the Hotel’s performance, as measured by the monthly STR Report, for the following three (3) consecutive month period after notice of termination is provided, has a positive RevPAR change versus its competitive set, then the Negative RevPAR Individual Hotel Performance Failure shall be deemed cured and Lessee shall have no right to terminate for such Negative RevPAR Individual Hotel Performance Failure (and any notice of termination with respect thereto shall be deemed null and void). If however, the Hotel’s performance at any given period after termination has been cured, as measured by the monthly STR Report for the following twelve (12) month period, again becomes greater than negative 10% change against the individual Hotel’s competitive set as measured by the running twelve (12) month period, Lessee may terminate this Agreement with respect to the individual Hotel upon sixty (60) days prior written notice and Operator shall no longer have the option to cure.

Section 16.03.                                          Sale of Hotel.

Lessee may sell or otherwise dispose of the Hotel to any other person, partnership, firm or corporation at any time. In such event during the Operating Term, Lessee may notify Operator in writing no less than thirty (30) days prior to any such sale of the Hotel and this Agreement shall terminate with respect to the Hotel upon the closing of the sale.  Upon the sale of the hotel by the Lessee, Operator will be entitled to an Operator Fee equivalent to the monthly average of the preceding twelve (12) months Operator Fee for a sixty (60) day period after the sale.

Section 16.04.

Bad Acts

This agreement may be terminated  with  a sixty (60) day notice should Operator commit an act of fraud, criminal conduct, misappropriation of funds, dishonesty, or willful misconduct of the Operator in connection with the management and operation of the Hotel.  Such acts will be considered “bad person” acts and will result in immediate termination of Operator with no recourse against Lessee or Owner.

Section 16.05.                                          Optional Termination.

This Agreement may be terminated by Lessee at any time without a reason upon no less than sixty (60) days prior notice to Operator, and Lessee shall pay Operator a termination fee with respect to any such Hotel equal to the lesser of: 1) 50% of the Operator’s Fee paid with respect to the Hotel during the trailing twelve (12) months prior to the relevant termination (which may include Operator's Fees for the Hotel for periods prior to the Commencement Date) or, 2) 50% of the average monthly Operator's Fee over the trailing twelve (12) months prior to the relevant termination multiplied by the number of months remaining of the then Initial Term or Renewal Term.

Section 16.06.                                          Lessee Change of Control.

This Agreement may be terminated by Lessee or Operator upon a change of control of Lessee (as defined below) during the Operating Term.  Said termination will be exercised by delivery of written notice to the other party not less than sixty (60) days prior to the effective date of termination which notice shall set forth the effective date of termination.  For purposes hereof, a “change of control” shall be deemed to have occurred if, during the Operating Term, any of the following events occurs:

(i)

any “person”, as that term is used in Section 13(d) and Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes, is discovered to be, or files a report on Schedule 13D or 14D-1 (or any successor schedule, form or report) disclosing that such person is, a beneficial owner (as defined in Rule 13d-3 under the Exchange Act or any successor rule or regulation), directly or indirectly, of securities of Condor Hospitality Trust, Inc., the parent of Lessee (the “Parent”) representing 50% or more of the combined voting power of the Parent’s then outstanding securities entitled to vote generally in the election of directors;

(ii)	individuals who, as of the date of this Agreement, constitute the Board of Directors of the Parent or their duly elected successors cease for any reason to constitute at least a majority of the Board of Directors of the Parent;

(iii)

the Parent is merged, consolidated or reorganized into or with another corporation or other legal person, or securities of the Parent are exchanged for securities of another corporation or other legal person, and immediately after such merger, consolidation, reorganization or exchange less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held, directly or indirectly, in the aggregate by the holders of securities entitled to vote generally in the election of directors of the Parent immediately prior to such transaction; or

(iv)

the Parent in any transaction or series of related transactions, sells all or substantially all of its assets to any other corporation or other legal person and less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or sales are held, directly or indirectly, in the aggregate by the holders of securities entitled to vote generally in the election of directors of the Parent immediately prior to such sale.

In the event Lessee terminates this Agreement solely in accordance with this Section 16.06, Lessee shall pay Operator a termination fee equal to 50% of the Operator’s Fee paid to Operator during a number of months prior to the notice of termination multiplied by the lesser of twelve (12) months or the number of months otherwise remaining of the then Initial Term or Renewal Term.

Section 16.07.                                          Operator Change of Control.

This Agreement may be terminated by Lessee upon a change of control of Operator (as defined below) during the Operating Term.  Said termination will be exercised by delivery of written notice to the Operator, such notice to be provided within sixty (60) days following the Lessee being made aware of the event giving rise to the change of control and not less than thirty (30) days prior to the effective date of termination which notice shall set forth the effective date of termination; provided that, in the event such written notice to Operator is not provided in accordance within the terms of this sentence, the Lessee shall be deemed to have waived any rights to terminate this Agreement with respect to the particular change of control giving rise to the required notice.  For purposes hereof, a “change of control of Operator” shall mean (i) a change of fifty percent or more of the voting control of Operator or any of its owner entities or (ii) a substantial change in the current management of Operator.

In addition to the rights and remedies otherwise available to the Parties at law or in equity, the following provisions will apply following termination of this Agreement pursuant to Article 14 or any other provision of this Agreement:

(a)

Operator shall quit, vacate, surrender, and deliver to Owner peacefully and promptly the Hotel and all Permits and all books, records, accounts, contracts, keys, Working Capital, and all other pertinent and necessary documents and records pertaining to the Hotel and the operation thereof.  If any Permits, including but not limited to any liquor license, is issued to Operator or any of its Affiliates, Operator shall, to the extent permitted by Legal Requirements, assign or cause its Affiliate holding any such Permits to assign to Lessee or its designee all of the interest of Operator or its Affiliates in such Permits and the Hotel liquor inventory without charge (other than any out of pocket expenses of the assignment, which shall be Operating Expenses), or (if such assignment is not permitted by applicable law) to use reasonable efforts to provide Owner or Owner’s designee with the use and benefits of such Permits and Hotel liquor inventory until such time (not to exceed 180 days) as Owner and/or its designee are able to obtain new Permits; provided that Lessee shall indemnify, defend and hold harmless Operator and its Affiliates from claims and liabilities arising from the post-termination use of such Permits;

(b)

Operator shall deliver to Lessee any and all of Lessee’s properties and assets within the possession of Operator, including keys, locks and safe combinations, files, correspondence, information regarding group bookings, reservation lists, ledgers, bank statements for the Operating Account and FF&E Reserve, accounting books and records, all electronic data maintained by Operator relating to the Hotel (which data shall be delivered on computer disc in a format that is accessible and readable by Lessee’s then current computer systems), insurance policies, bonds and other documents, agreements, leases, licenses, records and plans (including, without limitation, the as-built or record set plans) relating to the operation of the Hotel, provided that Operator may retain possession of copies of any of the foregoing;

(c)	Operator shall keep confidential all information concerning the Hotel obtained by Operator or in Operator's possession, and not use any of it for its own account, for the account of others or in any other manner that would directly or indirectly compete with the Hotel;

(d)	Operator shall remit to Owner the balance (if any) of the Operating Account and the FF&E Reserve, after computation and disbursement to Operator of all accrued and unpaid Management Fees and Operating Expenses reimbursable to Operator;

(e)

As expeditiously as reasonably possible, prepare and deliver to Lessee the financial reports required under this Agreement with respect to the final Accounting Period and Fiscal Year and remit to Owner the amount (if any) shown as owing to Owner in the final financial statements on account of previously overpaid Management Fee, Operating Expenses reimbursable to Operator or other payments due under this Agreement; and

(f)

Operator shall do all acts and execute and deliver all documents reasonably requested by Lessee in connection with the transfer, all without consideration therefor, and otherwise reasonably cooperate with Owner and any successor operator to insure or facilitate orderly continuation of the business of the Hotel;

(g)	The rights and liabilities of the Parties having accrued prior to termination of this Agreement shall continue;

(h)	Operator will turn over possession of the Hotel in a clean, safe and secure manner;

(i)	Prior to termination, Operator agrees to maintain operating inventories at standards consistent with past practice and the Hotel pursuant to the Annual Plan and existing repair and maintenance schedules;

(j)

Lessee, at its option, may install a shadow management team in the Hotel during the  ten (10) day period immediately preceding the termination date to have daily access to the Hotel and its books and records; provided that such team shall not (a) unreasonably interfere with the management and operations of the Hotel, and (b) consist of more than ten (10) members.  Lessee shall use its reasonable efforts to cause the entity that succeeds Operator to hire a sufficient number of Hotel Employees to avoid a WARN Act violation;

(k)	Operator shall at all times fully co-operate with and explain all aspects of the business and operation of the Hotel to Lessee or any persons authorized by Lessee to allow Owner or such persons to successfully and efficiently conduct the business after the expiration of the Term.

Section 16.08.                                          Bookings Beyond Expiration of Term.

              Operator shall diligently discharge all its obligations under this Agreement during the whole of the Term, and in particular shall continue to advertise and promote the Hotel and actively seek and accept bookings notwithstanding that they are to occur after the expiration of the Term.  Lessee shall be responsible on its own account for all costs, charges and commissions payable for bookings made by Operator in the ordinary course of business of the Hotel, which are for dates after the expiration of the Term.

Section 16.09.                                          Tax Law Change.

Lessee may terminate this Agreement upon sixty (60) days’ notice to Operator if Lessee ceases to be qualified as a real estate investment trust or if the United States tax laws change to allow a hotel REIT to self-manage its properties.  In such event, Lessee shall pay Operator a termination fee equal to 50% of the Operator’s Fee paid to Operator during a number of months prior to the notice of termination multiplied by the lesser of twelve (12) months or the number of months otherwise remaining of the then Initial Term or Renewal Term.

Section 16.10.                                            Default or Termination of Alcoholic Concession Agreement by Operator.

If Operator or its Affiliate chooses to exercise its option to terminate the ABC Lease,  or if Lessee terminates the ABC Lease based upon default of ABC Tenant under the ABC Lease, Lessee may terminate this Agreement and such termination shall be by delivery of written notice by Lessee to Operator not less than ninety (90) days prior to the effective date of the termination.

In the event the ABC Lease is terminated, the parties agree to work together in good faith to make reasonable revisions to this Agreement, which might be necessary due to the termination.

Section 16.11.                                          Termination Fees.

          Except as provided in Sections 16.03, 16.05, 16.06 and 16.09, Operator shall not be entitled to a termination fee or compensation in the event this agreement is terminated for a Hotel or Hotels by Lessee.

ARTICLE 17                               


DEFAULT AND REMEDIES

Section 17.01.                                          Events of Default- Remedies.

(a)              The following shall constitute Events of Default:

(1)              The failure of Operator to diligently and efficiently operate the Hotel in accordance with the provisions of this Agreement;

(2)              The failure of Operator to pay any amount to Lessee provided for herein for a period of five (5) days after written notice by Lessee of failure to pay such sum when payable;

(3)              The failure of Lessee to pay any amount to Operator provided for herein for a period of five (5) days after written notice by Operator of failure to pay such sum when payable;

(4)              The filing of a voluntary petition in suspension of payments, bankruptcy or insolvency by either Lessee or Operator or any entity which owns or controls such party or if any such party otherwise voluntarily avails itself of any federal or state laws for the relief of debtors or admits in writing its inability to pay its debts as they become due;

(5)              The consent to an involuntary petition in bankruptcy or the failure to vacate within sixty (60) days from the date of entry thereof any order approving an involuntary petition by or against either Lessee or Operator;

(6)              The entering of an order, judgment or decree by any court of competent jurisdiction, on the application of a creditor, adjudicating Lessee or Operator a bankrupt or insolvent or appointing a judicial receiver, trustee or liquidator of all or a substantial part of such party’s assets, and such order, judgment or decree shall continue unstayed and in effect for a period of one hundred twenty (120) consecutive days;

(7)              The failure of either Lessee or Operator to perform, keep or fulfill any of the other covenants, undertakings, obligations or conditions set forth in this Agreement, and the continuance of any such default for a period of thirty (30) days after written notice of such failure;

(8)              Default or termination of the franchise license for a Hotel as a result of any action, or failure to act, on the part of Operator;

(9)              Failure by Operator to pay, when due, the accounts payable for the Hotels for which Lessee had previously reimbursed Operator.

(10)              Hotel receives a “failure” or its equivalent in any quality inspection report from any of the Franchisors, if such deficiencies are within Operator’s reasonable control.

(11)              Failure by Operator to execute any and all subordination agreements, estoppel certificates and other documents requested by Lessee or Owner and/or the Holder to further evidence the subordination of this Agreement and Operator’s rights hereunder.

(b)              Upon the occurrence of any Event of Default, the non-defaulting party shall give to the defaulting party notice of its intention to terminate this Agreement after the expiration of a period of ten (10) days from such date of notice and, upon the expiration of such period, this Agreement shall terminate and expire without penalty. If, however, with respect to the Events of Default referred to in items (1), (4), (5), (6), (7), (9) (10) and (11) of subsection (a) above, unless a specific right of termination is specified elsewhere in this Agreement for the event in question, upon receipt of such notice, the defaulting party shall promptly and with all due diligence cure the default or take and continue action to cure such default within such ten (10) day period; provided, in the case of an event described in Section 17.01(a)(10), and subject to Lessee’s termination rights pursuant to Section 16.01, the Operator shall cure such default by receipt of a favorable quality inspection report upon an inspection by the Franchisor within six (6) months following the failed inspection.  If such default shall not be capable of being cured within such ten (10) day period, then provided the defaulting party diligently pursues the cure of such default, such party shall have an additional five (5) days to cure any such default unless otherwise extended by the non-defaulting party. The procedure set forth in the preceding two sentences shall not be available for the curing of any default under items (2), (3) or (8) of subsection (a) above. In the event such default is not cured by the expiration of such period, the non-defaulting period may terminate this Agreement effective upon expiration of such period without penalty or payment of any fee.

Section 17.02.                                          Rights Not Exclusive.

(a)              The rights granted under this Article 17 shall not be in substitution for, but shall be, except as otherwise provided in this Agreement, in addition to any and all rights and remedies for breach of contract granted by applicable provisions of law; provided, however, upon any termination of this Agreement by Operator or Lessee as provided in this Agreement, Operator shall be entitled to recover only such sums as are owing to or which accrued for the benefit of Operator under this Agreement up to or on the date of any such termination, and in no event will Operator have any claim or cause of action for “future profits,” damages resulting from termination or otherwise under this Agreement.   Nothing in the preceding sentence, however, shall be interpreted to limit or restrict the Operator’s rights under any indemnification, hold harmless or defend provision of this Agreement all of which rights shall survive termination and continue to remain enforceable against Lessee as more fully set forth elsewhere in this Agreement.

(b)              No failure of Operator or Lessee to insist upon the strict performance of any covenant, agreement, term or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such breach or any subsequent breach of such covenant, agreement, term or condition. No covenant, agreement, term or condition of this Agreement and no breach thereof shall be waived, altered or modified except by written instrument signed by both Lessee and Operator. No waiver of any breach shall affect or alter this Agreement but each and every covenant, agreement, term and condition of this Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach thereof.

(c)              Lessee, for itself and on behalf of Owner, waives any right to seek or recover punitive or exemplary damages from Operator.

ARTICLE 18                               


NOTICES

Section 18.01.                                          Notices.

(a)              Any notice, statement or demand required to be given under this Agreement shall be in writing and shall be delivered by certified or registered mail, postage prepaid, return receipt requested, or by overnight delivery with proof of delivery, or by facsimile with receipt of transmission, addressed to the parties hereto at their respective addresses listed below:

(1)              Notices to Lessee shall be addressed:

Condor Hospitality Trust, Inc.

1800 West Pasewalk Avenue, Suite 200

Norfolk, NE 68702-1448

Attention:  J. William Blackham, CEO

Facsimile: (402) 371-4229

(2)              Notices to Operator shall be addressed:

Presidian Destinations, Ltd.

9000 Tesoro Drive, Suite 300

San Antonio, Tx 78209

Attention: Charles Leddy, CEO

Facsimile:  (210) 646-8814

(b)              All notices, statements, demands and requests shall be effective three (3) days after being deposited in the United States mail or one day after being sent by overnight delivery or by facsimile. However, the time period in which a response to any such notice, statement, demand or request must be given shall commence to run from date of receipt by the addressee thereof as shown on the return receipt of the notice, statement, demand or request, but in all events not later than the tenth (10th) day after it shall have been mailed as required herein.

(c)              By giving to the other party at least thirty (30) days written notice thereof, either party shall have the right from time to time and at any time during the Operating Term to change their respective addresses for notices, statements, demands and requests, provided such new address shall be within the United States of America.

ARTICLE 19                               


ASSIGNMENT

Section 19.01.                                          No Assignment by Operator.

, Operator shall have no right to sell, transfer or assign (or permit the sale, transfer or assignment of) any of its rights, duties or obligations under this Agreement in any manner, either directly or indirectly, voluntarily, or by operation of law without the prior written consent of Lessee (which consent may be withheld in Lessee’s sole and absolute discretion). Notwithstanding the foregoing, Purchaser may assign this Agreement to any properly formed business entity owned primarily by Purchaser and/or its principal owners.

Section 19.02.                                          Assignment by Lessee.

Lessee may transfer or assign its rights and obligations under this Agreement without the consent of Operator but shall deliver to Operator written notice of such transfer or assignment not less than ten (10) days prior to the effective date thereof; provided, however, in the event of the assignment of this Agreement to a party that is not an Affiliate, Operator shall have the right to terminate this Agreement within fifteen (15) days after receipt of written notice of such assignment, which termination will be effective within thirty (30) days of Lessee’s receipt of such termination notice.  Any transfer or assignment of this Agreement by Lessee shall include an express assumption by the transferee or assignee of Lessee’s obligations hereunder.  Nothing herein shall be deemed to require Lessee to assign or attempt to assign this Agreement to any third party, including any buyer of a Hotel.

ARTICLE 20                               


SUBORDINATION

Section 20.01.                                          Subordination To Mortgage.

Operator hereby agrees that this Agreement, including, but not limited to Operator’s Fee, shall in all respects be and is hereby expressly made subordinate and inferior to the liens, security interest and/or any Mortgage and to any promissory note and other indebtedness secured or to be secured thereby and to all other instruments evidencing or securing or to evidence or secure indebtedness, and all amendments, modifications, supplements, consolidations, extensions and revisions of such note and other instruments and any other indebtedness of Lessee or Owner, secured or unsecured. Operator shall execute any and all subordination agreements, estoppel certificates and other documents requested by Lessee or Owner and/or the Holder to further evidence the subordination of this Agreement and Operator’s rights hereunder including without limitation providing any purchaser of a Hotel at a foreclosure sale or deed-in-lieu of foreclosure (including the lender) with the right to terminate this Agreement; provided, however, Lessee shall use its commercially reasonable efforts to obtain from the holder of any Mortgage a nondisturbance agreement, in form reasonably acceptable to Operator providing that this Agreement shall remain in full force and effect notwithstanding the fact that the Mortgage has been foreclosed.

Section 20.02.                                          Foreclosure.

Prior to termination of this Agreement by foreclosure under the Mortgage or by acquisition of the property to be covered by the Mortgage by deed in lieu of foreclosure, Operator shall have the right to enjoy all rights and privileges conferred upon it pursuant to this Agreement, including, without limitation the rights to the Operator’s Fee, and Operator shall incur no liability to the Holder for acting pursuant to the terms of this Agreement; provided, however, Operator shall be required to (and does hereby agree to) repay to the Holder any Operator’s Fee paid to Operator under this Agreement from and after the date which is thirty (30) days after the date of receipt by Operator of a notice of default under the Mortgage, which default is not cured and results in the acceleration of the indebtedness secured by the Mortgage and the ultimate foreclosure of the liens and/or security interest under the Mortgage and/or other acquisition of the property covered thereby by the Holder in lieu of foreclosure.  In the event of such foreclosure, Operator shall have the right to terminate this Agreement on thirty (30) days’ written notice to Lessee.  Notwithstanding the foregoing, Operator may pursue, as an unsecured creditor, a claim for all amounts due and owing to Operator under this Management Agreement in accordance with the terms of this Section 20.02.

Section 20.03.                                          Estoppel Certificates.

Lessee and Operator agree, at any time and from time to time, upon not less than 10 days prior written notice from the other party or any purchaser or lender, to provide a statement in writing certifying that this Agreement is unmodified and in full force and effect (or, if there have been modifications, that the same is full and force and effect as modified and stating the modifications), and stating whether or not to the best knowledge of the signer of such certificate, there exists any default in the performance of any obligation contained in this Agreement, and if so, specifying each such default of which a signer may have knowledge.  Any statement delivered pursuant to this Section may be relied upon by the other party and by the prospective lender or purchaser.

ARTICLE 21                               


MISCELLANEOUS

Section 21.01.                                          Further Documentation and Reporting Compliance.

Lessee and Operator shall execute and deliver all appropriate supplemental agreements and other instruments, and take any other action necessary to make this Agreement fully and legally effective, binding, and enforceable in accordance with the terms hereof as between them and as against third parties.  Operator acknowledges that Parent is a reporting company under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and other federal laws, including the Sarbanes-Oxley Act of 2002, and Operator shall reasonably cooperate in providing Lessee information as necessary for Parent to prepare and submit its reports under such laws in a timely fashion.

Section 21.02.                                          Captions.

The titles to the several articles of this Agreement are inserted for convenience only and are not intended to affect the meaning of any of the provisions hereof.

Section 21.03.                                          Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of Lessee, its successors and/or assigns, and subject to the provisions of Article XIX, shall be binding upon and inure to the benefit of Operator, its permitted successors and assigns.

Section 21.04.                                          Competitive Market Area.

Operator hereby agrees, for the benefit of Lessee, its successors and assigns, except for the hotels, if any, listed as Exhibit A-3, that Operator (and its Affiliates) will not own, operate, lease, manage, or otherwise have an interest in, directly or indirectly, any hotel within a  three (3) mile radius of any Hotel during the Operating Term unless expressly consented to in writing by Lessee in advance, which consent may be withheld in Lessee’s sole and absolute discretion.

Section 21.05.                                          Assumption of Post Termination Obligations.

In the event of termination of this Agreement, Lessee shall be responsible for assuming obligations under contracts entered into by Operator only to the extent that any such contract shall have been entered into in accordance with Section 4.05(a) and Lessee shall be responsible for the payment of obligations incurred by Operator in the operation of the Hotel only to the extent that such obligations shall have been incurred in accordance with the terms of this Agreement, and Operator hereby agrees to indemnify and to hold Lessee harmless from and against any liability in connection with any such contracts, agreements or obligations not so approved in writing by Lessee.  Lessee will indemnify and hold Operator harmless from all costs, expenses, claims, damages and liabilities, including without limitation, lawyers’ fees and disbursements, arising or resulting from Lessee’s failure following the expiration or earlier termination (for whatever cause) of this Agreement to provide all of the services contracted for in connection with the business booked on commercially reasonable terms for the Hotels on or prior to the date of such expiration or termination.  The provisions of this Section will survive any expiration or termination of this Agreement and will be binding upon Lessee and its successors and assigns, including any successor or assign that becomes the beneficial or legal owner of the Hotels after the effective date of any such expiration or termination.

Section 21.06.                                          Entire Agreement.

This Agreement, together with the Exhibits hereto, constitutes the entire Agreement between the parties relating to the subject matter hereof, superseding all prior agreements or undertakings, oral or written.  This Agreement and the Exhibits hereto shall be construed and interpreted without reference to any canon or rule of law requiring interpretation against the party drafting or causing the drafting of this Agreement or the portions in question, it being agreed and understood that all parties have participated in the preparation of this Agreement.

Section 21.07.                                          Governing Law.

This Agreement shall be construed and enforced in accordance with the laws of the State of Kansas.

Section 21.08.                                          No Political Contributions.

Any provision hereof to the contrary notwithstanding, no money or property of the Hotel shall be paid or used or offered, nor shall Lessee or Operator directly or indirectly pay or use or offer, consent or agree to pay or use or offer any money or property of the Hotel, for or in aid of any political party, committee or organization, or for or in aid of, any corporation, joint stock or other association organized or maintained for political purposes, or for, or in aid or, any candidate for political office or for nomination for such office, or in connection with any election including referendum for constitutional amendment, or for any political purpose whatever, or for lobbying in connection with legislation or regulation thereunder, or for the reimbursement for indemnification of any person for money or property so used.

Section 21.09.                                          Eligible Independent Contractor.

(a)      At the effective time of this Agreement, Operator shall qualify as an “eligible independent contractor” as defined in Section 856(d)(9) of the Internal Revenue Code of 1986, as amended (the “Code”).  To that end:

(i)	during the Operating Term, Operator shall not permit wagering activities to be conducted at or in connection with the Hotels;

(ii)	during the Operating Term, Operator shall not own, directly or indirectly (within the meaning of Section 856(d)(5) of the Code), more than 35% of the shares of Condor Hospitality Trust, Inc.;

(iii)

during the Operating Term, no more than 35% of the total combined voting power of Operator’s outstanding stock (or 35% of the total shares of all classes of its outstanding stock) shall be owned, directly or indirectly, by one or more persons owning 35% or more of the outstanding stock of Condor Hospitality Trust, Inc.; and

(iv)

At the effective time, Operator shall be actively engaged in the trade or business of operating “qualified lodging facilities” (defined below) for a person who is not a “related person” within the meaning of Section 856(d)(9)(F) of the Code with respect to the Parent or Lessee (“Unrelated Persons”). In order to meet this requirement, Operator agrees that it (i) shall derive at least 10% of both its revenue and profit from operating “qualified lodging facilities” for Unrelated Persons and (ii) shall comply with any regulations or other administrative guidance under Section 856(d)(9) of the Code with respect to the amount of hotel management business with Unrelated Persons that is necessary to qualify as an “eligible independent contractor” with the meaning of such Code Section.

(b)              A “qualified lodging facility” is defined in Section 856(d)(9)(D) of the Code and means a “lodging facility” (defined below), unless wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. A “lodging facility” is a hotel, motel or other establishment more than one-half of the dwelling units in which are used on a transient basis, and includes customary amenities and facilities operated as part of, or associated with, the lodging facility so long as such amenities and facilities are customary for other properties of a comparable size and class owned by other owners unrelated to Condor Hospitality Trust, Inc.

(c)              Operator shall not sublet any Hotel or enter into any similar arrangement on any basis such that the rental or other amounts to be paid by the sublessee thereunder would be based, in whole or in part, on either (a) the net income or profits derived by the business activities of the sublessee, or (b) any other formula such that any portion of the rent would fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Internal Revenue Code, or any similar or successor provision thereto.

Section 21.10.                                          Time of the Essence.

Time is of the essence of this Agreement.

Section 21.11.                                          Offsets.

Each party may offset amounts owed to another party hereunder against any amounts owed to such party, except to the extent any such offset is prohibited by the terms of the Lessee (or its Affiliates) credit agreements.

Section 21.12.                                          Final Accounting.

(a)              In addition to the reports required by Section 9.02, within sixty (60) days following the effective date of expiration or termination of this Agreement, Operator shall prepare and submit to Lessee a final accounting of Hotel operations through the effective date of such expiration or termination, which accounting shall be in the form of the financial statements required hereunder.

(b)              Upon the effective date of expiration or termination of this Agreement, Operator shall deliver possession of the Hotel, and any cash, property and other assets pertaining thereto, together with any and all keys or other access devices, to Lessee.

(c)              Upon the expiration or termination of this Agreement, Operator shall reasonably cooperate with and assist Lessee as may be necessary for the transfer of the operations and management of the Hotels to the successor operator and the transfer any and all Hotel licenses and permits to Lessee or Lessee’s designee.

Section 21.13.                                          Franchisor Communications.

During the Operating Term, Operator shall promptly deliver to Lessee copies of any deficiency notices or similar notices received from a Franchisor and any response thereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

LESSEE:

TRS KCI LOFT, LLC

By:              /s/ Jeffrey W. Dougan

Title:              Vice President

OPERATOR:

PRESIDIAN DESTINATIONS, LTD.

By:              /s/ Charles J. Leddy

Title:              Chief Executive Officer

EXHIBIT A

HOTEL PROPERTIES AND OWNERS

EXHIBIT A-1

COMPETITIVE SET

EXHIBIT A-2

ACCOUNTING SOFTWARE AND PAYROLL PROCESSES

EXHIBIT A-3

LIST OF OPERATOR’S HOTELS WITHIN 3 MILE RADIUS

N/A

EXHIBIT B

FRANCHISE AGREEMENTS

Aloft                                                                        11620 Ash St, Leawood, KS                                                                          The Sheraton, LLC

Exhibit 10.3

 

LOAN AGREEMENT

by and among

CDOR KCI LOFT, LLC, a Delaware limited liability company

and

TRS KCI LOFT, LLC, a Delaware limited liability company

and

GREAT WESTERN BANK

dated as of

December 14, 2016

THIS LOAN AGREEMENT (as amended, restated, supplemented, extended, or otherwise modified in writing from time to time, this " Agreement "), dated as of December 14, 2016, is entered into by and among CDOR KCI LOFT, LLC, a Delaware limited liability company (" CDOR KCI ") and TRS KCI LOFT, LLC, a Delaware limited liability company (" TRS KCI ", and together with CDOR KCI, individually a " Borrower " and collectively, the " Borrowers ") and GREAT WESTERN BANK (" Bank "). In consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01.  Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings:

" Adjusted Fixed Rate " mean the greater of (A) 4.33% per annum and (B) the Two-Year Treasury Rate plus 2.50% per annum, which rate shall be fixed during the applicable period.

" Adjusted Net Operating Income " means the net operating income of Borrowers as of the end of the applicable fiscal quarter, for the preceding twelve (12) month period, minus (a) an amount equal to four percent (4%) of gross room revenues from Hotel for furniture, fixtures and equipment reserve and (b) an amount equal to four percent (4%) of gross room revenues from the Hotel for management fees, both for the preceding twelve (12) month period.

" Affiliate " means another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

" Agreement " has the meaning specified in the introduction hereto.

" Applicable Rate " means (a) from the Closing Date through and including the Maturity Date, 4.33% per annum and (b) in the event Borrowers elect to extend the term of the Loans pursuant to the terms of Article II below, from the first day following the Maturity Date through and including the Extended Maturity Date, at the election of Borrowers, either (i) the Adjusted Fixed Rate or (ii) the LIBOR Rate plus 3% per annum, adjusted monthly; provided, however that such rate will never be less than the initial floating rate set for the month of January 2022.

" Association " means Commercial Owner's Association of Park Place, Inc., a Kansas non-profit corporation.

" Bank " has the meaning specified in the introduction hereto, and shall include any subsequent holder of the Term Loan 1 Note or the Term Loan 2 Note.

" Borrower " or " Borrowers " has the meaning specified in the introduction hereto.

" Business Day " means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, Nebraska.

" Cell Tower Lease " means the Building and Rooftop Lease Agreement dated August 12, 2014 between Leawood ADP, Ltd. (predecessor-in-interest to CDOR KCI) as lessor and Verizon Wireless (VAW) LLC, a lessee.

" Closing Date " means December 14, 2016.

" Collateral " means the Real Property, Personal Property, and other property interests in which Liens have been granted to Bank pursuant to the Mortgage or any Collateral Document now or hereafter provided by any Borrower or any other Person to Bank in connection with the Loans.

" Collateral Documents " means collectively, the Mortgage, the Management Assignment, and any other security agreements, assignments, and other instruments requested by Bank, each in a form as provided by Bank, for purposes of creating or perfecting a Lien in favor of Bank in the Collateral.

" Compliance Certificate " means a certificate, in substantially the form attached hereto as Exhibit A , properly completed, executed and certified by a responsible financial officer of each Borrower.

" Condor " means Condor Hospitality Trust, Inc., a Maryland corporation.

" Condor Adjusted Consolidated Net Operating Income " means the net operating income for all hotel properties owned by an Affiliate of Condor as of the end of the applicable fiscal quarter, for the preceding twelve (12) month period, minus (a) an amount equal to four percent (4%) of gross room revenues from all hotel properties owned by an Affiliate of Condor at the end of the applicable fiscal quarter for furniture, fixtures and equipment reserve and (b) an amount equal to four percent (4%) of gross room revenues from all hotel properties owned by an Affiliate of Condor as of the end of the applicable fiscal quarter for management fees and expenses, both determined for the preceding twelve (12) month period.

" Condor Debt Service Coverage Ratio " means the ratio of (a) Condor Adjusted Consolidated Net Operating Income to (b) Condor Imputed Consolidated Debt Service; provided that any hotel properties sold by Condor or an Affiliate since the immediately prior reporting period shall be excluded for purposes of calculating the Condo Debt Service Coverage Ratio for the then current reporting period.

" Condor Imputed Consolidated Debt Service " means (a) the then current monthly principal and interest payments on all non-revolving loan obligations of Condor and all Affiliates of Condor included on its consolidated financial statements times 12, plus (b) annual principal and interest payments required to fully amortize the least amount Condor is allowed to draw on its revolving line of credit with Bank pursuant to that certain Amended and Restated Loan Agreement dated as of December 3, 2008 between Bank and Condor, as the same may be amended in writing, regardless of the amount of the revolving line of credit that has been advanced to Condor, based on a twenty (20) year amortization and an interest rate of 4.50% per annum; provided, that the principal and interest payments on loan obligations of Condor or an Affiliate of Condor included on its consolidated financial statements that financed the acquisition or development of any new hotel within the preceding twelve (12) month period shall be determined on a pro forma basis by taking the current scheduled principal and interest payment on such loan obligation and multiplying such current payment by the number of months that such new hotel has been owned, opened and operated by Condor or such Affiliate.

" Control ", " Controlled " and " Controlling " each mean the power to direct the management and policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

" Debt " means (A) indebtedness for borrowed money or for the deferred purchase price of property or services (other than trade payables due in the ordinary course of business); (B) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases; (C) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (A) or (B) above; and (D) liabilities in respect of unfunded vested benefits under plans covered by Title IV of the Employee Retirement Income Security Act of 1974 (ERISA)).

" Debt Service Coverage Ratio " means the ratio of (a) Adjusted Net Operating Income to (b) the annual principal and interest payments on the Loans for the applicable measuring period.

" Default Rate " means the lesser of (i) the Maximum Rate or (ii) four percent (4%) per annum over the Applicable Rate.

" Easement and Development Agreements " means those certain easement, covenants, and development agreements that benefit and burden the Real Property, as set forth on Exhibit "B" attached hereto.

" Environmental Indemnity " means that certain Environmental Indemnification Agreement from Borrowers to and in favor of Bank, in a form and substance satisfactory to Bank, as amended, restated, supplemented, extended or otherwise modified in writing from time to time.

" Events of Default " has the meaning specified in Section 6.01 .

" Extended Maturity Date " means December 1, 2023.

" Fiscal Year " means the fiscal year period ending on December 31 of each year.

" Franchise Agreement " means that certain Franchise Agreement on Change of Ownership dated on or around the date hereof between TRS KCI and Franchisor, as the same may be amended from time to time.

" Franchisor " means The Sheraton LLC, a Delaware limited liability company.

" Governmental Authority " means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

" Limited Guaranty " means a guaranty of certain non-recourse carveouts in a form as provided by Bank, as amended, restated, supplemented, extended or otherwise modified in writing from time to time.

" Liquor Operator Lease " means that certain Alcoholic Beverage Concession and Lease Agreement dated as of March 15, 2009 between Leawood ADP, Ltd. (predecessor-in-interest to TRS KCI) and LJABC-KS, LLC a Kansas limited liability company, as amended.

" Hotel " means the approximately 88,825 gross square foot, 156 guest room hotel located on the Land.

" Land " means the real estate located at 11620 Ash Street, Leawood, Johnson County, Kansas and legally described as Lot 9, Park Place Second Plat, a subdivision in the City of Leawood, Johnson County, Kansas according to the recorded plat filed in Book 200711, Page 006579, which consists of 7,008.26 square feet of land at the ground surface and 27,579.35 square feet above elevation 948.5.

" Laws " means collectively all federal, state and local statutes, guidelines, rules, regulations, ordinances, codes and administrative or judicial precedents, authorities or orders.

" LIBOR Rate " means as of December 1, 2021 and then the first Business Day of each month thereafter, the rate of interest per annum that is equal to the arithmetic mean of the rates appearing on "Page 3750" on the Telerate Service (or such other page as may replace Page 3750 on the Telerate Service) as of 11:00 a.m., London time, on that day (or, if such day is not a Business Day, the immediately preceding Business Day) for the offering by such institutions as are named therein to prime banks in the LIBOR Interbank Market in London, England, for delivery of that day of U.S. dollar deposits of One Million Dollars ($1,000,000.00) each for a one (1) month period.

" Lien " means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction to evidence any of the foregoing).

" Loan Commitment " or " Loan Commitments " means individually, the Term Loan 1 Commitment or the Term Loan 2 Commitment, and collectively, the Term Loan 1 Commitment and the Term Loan 2 Commitment.

" Loan Documents " means this Agreement, the Term Loan 1 Note, the Term Loan 2 Note, the Mortgage, the Management Assignment, the Limited Guaranty, the Springing Guaranty, the Environmental Indemnity, and all other agreements, documents, instruments, and certificates delivered to, or in favor of Bank under this Agreement or in connection with the extension of the Loans.

" Loan " or " Loans " means individually Term Loan 1 or Term Loan 2, and collectively, Term Loan 1 and Term Loan 2.

" Management Agreement " means that certain Hotel Management Agreement dated on or around the date hereof between TRS KCI and Presidian Destinations, LTD., as the same may be amended from time to time.

" Management Assignment " means a collateral assignment of the Management Agreement from TRS KCI to and in favor of Bank, in a form and substance satisfactory to Bank.

" Material Adverse Effect " means any set of circumstances or events which (i) has or could reasonably be expected to have any material adverse effect upon the validity or enforceability of any Loan Documents or any material term or condition contained therein; (ii) is or could reasonably be expected to be material and adverse to the financial condition, business assets, operations, or property of either Borrower or (iii) materially impairs or could reasonably be expected to materially impair the ability of either Borrower to perform the obligations under the Loan Documents.

" Maturity Date " means December 1, 2021.

" Maximum Rate " means the maximum non-usurious interest rate, if any, that at any time, or from time to time, may be contracted for, taken, reserved, charged or received under applicable state or federal law.

" Mortgage " means the Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing from Borrowers to Bank, in a form and substance satisfactory to Bank, as amended, restated, supplemented, extended or otherwise modified in writing from time to time.

" Obligations " means all obligations, indebtedness, and liabilities of each Borrower to Bank arising pursuant to any of the Loan Documents, whether now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, including, without limitation, the obligation of each Borrower to repay the Loans, interest on the Loans, and all fees, costs, and expenses (including reasonable attorneys' fees and expenses) provided for in the Loan Documents.

" Organization Documents " means, (a) with respect to any corporation, the articles of incorporation, bylaws, and certificate of existence or good standing issued by the applicable Governmental Authority in which the corporation was organized or in which it is registered as a foreign corporation; (b) with respect to any limited liability company, the articles of formation or organization, operating agreement and certificate of existence or good standing issued by the applicable Governmental Authority in which the company was organized or in which it is registered as a foreign limited liability company; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation, any agreement, instrument, filing or notice with respect thereto filed in connection with its formation with the applicable Governmental Authority in the jurisdiction of its formation, any certificate or articles of formation of such entity, and any certificate of existence or good standing issued by the applicable Governmental Authority in which the entity was formed or in which it is registered as a foreign entity.

" Parking Garage " means that certain parking garage adjacent to the Real Property for which the Hotel may utilize 156 parking stalls pursuant to the Easement and Development Agreements.

" Permitted Liens " means the Liens permitted under Section 5.02(b) .

" Person " means any individual, corporation, business trust, association, company, partnership, joint venture, Governmental Authority, or other entity.

" Personal Property " means the fixtures, furniture and equipment located on or used exclusively in connection with the Real Property.

" Real Property " means the Land, the Hotel, all other real estate improvements now or hereafter located on the Land, and any other interests in real property associated therewith.

" Reserve Account " means deposit account #14150874 in Borrowers' name and maintained at Bank.

" Springing Guaranty " means a guaranty of the Obligations that becomes effective only in the event Borrowers fail to meet the minimum Debt Service Coverage Ratio (pre-distribution) set forth in Section 5.01(k) below, in a form as provided by Bank, as amended, restated, supplemented, extended or otherwise modified in writing from time to time.

" Term Loan 1 " means the loan made under Section 2.01 .

" Term Loan 1 Commitment " means $14,326,000.

" Term Loan 1 Note " means the promissory note from Borrowers to Bank in the principal amount of the Term Loan 1 Commitment, together with all extensions, renewals, modifications, substitutions and amendments thereof.

" Term Loan 2 " means the loan made under Section 2.02 .

" Term Loan 2 Commitment " means $1,599,000.

" Term Loan 2 Note " means the promissory note from Borrowers to Bank in the principal amount of the Term Loan 2 Commitment, together with all extensions, renewals, modifications, substitutions and amendments thereof.

" Two-Year Treasury Rate " means the rate per annum conclusively determined by Bank (absent manifest error) as of December 1, 2021 to be the U.S. Treasury constant maturities 2-year as posted in the Federal Reserve Statistical Release H.15 (daily rates) at: http://www.federalreserve.gov/Releases/H15/Update/   ( or if not posted on such website, as reported by any service selected by Bank).

" UCC " means the Uniform Commercial Code in effect in the State of Nebraska.

Section 1.02.  Accounting Matters .  All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistently applied, except as otherwise stated herein.  To enable the ready and consistent determination of compliance by each Borrower with its obligations under this Agreement, neither Borrower will change the manner in which either the last day of its Fiscal Year or the last days of the first three fiscal quarters of its Fiscal Year is calculated, unless Borrowers provide Bank with at least 30 days prior written notice of such change.

Section 1.03.  Construction .  Wherever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. The headings, captions or arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of the Loan Documents, nor affect the meaning thereof.

ARTICLE II

AMOUNT AND TERMS OF THE LOANS

Section 2.01.                                          Term Loan 1 .  Bank agrees, on the terms and conditions hereinafter set forth, to extend credit to Borrowers on the Closing Date in a single advance in the amount of the Term Loan 1 Commitment (" Term Loan 1 "); provided, however, (a) that $1,500,000 of Term Loan 1 will be deposited into the Reserve Account (the " PIP Funds ") and disbursed in accordance with Section 3.02 below and (b) a portion of Loan 1 in an amount equal to the difference between the estimated $500,000 in closing costs and the actual closing costs will be deposited into the Reserve Account to make an initial deposit into the Reserve Account for Room Revenue Funds or for other uses as approved by Bank.

(a)              Term Loan 1 Note .  Term Loan 1 shall be evidenced by the Term Loan 1 Note.

(b)              Use of Proceeds .  Borrowers shall use the proceeds of Term Loan 1 to acquire the Real Property and the Personal Property, to pay for certain closing costs associated with the acquisition, to pay for renovations and other improvements required by the PIP, to make an initial deposit into the Reserve Account for Room Revenue Funds, or for other uses as approved by Bank.

(c)              Applicable Rate .  Interest shall accrue on the unpaid principal amount of Term Loan 1 from the Closing Date until the date due at the Applicable Rate.

(d)              Repayment of Principal and Interest .  Beginning on January 1, 2017 and on the 1st day of each month thereafter, Borrowers shall pay to Bank principal and interest payments in the amount necessary to amortize Term Loan 1 over 300 months.  Borrowers shall pay all unpaid principal and any accrued unpaid interest on Term Loan 1 on the Maturity Date.

Notwithstanding the foregoing, so long as no Event of Default is continuing, Borrowers may elect to extend the Maturity Date to the Extended Maturity Date by providing Bank with written notice of such election at least 90 days  prior to the Maturity Date.  In the event of such extension, Borrowers shall continue to make monthly principal and interest payments pursuant to Section 2.01(d) above, and Borrowers shall pay all unpaid principal and any accrued and unpaid interest on Term Loan 1 on the Extended Maturity Date.

Section 2.02.                                          Term Loan 2 .  Bank agrees, on the terms and conditions hereinafter set forth, to extend credit to Borrowers on the Closing Date in a single advance in the amount of the Term Loan 2 Commitment (" Term Loan 2 ").

(a)              Term Loan 2 Note .  Term Loan 2 shall be evidenced by the Term Loan 2 Note.

(b)              Use of Proceeds .  Borrowers shall use the proceeds of Term Loan 2 to acquire the Real Property and the Personal Property, to pay for certain closing costs associated with the acquisition, to pay for renovations and other improvements required by the PIP, to make an initial deposit into the Reserve Account for Room Revenue Funds, or for other uses as approved by Bank.

(c)              Applicable Rate .  Interest shall accrue on the unpaid principal amount of Term Loan 2 from the Closing Date until the date due at the Applicable Rate.

(d)              Repayment of Principal and Interest .  Beginning on January 1, 2017 and on the 1st day of each month thereafter, Borrowers shall pay to Bank principal and interest payments in the amount necessary to amortize Term Loan 2 over 84 months.  Borrowers shall pay all unpaid principal and any accrued unpaid interest on Term Loan 2 on the Maturity Date.

Notwithstanding the foregoing, so long as no Event of Default is continuing, Borrowers may elect to extend the Maturity Date to the Extended Maturity Date by providing Bank with written notice of such election at least 90 days  prior to the Maturity Date.  In the event of such extension, Borrowers shall continue to make monthly principal and interest payments pursuant to Section 2.02(d) above , and Borrowers shall pay all unpaid principal and any accrued and unpaid interest on Term Loan 2 on the Extended Maturity Date.

Section 2.03.                                          Prepayment .  If Borrowers prepay the Loans prior to the Maturity Date as a result of a loan obtained by one or more Borrowers from another FDIC insured lender, Borrowers shall pay to Bank a prepayment fee in the amount of .50% of the outstanding principal amount of the Loans.  Notwithstanding the foregoing,  Borrowers may prepay the Loans from any source, on or within 10 days prior to the Maturity Date without payment of the prepayment fee; provided, however, that Borrowers provide at least 30 days' notice to Bank of the intent to payoff.

In the event Borrowers extend the term of the Loans to the Extended Maturity Date  and elect for interest to accrue during such extension at the Adjusted Fixed Rate, then if Borrowers prepay the Loans after the Maturity Date, but prior to the Extended Maturity Date, as a result of a loan obtained by Borrowers from another FDIC insured lender, Borrowers shall pay to Bank a prepayment fee in the amount of .50% of the outstanding principal amount of the Loans. Notwithstanding the foregoing,  Borrowers may prepay the Loans from any source, on or within 10 days prior to the Extended Maturity Date without payment of the prepayment fee; provided, however, that Borrowers provide at least 30 days' notice to Bank of the intent to payoff.

Section 2.04.                                          Payments and Computations .

(a)              Method of Payment .  Except as otherwise expressly provided herein, all payments of principal, interest, and other amounts to be made by Borrowers under the Loan Documents shall be made to Bank in U.S. dollars and in immediately available funds, without set-off, deduction, or counterclaim, not later than 2:00 p.m. (Central time) on the date on which such payment becomes due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day).  Borrowers hereby authorize Bank, if and to the extent payment of any amount is not made when due under any Loan Document, to charge from time to time against any account of either Borrower with Bank any amount so due.

(b)              Payment Allocation .  At the sole option of Bank, all payments to Bank will be applied as follows: FIRST, to sums due and owing to Bank under this Agreement or the other Loan Documents (other than principal and interest due under this Agreement); SECOND, the payment of accrued but unpaid interest due under the terms of this Agreement or the other Loan Documents; and THE BALANCE, if any, toward the reduction of the unpaid principal balance of the Loans, as determined by Bank.  The early or late date of making a monthly payment will be disregarded for purposes of allocating the payment between principal and interest.  For this purpose, the payment will be treated as though made on the date due.

(c)              Payments on a Non-Business Day .  Whenever any payment under any Loan Document shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest and fees, as the case may be, provided , however , in the event the next succeeding Business Day is the start of a new month, then such payment shall be made on the preceding Business Day.

(d)              Return of Proceeds .  If at any time payment, in whole or in part, of any amount received by Bank hereunder is rescinded or must otherwise be restored or returned by Bank as a preference, fraudulent conveyance, or otherwise under any bankruptcy, insolvency, or similar law, then each Person receiving any portion of such amount agrees, upon demand, to return the portion of such amount it has received to Bank.

(e)              Computations .  All computations of interest accrued at the Applicable Rate or the Default Rate (but not the Maximum Rate) and the fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) elapsed, and all computations of interest accrued at the Maximum Rate shall be based upon a year with 365 or 366 days, as appropriate.

(f)              Late Charge .  In the event Borrowers fail to make a payment required hereunder within ten (10) days of when due, Borrowers shall pay to Bank a late charge in the amount equal to five percent (5%) of any shortfall on such payment.

Section 2.05.                                          Withholding Taxes .  All payments by Borrowers of amounts payable under any Loan Document shall be payable without deduction for or on account of any present or future taxes, duties, or other charges levied or imposed by any Governmental Authority through withholding or deduction with respect to any such payments (but excluding any tax imposed on or measured by the net income or profit of Bank) (all such taxes, duties or other charges, giving effect to the taxes excluded pursuant to the foregoing parenthetical herein the " Non-Excluded Taxes ").  If any Non-Excluded Taxes are so levied or imposed, Borrowers shall make additional payments in such amounts so that every net payment of amounts payable by Borrowers under any Loan Document, after withholding or deduction for or on account of any Non-Excluded Taxes, will be equal to the amount provided for herein or therein; provided that Borrowers may withhold to the extent required by Law and shall have no obligation to pay such additional amounts to Bank to the extent that such Non-Excluded Taxes are United States withholding taxes imposed (or branch profits taxes imposed in lieu thereof) on amounts payable to Bank at the time Bank becomes a party to the Loan Documents, except to the extent that Bank's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from Borrowers with respect to such Non-Excluded Taxes pursuant to this Section 2.05 .  Borrowers shall furnish promptly to Bank official receipts evidencing any such withholding or reduction.

Section 2.06.                                          Default Interest .  Upon the occurrence of an Event of Default, at the option of Bank, exercised by delivering a written notice to Borrowers, all principal and, to the extent permitted by applicable Law, interest, fees and other amounts owing hereunder, shall bear interest from the date of Borrowers' receipt of such notice until the date that such Event of Default is waived or cured or all Obligations are paid in full, at the Default Rate.  Interest payable at the Default Rate shall be payable from time to time on demand or, if not sooner demanded, on the last Business Day of each calendar month.

Section 2.07.                                          Maximum Amount Limitation .  Anything in this Agreement or the other Loan Documents to the contrary notwithstanding, Borrowers shall not be required to pay unearned interest on any of the Obligations, or ever be required to pay interest on any of the Obligations at a rate in excess of the Maximum Rate, if any. If the effective rate of interest which would otherwise be payable under this Agreement or any of the other Loan Documents would exceed the Maximum Rate, if any, then the rate of interest which would otherwise be contracted for, charged, or received under this Agreement or any of the other Loan Documents shall be reduced to the Maximum Rate, if any. If any unearned interest or discount or property that is deemed to constitute interest (including, without limitation, to the extent that any of the fees payable by Borrowers for the Obligations to Bank under this Agreement or any of the other Loan Documents are deemed to constitute interest) is contracted for, charged, or received in excess of the Maximum Rate, if any, then such interest in excess of the Maximum Rate shall be deemed a mistake and canceled, shall not be collected or collectible, and if paid nonetheless, shall, at the option of Bank, be either refunded to Borrowers or credited on the principal of such Obligations. It is further agreed that, without limitation of the foregoing and to the extent permitted by applicable Laws, all calculations of the rate of interest or discount contracted for, charged or received by Bank under this Agreement, or under any of the Loan Documents, that are made for the purpose of determining whether such rate exceeds the Maximum Rate applicable to Bank, if any, shall be made, to the extent permitted by applicable Laws (now or hereafter enacted), by amortizing, prorating and spreading during the period of the full term of the applicable Loan and any renewals thereof all interest at any time contracted for, charged or received by Bank in connection therewith. This Section 2.07 shall control every other provision of all agreements among the parties to this Agreement pertaining to the transactions contemplated by or contained in the Loan Documents, and the terms of this Section 2.07 shall be deemed to be incorporated in every Loan Document and communication related thereto.

Section 2.08.                                          Bank Records .  Each Loan and all payments or prepayments made thereunder on account of principal or interest may be evidenced by Bank in accordance with its usual practice in an account or accounts evidencing such Loans and all payments or prepayments thereunder from time to time and the amounts of principal and interest payable and paid from time to time thereunder; in any legal action or proceeding in respect of the Obligations, the entries made in such account or accounts shall be prima facie evidence of the existence and amount of each Loan and all payments or prepayments made thereunder on account of principal or interest.

ARTICLE III

CONDITIONS PRECEDENT

Section 3.01.                                          Conditions Precedent to the Loans .  The effectiveness of this Agreement and obligations of Bank to make the Loans are subject to the conditions precedent that Bank shall have received the following, in form and substance satisfactory to Bank:

(a)              This Agreement, the Term Loan 1 Note, the Term Loan 2 Note, the Mortgage, and the Environmental Indemnity duly executed by Borrowers.

(b)              The comfort letter with respect to the Franchise Agreement duly executed by Franchisor.

(c)              The Management Assignment duly executed by TRS KCI.

(d)              The consent to Management Assignment duly executed by the applicable Person.

(e)              The Limited Guaranty and the Springing Guaranty duly executed by Condor.

(f)              A copy of the fully executed lease between CDOR KCI (as landlord) and TRS KCI (as tenant).

(g)              A Lease Subordination Agreement, in a form and substance acceptable to Bank in its reasonable discretion, duly executed by TRS KCI and CDOR KCI.

(h)              A copy of the Franchise Agreement.

(i)              A copy of the Management Agreement.

(j)              Financing Statements (Form UCC-1) delivered to Bank by Borrowers in form and content satisfactory to Bank and in proper filing form under the UCC as may be necessary to perfect the security interests created by the Collateral Documents.

(k)              Evidence that all other actions necessary, or in the opinion of Bank, desirable to enable Bank to perfect and protect the Liens created by the Collateral Documents have been taken.

(l)              Copies of the Organization Documents and resolutions of each Borrower as Bank may require (i) authorizing each Borrower to enter into the transactions contemplated by this Agreement and (ii) evidencing the identity, authority and capacity of each responsible officer of such Borrower authorized to act as a responsible officer in connection with this Agreement and the other Loan Documents to which such Borrower is a party.

(m)              Copies of the Organization Documents and resolutions of Condor as Bank may require (i) authorizing Condor to enter into the Limited Guaranty and the Springing Guaranty and (ii) evidencing the identity, authority and capacity of each responsible officer of Condor authorized to act as a responsible officer in connection with the Limited Guaranty and the Springing Guaranty.

(n)              Copies of UCC search reports listing all financing statements and other encumbrances which name and which are filed in the jurisdiction in which each Borrower is located or organized, together with copies of such financing statements.

(o)              A detailed summary of Borrowers' uses of the proceeds of the Loans, including supporting documentation to verify the costs of such uses.

(p)              A Phase I environmental site assessment of the Real Property in a form and substance reasonably satisfactory to Bank.

(q)              An appraisal of the Real Property in compliance with all of the minimum standards as required by FIRREA in its uniform appraisal standards adopted June 7, 1994, dealing with federally regulated institution and which is otherwise in a form and substance satisfactory to Bank in its reasonable discretion.

(r)              An ALTA lender's title insurance policy effective as of a date no earlier than the date and time of recording of the Mortgage, in the amount the Loan Commitments, insuring Bank's interest in the Real Property, including the permanent easement to use the Parking Garage as an insured easement parcel, with only such exceptions as may be approved by Bank, and all endorsements required by Bank, including without limitation: ALTA 9; Subdivision Control Act; Zoning 3.1; Access; Survey; and Location.

(s)              An ALTA survey of the Real Property prepared by a surveyor duly registered and in good standing in the State of Kansas.

(t)              Evidence of the insurance coverage required under this Agreement or the other Loan Documents, or as otherwise required by Bank.

(u)              A satisfactory review by Bank of any pending litigation relating to any Borrower or to Condor.

(v)              An opinion letter from counsel to Borrowers and Condor in a form reasonably satisfactory to Bank.

(w)              An origination fee on the Loans in the amount of .50% of the principal amount of the Loans, which origination fee shall be deemed fully earned and non-refundable.

(x)              Evidence verifying Borrowers have made a minimum cash equity contribution towards the acquisition of the Real Property and the Personal Property in the amount of at least $8,575,000.

(y)              Copies of the Association's Organization Documents and the Association's most recent financial statements, copies of the insurance certificates maintained by the Association on the Parking Garage, and evidence that the Association is a single purpose entity whose only asset is the Parking Garage, that there is no mortgage lien against the Parking Garage, that the Association does not have any unsecured debt, and that the Association maintains sufficient funds in its operating and reserve accounts to operate and maintain the Parking Garage.

(z)              Evidence that the costs and expenses (including, without limitation, attorney's fees) referred to in Section 7.04(a) , to the extent incurred and invoiced, shall have been (or will be on the Closing Date) paid in full.

(aa)              Such other documents, property information and other preconditions as Bank may require.

Section 3.02.                                          Additional Conditions Precedent to Disbursement of PIP Funds .  In addition to the conditions set forth in Section 3.01 , the obligation of the Bank to disburse the PIP Funds from the Reserve Account shall be subject to the further conditions precedent that:

(a)              On the date of the disbursement of any PIP Funds the following statements shall be true and the receipt by Borrowers of any PIP Funds shall be deemed to constitute a representation and warranty by Borrowers that such statements are true on such date:

(i)

the representations and warranties contained in this Agreement and in other Loan Documents are correct in all material respects on and as of the date of disbursement of the PIP Funds to Borrowers as though made on and as of such date;

(ii)

no Event of Default or event which, with the passage of time or the giving of notice or both would constitute an Event of Default, has occurred or would result from the disbursement of the PIP Funds to Borrowers;

(iii)

there has been no material change in the financial condition of either Borrower since the effective date of this Agreement that would have a Material Adverse Effect as to such Borrower; and

(iv)

there are no construction liens filed against the Real Property that have not been released of record.

 (b)              Bank shall have received each of the following, in form and substance satisfactory to Bank:

(i)

a copy of the Franchisor's property improvement plan for the Real Property (the " PIP ");

(ii)

c opies of all pay requests , applications, invoices and other documentation reasonably requested by Bank as evidence that the renovations made pursuant to the PIP, for which payment is requested, have been completed and the amount of the advance is supported by the documentation furnished; and

(iii)

such other documents, property information and other preconditions as Bank may reasonably require.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01.                                          Representations and Warranties of Borrowers .  Each Borrower represents and warrants as follows:

(a)              Existence, Qualification and Power; Compliance with Laws .  Each Borrower (i) is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization and (ii) has all requisite power, authority and governmental licenses, authorizations, consents and approvals to (A) carry on its business and (B) execute, deliver, and perform its obligations under the Loan Documents to which it is a party.

(b)              The Loan Documents .  The execution, delivery and performance by each Borrower of each Loan Document to which it is a party are within such Borrower's powers, have been duly authorized by all necessary company action, do not contravene (i) such Borrower's Organization Documents or (ii) any Law or any contractual restriction binding on or affecting such Borrower, and do not result in or require the creation of any Lien (other than pursuant to the terms of the Collateral Documents) upon or with respect to the Collateral.

(c)              Governmental Approvals .  No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery and performance by each Borrower of any Loan Documents to which it is a party, except for such as have been made or obtained or are contemplated hereby to be made or obtained.

(d)              Enforceability .  This Agreement is, and each other Loan Document to which each Borrower is a party when delivered will be, legal, valid and binding obligations of such Borrower enforceable against such Borrower in accordance with their respective terms, except as limited by debtor relief laws and general principles of equity.

(e)              Rights in Collateral; Priority of Liens .  Borrowers own the Collateral free and clear of any and all Liens in favor of third parties, other than Permitted Liens.  Upon the proper filing of UCC financing statements, the proper recording of the Mortgage, and the taking of the other actions required by Bank, the Liens granted pursuant to the Collateral Documents will constitute valid and enforceable first priority Liens on the Collateral in favor of Bank, other than Permitted Liens.

(f)              Hazardous Substance .  To the best of each Borrower's knowledge, no substance, material or waste that is now or hereafter designated or regulated as "toxic," "hazardous," "caustic," "pollutant," or "contaminant" or a similar designation or regulation under any environmental Law, including, without limitation, asbestos, PCBs, petroleum or natural gas, has been disposed of or released and or otherwise exists in, on or under the Real Property, in each case, in violation of any environmental law.

(g)              Insurance .  The Real Property is insured with financially sound and reputable insurance companies, in such amounts and with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where Borrowers operate.

(h)              Litigation .  As of the Closing Date, there is no known pending or threatened action or proceeding affecting either Borrower or any of the transactions contemplated hereby before any Governmental Authority, which reasonably could be expected to have a Material Adverse Effect.  As of the Closing Date there are no known outstanding judgments against either Borrower.

(i)              Solvency .  As of and from and after the date of this Agreement, Borrowers: (i) own and will own assets the fair saleable value of which are (A) greater than the total amount of liabilities (including contingent liabilities) and (B) greater than the amount that will be required to pay the probable liabilities of their then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to them; (ii) have capital that is not unreasonably small in relation to their business as presently conducted or any contemplated or undertaken transaction; and (iii) do not intend to incur and do not believe that they will incur debts beyond their ability to pay such debts as they become due.

(j)              Disclosure .  As of the Closing Date, all financial information and other factual information furnished by or on behalf of either Borrower in writing to Bank (including, without limitation, all factual information contained in the Loan Documents) for purposes of or in connection with this Agreement, the other Loan Documents or any transaction contemplated herein or therein is true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided.

(k)              Use of Proceeds .  (i) No proceeds of the Loans will be used to acquire any security in any transaction which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934; (ii) neither Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System); and (iii) no proceeds of the Loans will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.

(l)              Investment Company Act .  No Borrower is required to be registered as an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

(m)              Taxes .  Each Borrower has filed all Federal, state and other material tax returns and reports required to be filed, and has paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon it or its properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with generally accepted accounting principles.  There is no proposed tax assessment against either Borrower that would, if made, have a Material Adverse Effect.

ARTICLE V

COVENANTS OF BORROWERS

Section 5.01.                                          Affirmative Covenants .  So long as any Obligations remain unpaid or Bank shall have any Loan Commitment hereunder, each Borrower will, unless Bank shall otherwise consent in writing:

(a)              Compliance with Laws.   Comply in all material respects with all applicable Laws.

(b)              Visitation Rights .  Permit Bank or any agents or representatives thereof upon reasonable notice, to examine during normal business hours and make copies of and abstracts from the records, books and accounts of such Borrower, inspect the Real Property, and discuss the affairs, finances and accounts of such Borrower with any of its officers, managers or employees.

(c)              Reporting Requirements .  Furnish to Bank:

(i)              As soon as available and in any event within one hundred twenty (120) days after the end of each Fiscal Year of Borrowers, a copy of Borrowers' annual internally prepared financial statements, including income and expense statements, all in a form and substance reasonably satisfactory to Bank;

(ii)              As soon as available and in any event within fifteen (15) days after submission to the Internal Revenue Service, a copy of the annual federal tax return, including all schedules attached thereto, for the entity whose annual federal tax return includes Borrowers' financial information;

(iii)              As soon as available and in any event within forty-five (45) days after the end of each fiscal quarter of Borrowers, a copy of Borrowers' internally prepared financial statements for such quarter in a form and substance reasonably satisfactory to Bank, along with the completed Compliance Certificate;

(iv)              As soon as available and in any event within forty-five (45) days after the end of each Fiscal Year of Borrowers, a copy of Borrowers' capital and operating budget for the Real Property for the then current Fiscal Year in a form and substance reasonably satisfactory to Bank;

(v)              As soon as available and in any event within fifty (50) days after the end of each fiscal quarter of Condor, copies of Condor's SEC Form 10-Q;

(vi)              As soon as available and in any event within ninety-five (95) days after the end of each fiscal year of Condor, copies of Condor's SEC Form 10-K and copy of the operating statement for the Real Property that is used in preparing the Condor consolidated audit by KMPG;

(vii)              As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Condor, a copy of Condor's annual financial statements audited by independent public accountants reasonably acceptable to Bank and otherwise in a form and substance reasonably satisfactory to Bank;

(viii)              As soon as available and in any event within forty-five (45) days after submission to the Internal Revenue Service, a copy of Condor's annual federal tax return, including all schedules attached thereto;

(ix)              As soon as available and in any event within forty-five (45) days after the end of each fiscal year of the Association, Borrowers shall make best efforts to provide Bank with the Association's financial statements for such fiscal year and its capital and operating budget for the then current fiscal year in a form and substance reasonably satisfactory to Bank, together with copies of bank statements showing the Association's cash on hand.  If the Association's financial statements, budgets and bank statements are not available, then Borrowers agree to provide Bank with a summary of (a) the prior year's income and expenses for the Association and (b) the anticipated capital and operating income and expenses of the Association for the upcoming year, all of which is included in (a) shall be certified by a responsible officer of each Borrower to be true and correct in all material respects and all of which is included in (b) shall be certified by a responsible officer of each Borrower to be good faith estimates based on reasonable assumptions;

(x)              As soon as available and in any event within ten (10) days after renewal of such policies, Borrowers shall make best efforts to provide Bank with copies of the insurance certificates evidencing the insurance maintained by the Association on the Parking Garage. If the Association's insurance certificates are not available, then Borrower agrees to provide Bank with  a summary of the Association's insurance coverages on the Parking Garage, which shall be certified by a responsible officer of each Borrower to be true and correct in all material respects;

(xi)              Promptly after the receipt thereof, a copy of any management letters or written reports submitted to either Borrower by its independent certified public accountants with respect to the business, financial condition or operation of either Borrower; and

(xii)              Such other information respecting the condition or operations, financial or otherwise, of Borrowers as the Bank may from time to time reasonably request.

(d)              Insurance .  Maintain, in addition to what is required by any Loan Document, insurance policies with insurance companies acceptable to Bank in its reasonable discretion and in such amounts and covering such risks as are usually carried by entities engaged in similar businesses and owning similar properties in the same general areas in which Borrowers operate, provided that in any event Borrowers will maintain property insurance and comprehensive general liability insurance reasonably satisfactory to Bank and provide Bank with a copy of all insurance reviews conducted by any insurance broker or agent.  Bank shall be named as loss payee and an additional insured under any property insurance and general liability insurance.

All insurance policies must be issued by companies reasonably approved by Bank and must be acceptable to Bank in its reasonable discretion as to amounts, forms, risk coverages, deductibles, expiration dates, and loss payable and cancellation provisions.  In addition, each of the insurance policies shall contain such endorsements as Bank may reasonably require, provide that all proceeds be payable to Bank to the extent of its interest, and contain a provision that such insurance may not be cancelled by the issuer thereof without at least ten (10) days’ advance written notice to Bank.

Borrowers agree that Bank may review Borrowers' insurance coverage and, in Bank's reasonable discretion, require Borrowers to increase the amount of any such insurance coverage to insure additional risks so that at all times (i) the public liability insurance is reasonable and satisfactory to Bank and (ii) the hazard insurance on the project is for the full insurable value of the Real Property.

(e)              Keeping Books and Records .  Maintain proper books of record and account in which full, true, and correct entries in conformity with generally accepted accounting principles shall be made of all dealings and transactions in relation to its business and activities.

(f)              Payment of Obligations .  Pay and discharge as the same shall become due and payable, all of its obligations and liabilities, including (i) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with generally accepted accounting principles are being maintained by Borrowers; (ii) all lawful claims which, if unpaid, would by Law become a Lien upon its property; and (iii) all Debt, as and when due and payable, unless the same is being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with generally accepted accounting principles are being maintained by Borrowers.

(g)              Preservation of Existence, Etc.   (i) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization and (ii) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

(h)              Maintenance of the Real Property and Personal Property .  (i) Maintain, preserve and protect the Real Property and all of the Personal Property and other material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (ii) make all necessary repairs to the Real Property, Personal Property, materials, properties, and equipment necessary in the operation of its business, and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (iii) use the standard of care typical in the industry in the operation and maintenance of the Real Property and Personal Property.

(i)              Security Interests .  Defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein.  Each Borrower shall comply with the requirements of all state and federal Laws in order to grant Bank valid and perfected first priority Liens in the Collateral, other than Permitted Liens, with perfection (subject to applicable Law), in the case of any investment property or deposit account, being effected by giving Bank control of such investment property or deposit account, rather than by the filing of a UCC financing statement with respect to such investment property.  Bank is hereby authorized by each Borrower to file any UCC financing statements covering any Collateral.  Subject to the terms of this Agreement, each Borrower shall do whatever Bank may reasonably request, from time to time, to effect the purposes of this Agreement and the other Loan Documents, including filing notices of Liens, UCC financing statements, fixture filings and amendments, renewals and continuations thereof; cooperating with Bank's representatives; and, paying claims which might, if unpaid, become a lien on the Collateral, other than Permitted Liens.

(j)              Depository Accounts .  Establish and maintain all of Borrowers' depository accounts with Bank, other than a petty cash account in the maximum amount of $25,000 that Borrowers may maintain at a bank with a branch location near the Real Property.

(k)              Debt Service Coverage Ratio .  Commencing with the end of the second full fiscal quarter that Borrowers' operate the Hotel and at the end of each fiscal quarter thereafter, maintain (i) a Debt Service Coverage Ratio (pre-distribution) of not less than 1.35 to 1.00 and (ii) a Debt Service Coverage Ratio (post-distribution) of not less than 1.05 to 1.00.

Notwithstanding any provision contained herein to the contrary, the initial calculation of the Debt Service Coverage Ratio (after the second full fiscal quarter of operations) will be made using the prior six months' Adjusted Net Operating Income and principal and interest payments.  The next calculation will be made after the third full fiscal quarter of operations, using the prior nine months' Adjusted Net Operating Income and principal and interest payments. Borrowers may cure any violation of the Debt Service Coverage Ratio by prepaying the Loans in an amount determined by Bank in its reasonable discretion would have resulted in Borrowers satisfying the Debt Service Coverage Ratio if such prepayment was made during the applicable measurement period.

(l)              Condor Debt Service Coverage Ratio .  Cause Condor to maintain, as of the end of each fiscal quarter, a Condor Debt Service Coverage Ratio of at least 1.05 to 1.00.  Borrowers may cure any violation of the Condor Debt Service Coverage Ratio by prepaying the Loans in an amount determined by Bank in its reasonable discretion would have resulted in Condor satisfying the Condor Debt Service Coverage Ratio if such prepayment was made during the applicable measurement period.

(m)              Room Revenue Funds in Reserve Account . Deposit a minimum of 4% of the annual gross room revenues from the Hotel (as such revenues are determined by Bank in its reasonable discretion) into the Reserve Account (collectively the " Room Revenue Funds "), which deposits shall be made in monthly installments in an amount determined by Bank in its reasonable discretion.

(n)              Use of Room Revenue Funds .  Provide Bank with evidence reasonably satisfactory to Bank of the replacements or renovations to be made to the Real Property with each proposed withdraw of Room Revenue Funds from the Reserve Account, and obtain Bank's prior written consent to each such withdraw, which consent shall not be unreasonably withheld, conditioned or delayed.

(o)              Franchise Agreement . (i) Observe and perform all of the material conditions and obligations under the Franchise Agreement to be observed and performed by such Borrower, including without limitation, payment of all sums due thereunder and (ii) not to permit any default by such Borrower to occur and continue under the Franchise Agreement which would permit termination of the Franchise Agreement.

(p)              Management Agreement . (i) Observe and perform all of the material conditions and obligations under the Management Agreement to be observed and performed by such Borrower, including without limitation, payment of all sums due thereunder and (ii) not to permit any default by such Borrower to occur and continue under the Management Agreement which would permit termination of the Management Agreement.

(q)              Easement and Development Agreements . (i) Observe and perform all of the material conditions and obligations under the each Easement and Development Agreement to be observed and performed by such Borrower, including without limitation, payment of all sums due thereunder and (ii) not to permit any default by such Borrower to occur and continue under any Easement and Development Agreement which would permit termination of any Easement and Development Agreement.

(r)              Equity Contribution .  Maintain its initial capital contribution to the Hotel in the Real Property throughout the term of the Loans.

(s)              Association and Parking Garage . Pay all dues and assessments owing to the Association as the same become due and payable, unless the same is being contested in good faith by appropriate proceedings diligently conducted and Borrower is maintaining adequate reserves satisfactory to Bank in its reasonable discretion; provided, however, Borrowers have no right to contest the assessments if such contesting will enable the Association to revoke Borrowers' easement rights for, or otherwise prevent Borrowers or their Hotel guests from utilizing, 156 parking stalls in the Parking Garage. In its capacity as a member and/or employer of a director of the Association, use its reasonable best efforts to cause the Association to maintain the Parking Garage in good condition and repair other than ordinary wear and tear, and to otherwise perform the Association's material obligations with respect to the Parking Garage as set forth in the Easement and Development Agreements.

(t)              SNDAs .   Within thirty (30) days after the date hereof, provide Bank with a subordination, non-disturbance and attornment agreement acceptable to Bank in its reasonable discretion (" SNDA ") and duly executed by Borrower and the tenant under the Liquor Operator Lease.  Within sixty (60) days after the date hereof, provide Bank with an SNDA duly executed by Borrower and the tenant under the Cell Tower Lease.

Section 5.02.                                          Negative Covenants .  So long as any Obligations remain unpaid or Bank shall have any Loan Commitment hereunder, each Borrower will not, without the written consent of Bank:

(a)              Indebtedness, etc .  Create, incur, assume or suffer to exist any Debt, other than the Loans and trade payable incurred in the ordinary course of business.

(b)              Liens, etc .  Create or suffer to exist any Lien or any other type of preferential arrangement, upon or with respect to any of the Collateral, other than:

(i)              mechanics' and materialmen's liens which are either (x) not yet due and payable or (y) being contested in good faith by appropriate proceedings which serve to stay the foreclosure of such liens and as to which appropriate reserves have been established;

(ii)              Liens (other than Liens relating to environmental liabilities or the Employee Retirement Income Security Act of 1974 (ERISA)) for taxes, assessments, or other governmental charges that are not more than 30 days overdue or, if the execution thereof is stayed, which are being contested in good faith by appropriate proceedings diligently pursued and for which adequate reserves have been established;

(iii)              Liens resulting from good faith deposits to secure payments of workmen's compensation unemployment insurance, or other social security programs or to secure the performance of tenders, leases, statutory obligations, surety, customs and appeal bonds, bids or contracts (other than for payment of Debt);

(iv)              Liens evidenced by precautionary UCC filings with respect to operating leases entered into in the ordinary course of business;

(v)              attachment or judgment liens not constituting an Event of Default;

(vi)              Liens created by the Loan Documents;

(vii)              Liens disclosed in the title insurance policy relating to the Real Property; and

(viii)              bankers’ liens, rights of setoff and other similar Liens existing solely with respect to cash and other investments on deposit in one or more accounts maintained by or on behalf of Borrower, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, solely securing amounts owing to such bank with respect to cash management and operating account arrangements, and which such accounts are held and maintained in accordance with the terms of the Loan Documents.

(c)              Fundamental Changes .  Merge, dissolve, liquidate, consolidate with or into, another Person, or sell, lease, assign or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, or create or otherwise acquire any subsidiary.

(d)              Transfer of Assets .  Sell, lease, assign, transfer, or otherwise voluntarily dispose of any of its assets, except: (i) dispositions of inventory in the ordinary course of business; (ii) dispositions of (A) obsolete or worn out equipment, (B) equipment not necessary for the operation of its business, or (C) equipment which is replaced with property of equivalent or greater value as the property which is disposed; (iii) leasing of the Real Property from CDOR KCI to TRS KCI; (iv) the Cell Tower Lease; (v) the Liquor Operator Lease; and (vi) guest rentals in the ordinary course of business.

(e)              Lines of Business .  Engage in any line or lines of business activity, materially different from those currently conducted.

(f)              Transactions with Affiliates .  Enter into any transaction of any kind with any Affiliate of either Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to such Borrower or such Affiliate as would be obtainable by such Borrower or such Affiliate at the time in a comparable arm’s length transaction with a Person other than an Affiliate.

(g)              Member Interests .  Permit a member of either Borrower to sell, transfer or otherwise dispose of any portion of its member interest in such Borrower.  Bank agrees that it will not unreasonably withhold its consent to any such transfer or disposition.

(h)              Control .  Permit a change of Control of either Borrower to occur.

(i)              PIP Funds and Room Revenue Funds .   Withdraw any PIP Funds or Room Revenue Funds from the Reserve Account, except in accordance with this Agreement.

(j)              Amendment to Franchise Agreement .  (i) Terminate the Franchise Agreement or (ii) materially amend, modify, waive or consent to any material change or modification of the Franchise Agreement.

(k)              Amendment to Management Agreement .  (i) Terminate the Management Agreement or (ii) materially amend, modify, waive or consent to any material change or modification of the Management Agreement.

(l)              Amendment to Easement and Development Agreements .  (i) Terminate any Easement and Development Agreement or (ii) materially amend, modify, waive or consent to any material change or modification of any Easement and Development Agreement.

ARTICLE VI

EVENTS OF DEFAULT AND REMEDIES

             Section 6.01.                                          Events of Default .  Each of the following events shall be an " Event of Default ":

(a)              Borrowers fail to pay any amount payable hereunder, under the Term Loan 1 Note, the Term Loan 2 Note, or the other Loan Documents, including principal, interest or other charges, within three (3) days after receipt of written notice from Bank of the failure to pay when due; or

(b)              Any representation or warranty made by either Borrower (or any of its members, limited liability company managers or officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or

(c)              Borrowers fail to deliver all reporting requirements under Section 5.01(c) within ten (10) days after the receipt of written notice from Bank of the failure to deliver by the date due for delivery of such items as required by Section 5.01(c) ; or

(d)              Either Borrower fails to perform or observe any term, covenant or agreement contained in any Loan Document (other than those listed in any other clause of this Section 6.01 )) on its part to be performed or observed and any such failure remains unremedied for thirty (30) days after written notice thereof shall have been given to such Borrower by Bank, provided, however, that no Event of Default shall be deemed to exist if, within said thirty (30) day period, such Borrower has commenced appropriate action to remedy such failure and is diligently and continuously pursuing such action until such cure is completed, unless such cure is or cannot be completed within ninety (90) days after written notice shall have been given; or

(e)              Either Borrower fails to pay any Debt in an amount in excess of $100,000 (either in any individual case or in the aggregate), (excluding Debt evidenced by the Term Loan 1 Note, the Term Loan 2 Note, or this Agreement, or any interest or premium thereon) when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or

(f)              Either Borrower generally does not pay its debts as such debts become due, or admits in writing its inability to pay its debts generally, or makes a general assignment for the benefit of creditors; or any proceeding is instituted by or against either Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property, and, in the case of any such proceeding instituted against it (but not instituted by it) either such proceeding remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property) occurs; or such Borrower takes any corporate action to authorize any of the actions set forth above in this subsection (f) ; or

(g)              Any one or more judgment(s) or order(s) for the payment of money in excess of $100,000 in excess of valid insurance coverage therefor, in the aggregate, shall be rendered against either Borrower and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(h)              Any provision of any Loan Document shall for any reason cease to be valid and binding on either Borrower or Condor, or either Borrower or Condor shall so state in writing; or

(i)              The Mortgage or any other Collateral Document shall for any reason, except permitted by the terms thereof, cease to create a valid or perfected first priority Lien in any of the property purported to be covered thereby, other than Permitted Liens; or

(j)              There occurs an event of default under any other agreement between either Borrower or Condor or any Affiliate of Condor and Bank, including without limitation, any loan agreement, note, security agreement, deed of trust, assignment or other instrument, and such default is not waived or cured within 60 days after the occurrence of such default.

Section 6.02.                                          Remedies .  Upon the occurrence of an Event of Default, Bank:

(a)              may, by notice to Borrowers, declare the Loans, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Loans, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, notice of intent to accelerate or notice of acceleration, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrowers; provided , however , that in the event of an actual or deemed entry of an order for relief with respect to either Borrower under the Title 11 of the United States Code (the federal bankruptcy code) , (x) the obligation of Bank to make or maintain any Loan shall automatically be terminated and (y) the Loans, all such interest and all such amounts shall automatically become due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by Borrowers; and

(b)              may exercise all other rights and remedies afforded to Bank under the Loan Documents or by applicable Law or equity.

ARTICLE VII

MISCELLANEOUS

Section 7.01.                                          Amendments, etc .  No amendment or waiver of any provision of any Loan Document to which either Borrower is a party, nor any consent to any departure by such Borrower therefrom, shall in any event be effective unless the same shall be agreed or consented to by Bank and such Borrower, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 7.02.                                          Notices, etc .

(a)              General .  Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number specified for notices set forth on Schedule 7.02(a) or to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to Borrowers and Bank.  All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt  by the intended recipient and (ii) (A) if delivered by hand or by courier, upon delivery; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; and (C) if delivered by facsimile, when sent and appropriate answerback has been received by the sender; provided , however , that notices and other communications to Bank shall not be effective until actually received by Bank.  Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule 7.02(a) , it being understood and agreed that a voicemail message shall in no event be effective as a notice, communication or confirmation hereunder.

(b)              Effectiveness of Electronic Mail Documents and Signatures .  The Loan Documents may be transmitted and/or signed by electronic mail.  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.  Bank 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 electronic mail document or signature.

(c)              Oral Requests; Confirmations .  Each Borrower hereby requests Bank to rely upon and honor telephonic, facsimile, or email instructions for advances or repayments, given, or purported to be given, by any one of the individuals authorized in writing to sign the Loan Documents on behalf of such Borrower, or any other individual designated in writing by any one of such authorized signers.  Bank shall incur no liability for its acts or omissions which result from interruption of communications, misunderstood communications or instructions from unauthorized Persons, unless caused by the gross negligence or willful misconduct of Bank or its officers or employees.  EACH BORROWER AGREES TO PROTECT BANK AND HOLD IT HARMLESS FROM ANY SUCH LOSS, DAMAGE, CLAIM OR EXPENSE (INCLUDING REASONABLE LEGAL FEES), WHICH BANK SUFFERS OR INCURS, BASED ON OR ARISING OUT OF ANY SUCH ACTS OR OMISSIONS REFERENCED IN THE PREVIOUS SENTENCE, UNLESS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BANK OR ITS OFFICERS OR EMPLOYEES.  Each Borrower agrees to promptly review all confirmations, if any, sent to such Borrower by Bank.  Each Borrower understands that these confirmations are not legal contracts but only evidence of the valid and binding oral contract which such Borrower has already entered into with Bank.  In the event of a conflict, inconsistency or ambiguity between the provisions of this Agreement and the provisions of any such confirmation, the provisions of this Agreement will prevail.

(d)              Reliance by the Bank .  Bank shall be entitled to rely and act upon any notices purportedly given by or on behalf of either 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.  Each Borrower hereby indemnifies Bank from all losses, costs, expenses and liabilities resulting from the reliance by Bank on each notice purportedly given by or on behalf of such Borrower, unless caused by the gross negligence or willful misconduct of Bank or its officers or employees.  All telephonic notices to and other communications with Bank may be recorded by Bank, and each of the parties hereto hereby consents to such recording.

Section 7.03.                                          No Waiver; Remedies .  No failure on the part of Bank to exercise, and no delay in exercising, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by Law.

Section 7.04.                                          Costs, Expenses and Taxes .

(a)              Each Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses actually incurred in connection with the preparation, execution, delivery, filing, recording and administration of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for Bank actually incurred, and local counsel who may be retained by said counsel, with respect thereto and with respect to advising Bank as to its respective rights and responsibilities under the Loan Documents, and all costs and expenses (including reasonable counsel fees and expenses actually incurred) for Bank in connection with the enforcement of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, in the context of any bankruptcy proceedings. In addition, each Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of the Loan Documents and the other documents to be delivered under the Loan Documents, and agrees to save Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.

(b)              Each Borrower hereby indemnifies and holds Bank harmless from and against and shall reimburse Bank with respect to any and all claims, demands, causes of action, loss, damage, liabilities, costs and expenses (including reasonable attorneys’ fees and court costs) of any and every kind of character, known or unknown, fixed or contingent, asserted against Bank by any Person at any time and from time to time by reason of or arising out of (i) the breach of any representation or warranty of either Borrower as set forth in this Agreement or any Loan Document to which it is a party, and (ii) the failure of either Borrower to perform any obligation in this Agreement or any Loan Document to which it is a party, required to be performed by either Borrower, which indemnification shall survive the termination of this Agreement.

Section 7.05.                                          Security Interest and Right of Set-off . Each Borrower hereby grants to Bank a security interest in all deposit accounts (including without limitation the Reserve Account) maintained by such Borrower with Bank and all proceeds of such accounts.  Bank i s hereby authorized at any time while an Event of Default exists and from time to time, 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) at any time held by Bank and other indebtedness at any time owing by Bank to or for the credit or the account of either Borrower against any and all of the Obligations, irrespective of whether or not Bank shall have made any demand under such Loan Document and although deposits, indebtedness or such obligations may be unmatured or contingent. Bank agrees promptly to notify Borrowers after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Bank under this Section 7.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which Bank may have.

Section 7.06.                                          Severability of Provisions .  Any provision of this Agreement or of any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof or affecting the validity or unenforceability of such provision in any other jurisdiction.

Section 7.07.                                          Binding Effect; Successors and Assigns; Participations .

(a)              This Agreement shall be binding upon and inure to the benefit of Borrowers and Bank and their respective successors and assigns, except that Borrowers cannot assign or otherwise transfer their rights hereunder or any interest herein without the prior written consent of Bank.  Bank agrees that it will not unreasonably withhold its consent to any such assignment or transfer so long as the assignee or transferee is Controlled by Condor.

(b)              Bank may at any time sell or assign this Agreement and the other Loan Documents after providing at least 30 days' prior written notice to Borrowers; provided, that any such buyer or assignee shall be reasonably acceptable to Borrowers.

(c)              Bank may at any time sell participations in all or any portion of its rights in this Agreement or its Loan Commitments, Loans or rights and security under this Agreement and any of the other Loan Documents to any other party; provided, however, that (i) Bank's obligations under the Loan Documents (including, without limitation, its Loan Commitments) shall remain unchanged, (ii) Bank will remain solely responsible to Borrowers for the performance of such obligations, and (iii) Borrowers will continue to deal solely and directly with Bank in connection with Bank's rights and obligations under the Loan Documents.

(d)              In connection with any such proposed assignment, negotiation, hypothecation, granting of a participation or other transfer or arrangement, Bank may disclose to the proposed assignee, participant or other transferee or institution any information that each Borrower is required to deliver to Bank pursuant to this Agreement or the other Loan Documents, and each Borrower agrees to cooperate fully with Bank in providing any such information to any proposed assignee, participant or other transferee or institution.

Section 7.08.                                          Consent to Jurisdiction .

(A)              EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEBRASKA STATE OR FEDERAL COURT SITTING IN DOUGLAS COUNTY, NEBRASKA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY, AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEBRASKA STATE COURT OR IN SUCH FEDERAL COURT.  EACH BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. EACH BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO EACH BORROWER AT ITS ADDRESS SPECIFIED IN SECTION 7.02 . EACH BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

(B)              NOTHING IN THIS SECTION 7.08 SHALL AFFECT THE RIGHT OF BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF BANK TO BRING ANY ACTION OR PROCEEDING AGAINST EITHER BORROWER OR ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.

Section 7.09.                                          Governing Law . THE TERM LOAN 1 NOTE, THE TERM LOAN 2 NOTE, AND THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEBRASKA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

Section 7.10.                                          Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same agreement.  Delivery of an executed counterpart of a signature page of this Agreement by fax or other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 7.11.                                          WAIVER OF JURY TRIAL.   EACH   BORROWER AND BANK HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT TO WHICH IT IS A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.

Section 7.12.                                          Entire Agreement .  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES THERETO.

Section 7.13.                                          Survival .  All covenants, agreements, representations and warranties made by either Borrower in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by Bank and shall survive the execution and delivery of the Loan Documents and the making of any Loan, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Bank may have had notice or knowledge of any Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as any Obligations are outstanding and so long as any Loan Commitment has not expired or terminated. The expense reimbursement, additional cost, capital adequacy and indemnification provisions of this Agreement shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Obligations, the expiration or termination of any Loan Commitment, or the termination of this Agreement or any provision hereof.

Section 7.14.                                          Communications from Borrower; Joint and Several Liability; Extent of Obligations .  The obligations of each Borrower to repay the Obligations shall not be affected in any way or to any extent by any failure by Bank to obtain direction from all Borrowers in any given case (it being expressly agreed and understood that each Borrower is empowered to act on behalf of all Borrowers with respect to all matters relating to this Agreement and the credit facility evidenced hereby).  The liabilities and obligations of Borrowers hereunder is joint and several.  Each Borrower hereby:  (1) acknowledges and agrees that Bank shall have no obligation to proceed against any Borrower before proceeding against any other Borrower, (2) waives any defense to its obligations under this Agreement based upon or arising out of the disability or other defense or cessation of liability of any Borrower versus any other or of any other Person, and (3) waives any right of subrogation or ability to proceed against any Person or to participate in any security for the Obligations until the Obligations have been paid and reformed in full.

Section 7.15.                                          Credit Agreement Notice .  A credit agreement must be in writing to be enforceable under Nebraska law.  To protect you and us from any misunderstandings or disappointments, any contract, promise, undertaking, or offer to forebear repayment of money or to make any other financial accommodation in connection with this loan of money or grant or extension of credit, or any amendment of, cancellation of, waiver of, or substitution for any or all of the terms or provisions of any instrument or document executed in connection with this loan of money or grant or extension of credit, must be in writing to be effective.

INITIALS: /s/ JG

No further text on this page-

SIGNATURE PAGE TO LOAN AGREEMENT]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

BORROWERS:

CDOR KCI LOFT, LLC , a Delaware limited liability company

By:  /s/ Jonathan J. Gantt ____________________

Name: Jonathan J. Gantt

Its:  Vice President

TRS KCI LOFT, LLC , a Delaware limited liability company

By:  /s/ Jonathan J. Gantt ____________________

Name: Jonathan J. Gantt

Its:  Vice President

[BANK   SIGNATURE PAGE TO LOAN AGREEMENT]

GREAT WESTERN BANK

By:  /s/ Michael Phelps                                                                                                

Michael Phelps, Vice President – Business Banking

SCHEDULE 7.02(a)

TO

CREDIT AGREEMENT

Notices

EXHIBIT A

TO

LOAN AGREEMENT

Sample Compliance Certificate

This Compliance Certificate is executed and delivered pursuant to the terms of the Loan Agreement dated as of December 14, 2016 between Borrowers and Bank (as amended from time to time, the " Loan Agreement ").  Capitalized terms used herein and not otherwise defined herein have the meaning given to them in the Loan Agreement.

All the calculations set forth below shall be made pursuant to the terms of the Loan Agreement.

The undersigned, an authorized financial officer of each Borrower, does hereby certify to Bank  that as of, and for the period __________________.

1.              Default .

No Event of Default or event or condition that with the passage of time, the giving of notice or both would constitute an Event of Default has occurred or exists and is continuing or if an Event of Default or such event or condition has occurred, exists and is continuing, I have described on the attached Exhibit "1" the nature thereof and the steps taken or proposed to remedy such Event of Default or other event or condition.

2.              Section 5.01(k) – Debt Service Coverage Ratio (pre-distribution) .

(a)              Adjusted  Net Operating Income $_______________

(b)              Annual principal and interest payments

on the Loans $_______________

Ratio of  (a) to (b) ________ to 1.00

Required Ratio not less than 1.35 to 1.00

3.              Section 5.01(k) – Debt Service Coverage Ratio (post-distribution) .

(a)              Adjusted  Net Operating Income $_______________

(b)              Distributions $_______________

(b)              Annual principal and interest payments

on the Loans $_______________

Ratio of  (a-b) to (c) ________ to 1.00

Required Ratio not less than 1.05 to 1.00

4.              Section 5.01(k) – Condor Debt Service Coverage Ratio .

(a) Condor Adjusted Consolidated Net Operating Income $_____________

(b) Condor Imputed Consolidated Debt Service $_____________

Easement an Development Agreements

Deed and Easement Agreement filed in Book 200802, Page 000302.

Master Declaration of Protective Covenants, Conditions, Restrictions and Easements recorded for Park Place Second Plat filed in Book 200802, Page 000300.

Commercial Declaration of Protective Covenants, Conditions, Restrictions and Easements for Park Place Second Plat filed in Book 200802, Page 000301.

Unrecorded Design, Development and Construction Agreement, as evidenced by a Memorandum filed in Book 200802, Page 000303.

Exhibit 10.4

 

SPRINGING UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE

This Springing Unconditional Guaranty of Payment and Performance (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the " Springing Guaranty ") is entered into as of December 14, 2016 and given by CONDOR HOSPITALITY TRUST, INC., a Maryland corporation (" Guarantor ") to and in favor of GREAT WESTERN BANK (" Bank ").

WHEREAS, Bank has made certain Loans to CDOR KCI LOFT, LLC, a Delaware limited liability company and TRS KCI LOFT, LLC, a Delaware limited liability company (individually, a " Borrower " and collectively, " Borrowers ") pursuant to the terms of a Loan Agreement dated as of the date hereof among Borrowers and Bank (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the " Loan Agreement "); and

WHEREAS, as a condition to entering into the Loan Agreement, Bank requires Guarantor to execute this Springing Guaranty; and

WHEREAS, upon the request of, and as an accommodation to, Borrowers, Guarantor has agreed to execute this Springing Guaranty.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor and Bank hereby agree as follows:

1.              Guaranty.   In the event that at any measurement period as set forth in the Loan Agreement, Borrowers' Debt Service Coverage Ratio (pre-distribution) is less than 1.35 to 1.00 (a " DSCR Violation "), Guarantor hereby absolutely, irrevocably and unconditionally guarantees (as primary obligor and not merely as surety) to Bank, its successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration, or otherwise) and performance of the Guaranteed Obligations (as defined below), strictly in accordance with the terms of this Springing Guaranty, the Loan Agreement and the other Loan Documents, but only to the extent the Guaranteed Obligations are then due and payable.  The term " Guaranteed Obligations " as used in this Springing Guaranty shall mean:

(a)	Payment of all Obligations under the Loan Agreement and payment of any other indebtedness, obligations, fees and costs due and owing from either Borrower to Bank under the Loan Documents;

(b)	Performance of all covenants, conditions and obligations of either Borrower under the Loan Documents;

(c)

Payment and performance of all obligations of Guarantor under this Springing Guaranty;

(d)

Payment and performance of all future advances and other obligations of Borrower to Bank, whether now existing or hereafter incurred or created, whether voluntary or involuntary, whether absolute or contingent, liquidated or unliquidated, determined or undetermined, secured or unsecured, whether on original, renewed, extended or revised terms, whether Borrower may be liable individually or jointly with others, or whether incurred directly or acquired by Bank by assignment or otherwise; and

(e)

Payment and performance of all modifications, amendments, extensions, and renewals, however evidenced, of any of the Guaranteed Obligations.

Notwithstanding any provision contained herein to the contrary, this Springing Guaranty will remain in effect from the date of the applicable DSCR Violation until Borrowers meet the minimum Debt Service Coverage Ratio pre-distribution required in the Loan Agreement either (1) through Guarantor paying down the principal amount of the Loans, without repayment penalty, in an amount determined by Bank in its reasonable discretion to result in Borrowers meeting such minimum requirement and/or (2) the Hotel operation re-achieves the minimum Debt Service Coverage Ratio pre-distribution requirement. Notwithstanding any provision contained herein to the contrary, in the event that after the first instance in which a DSCR Violation occurs and is subsequently cured, another DSCR Violation occurs, then this Springing Guaranty shall automatically be deemed in force and effect until such time as the DSCR Violation is again cured in accordance with the terms of this paragraph.

2.              Right to Amend or Modify Guaranteed Obligations and/or Collateral.   Guarantor authorizes Bank, at its sole discretion, with or without notice and without affecting Guarantor's liability hereunder, from time to time to:  (a) change the time or manner of payment of any Guaranteed Obligation by renewal, extension, modification, acceleration or otherwise; (b) alter or change any provision of any Guaranteed Obligation including, but not limited to, the rate of interest thereon, and any document, instrument or agreement (other than this Springing Guaranty) evidencing, guaranteeing, securing or related to any Guaranteed Obligation; (c) release, discharge, exonerate, substitute or add one or more parties liable on any Guaranteed Obligation or one or more endorsers, cosigners or guarantors for any Guaranteed Obligation; (d) obtain collateral for the payment of any Guaranteed Obligation or any guaranty thereof; (e) release existing or after-acquired collateral on such terms as Bank, in its sole discretion, shall determine; (f) apply any sums received from Borrower, any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation or from the sale or collection of collateral or its proceeds to any Guaranteed Obligation whatsoever owed or to be owed to Bank by either Borrower in any order or amount and regardless of whether or not such Guaranteed Obligation is guaranteed hereby, is secured by collateral or is due and payable; and (g) apply any sums received from Guarantor or from the sale of collateral granted by Guarantor to any Guaranteed Obligation in any order or amount regardless of whether such Guaranteed Obligation is secured by collateral or is due and payable.

3.              Waivers.   Guarantor hereby unconditionally and irrevocably acknowledges and agrees to the matters set forth below:

(a)

Election of Remedies .  Guarantor waives all rights and defenses arising out of an election of remedies by Bank, including without limitation in connection with any bankruptcy or other debtor relief laws or under any other applicable federal, state or local law, including, but not limited to, those purporting to reduce Bank's right against Guarantor in proportion to the principal amount of the Guaranteed Obligations.

(b)

Statute of Limitations .  To the maximum extent permitted by law, Guarantor waives the benefit of the statute of limitations affecting Guarantor's liability hereunder or the enforcement hereof.

(c)

Action Against Borrowers and Collateral .  Guarantor waives all right to require Bank to:  (i) proceed against either Borrower, any endorser, cosigner, other guarantor or other person liable on any Guaranteed Obligation; (ii) join either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation in any action or actions that may be brought and prosecuted by Bank solely and separately against Guarantor on any Guaranteed Obligation; (iii) proceed against any item or items of collateral securing any Guaranteed Obligation or any guaranty thereof; or (iv) pursue or refrain from pursuing any other remedy whatsoever in Bank's power.

(d)

Borrower's Defenses .  Guarantor waives any defense arising by reason of any disability or other defense of either Borrower, either Borrower's successors or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation including, without limitation, any statute of limitation defense that may be available to either Borrower or such other Person.  Until all Guaranteed Obligations have been paid in full, even though it may be in excess of the liability incurred hereby and Bank has no further commitment to lend or extend financial accommodations to either Borrower, Guarantor shall not have any right of subrogation and Guarantor waives any benefit of and right to participate in any collateral now or hereafter held by Bank.  Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of sale of any collateral securing any Guaranteed Obligation or any guaranty thereof, and notice of the existence, creation or incurring of new or additional Guaranteed Obligations.

(e)

Borrower's Financial Condition .  Guarantor hereby recognizes, acknowledges and agrees that advances may be made from time to time with respect to any Guaranteed Obligation without authorization from or notice to Guarantor even though the financial condition of either Borrower, any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation may have deteriorated since the date of this Springing Guaranty.  Guarantor waives all right to require Bank to disclose any information with respect to any Guaranteed Obligation; the financial condition, credit or character of either Borrower, any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation; any collateral securing any Guaranteed Obligation or any guaranty thereof; or any action or inaction on the part of Bank, either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation.  Guarantor hereby assumes the responsibility for being informed of the financial condition, credit and character of either Borrower and of all circumstances bearing upon the risk of non-payment of any Guaranteed Obligation which diligent inquiry would reveal.

4.              No Right of Set-off or Grant of Security Interest.   Bank shall have no, and hereby waives any right to, a security interest in or a right to set off against any monies, securities or other property of Guarantor now or hereafter in the possession of or on deposit with Bank, Bank's agents or any one or more of them, whether held in general or special account or deposit or for safekeeping or otherwise.

5.              Subordination.   Any indebtedness of either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation now or hereafter owed to Guarantor is hereby subordinated to the Guaranteed Obligations.  Such indebtedness owed to Guarantor shall, if Bank so requests, be collected, enforced and received by Guarantor as trustee for Bank and be paid over to Bank on account of the Guaranteed Obligations but without reducing or affecting in any manner the liability of Guarantor set forth herein.  Should Guarantor fail to collect the proceeds of any such indebtedness owed to it and pay the proceeds to Bank, Bank, as Guarantor's attorney-in-fact, may do such acts and sign such documents in Guarantor's name as Bank considers necessary to effect such collection, and Guarantor hereby appoints Bank as Guarantor’s attorney-in-fact for such purposes.

6.              Invalid, Fraudulent or Preferential Payments.   Guarantor agrees that, to the extent either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation makes a payment or payments to, or is credited for any payment or payments made for or on behalf of either Borrower to Bank, which payment or payments, or any part thereof, is subsequently invalidated, determined to be fraudulent or preferential, set aside or required to be repaid to any trustee, receiver, assignee or any other party whether under any bankruptcy, state or federal law or under any common law or equitable cause or otherwise, then, to the extent thereof, the obligation or part thereof intended to be satisfied thereby shall be revived, reinstated and continued in full force and effect as if such payment or payments had not originally been made or credited.

7.              Joint and Several Obligations; Independent Obligations.   If more than one Guarantor signs this Springing Guaranty, the obligations hereunder are joint and several.  Guarantor's obligations hereunder are independent of the obligations of either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation and a separate action or actions may be brought and prosecuted against Guarantor on any Guaranteed Obligation.

8.              Events of Default.   Subject to the continuing existence of a DSCR Violation, Bank may declare all Guaranteed Obligations to be due and payable under this Springing Guaranty upon the occurrence and during the continuance of any of the following events (" Events of Default "):

(a)

The occurrence of an "Event of Default" (as defined in the Loan Agreement) under the Loan Agreement; or

(b)

Guarantor fails to perform any of its obligations under this Springing Guaranty within 30 days after written notice from Bank; or

(c)

Guarantor attempts to revoke this Springing Guaranty or this Springing Guaranty becomes ineffective for any reason; or

(d)

any representation or warranty made or given by Guarantor to Bank proves to be false or misleading in any material respect; or

(e)

Guarantor becomes insolvent or the subject of any bankruptcy proceeding or other debtor relief proceeding which remains undismissed or unstayed for a period of 60 days.

Subject to the continuing existence of a DSCR Violation, if an Event of Default shall occur and be continuing, Bank may declare all Guaranteed Obligations to be due and payable, in which event Guarantor shall provide for immediate payment of all Guaranteed Obligations, and Bank may proceed to enforce this Springing Guaranty in accordance with the terms and provisions of this Springing Guaranty and pursue all rights and remedies as provided by applicable law.

9.              Acknowledgment of Receipt.   Receipt of a true copy of this Springing Guaranty is hereby acknowledged by Guarantor.  Guarantor understands and agrees that this Springing Guaranty shall not constitute a commitment of any nature whatsoever by Bank to renew or hereafter extend credit to either Borrower. Guarantor agrees that this Springing Guaranty shall be effective with or without notice from Bank of Bank's acceptance hereof.

10.              Non-Reliance.   In executing this Springing Guaranty, Guarantor is not relying, and has not relied, upon any statement or representation made by Bank, or any employee, agent or representative of Bank, with respect to the status, financial condition or other matters related to either Borrower or the relationship between either Borrower and Bank.

11.              Multiple Guaranties.   If Guarantor has executed or does execute more than one guaranty of the Guaranteed Obligations of either Borrower to Bank, the limits of liability thereunder and hereunder shall be cumulative.

12.              Irrevocable Guaranty.   This Springing Guaranty is an irrevocable continuing guaranty.

13.              Assignment.   Bank may, with or without notice, assign this Springing Guaranty in whole or in part.  This Springing Guaranty shall inure to the benefit of Bank, its successors and assigns, and shall bind Guarantor and Guarantor’s heirs, executors, administrators, successors and assigns.

14.              WAIVER OF JURY TRIAL.   GUARANTOR AND BANK HEREBY EXPRESSLY WAIVE ANY AND ALL RIGHTS, WHETHER ARISING UNDER THE STATE CONSTITUTION, ANY RULES OF CIVIL PROCEDURE, COMMON LAW OR OTHERWISE, TO DEMAND A TRIAL BY JURY IN ANY ACTION, MATTER, CLAIM OR CAUSE OF ACTION WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATED TO THIS SPRINGING GUARANTY OR ANY OTHER AGREEMENT, DOCUMENT OR TRANSACTION CONTEMPLATED HEREBY WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. GUARANTOR AND BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, BANK AND GUARANTOR FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS SPRINGING GUARANTY OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SPRINGING GUARANTY.

15.              Notices.   Unless otherwise expressly provided herein, all notices, certificates, requests, demands, and other communications provided for under this Springing Guaranty shall be in writing and shall be mailed, faxed, or delivered to the address or facsimile number set forth in this Section.  All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt  by the intended recipient and (ii) (A) if delivered by hand or by courier, upon delivery; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; and (C) if delivered by facsimile, when sent and appropriate answerback has been received by the sender.  Notices and other communications to Bank, however, shall not be effective until actually received by Bank.

16.              Miscellaneous.

(a)

Governing Law .  This Springing Guaranty shall be governed by and construed according to the internal laws of the State of Nebraska without regard to conflict of law principles. Guarantor hereby submits to the jurisdiction of the Nebraska state courts sitting in Douglas County, Nebraska and the United States District Court for the District of Nebraska.

(b)

Headings .  The headings used herein are solely for the purpose of identification and have no legal significance.

(c)

Entire Agreement .  This Springing Guaranty constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and undertaking both written and orally between the parties with respect to the subject matter contained in this Springing Guaranty.

(d)

Severability .  Should any one or more provisions of this Springing Guaranty be determined to be illegal or unenforceable, all other provisions shall remain effective.

(e)

Drafting of Agreement .  This Springing Guaranty, as a matter of convenience for all parties, has been prepared by Bank.  The parties hereto agree that in the event of any ambiguity in this Springing Guaranty, such ambiguity shall not be construed against Bank.  It is the express intention of the parties that all aspects of this Springing Guaranty shall be construed and interpreted in as broad a manner as possible to the benefit and protection of Bank.

(f)

Interpretation .  If there is more than one Guarantor executing this Springing Guaranty, the term " Guarantor " shall mean all and any one or more of them.  As used in this Springing Guaranty, neuter terms include the masculine and feminine, and vice versa.  The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.  Terms used, but not defined herein, shall have the meaning set forth in the Loan Agreement.

(g)

Attorney's Fees . Guarantor shall pay to Bank all costs and expenses, including, but not limited to reasonable attorney fees, incurred by Bank in connection with the administration, enforcement, including any bankruptcy, at trial and on appeal, or the enforcement of any judgment or any refinancing or restructuring of Guarantor’s obligations under this Springing Guaranty or any document, instrument of agreement executed with respect to, evidencing or securing the indebtedness hereunder.

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[SIGNATURE PAGE TO SPRINGING GUARANTY]

Executed by the undersigned Guarantor as of the first date set forth above.

GUARANTOR:

CONDOR HOSPITALITY TRUST, INC. , a Maryland corporation

By :   /s/ Jonathan J. Gantt _____________

Name:  Jonathan J. Gantt

Title:

Senior Vice President and Chief Financial Officer

 

 

 

Exhibit 10.5

 

LIMITED GUARANTY OF PAYMENT AND PERFORMANCE

This Limited Guaranty of Payment and Performance (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the " Limited Guaranty ") is entered into as of December 14, 2016 and given by CONDOR HOSPITALITY TRUST, INC., a Maryland corporation (" Guarantor ") to and in favor of GREAT WESTERN BANK (" Bank ").

WHEREAS, Bank has made certain Loans to CDOR KCI LOFT, LLC, a Delaware limited liability company and TRS KCI LOFT, LLC, a Delaware limited liability company (individually, a " Borrower " and collectively, " Borrowers ") pursuant to the terms of a Loan Agreement dated as of the date hereof among Borrowers and Bank (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the " Loan Agreement "); and

WHEREAS, as a condition to entering into the Loan Agreement, Bank requires Guarantor to execute this Limited Guaranty; and

WHEREAS, upon the request of, and as an accommodation to, Borrowers, Guarantor has agreed to execute this Limited Guaranty.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor and Bank hereby agree as follows:

1.              Guaranty.   Guarantor hereby absolutely, irrevocably and unconditionally guarantees (as primary obligor and not merely as surety) to Bank, its successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration, or otherwise) of the Guaranteed Obligations (as defined below), strictly in accordance with the terms of this Limited Guaranty, the Loan Agreement and the other Loan Documents.  The term " Guaranteed Obligations " as used in this Limited Guaranty shall mean:

(a)	Payment of all Losses (as defined below) Bank incurs due to fraud by or on behalf of any Borrower in connection with the making or the servicing of either Loan;

(b)	Payment of all Losses Bank incurs due to theft by or on behalf of any Borrower; and

(c)	Payment of all Losses (as defined below) Bank incurs due to the filing of an involuntary bankruptcy or other debtor relief proceeding against any Borrower.

As used in this Limited Guaranty, the term “ Losses ” means any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, judgments, awards, amounts paid in settlement of whatever kind or nature (including but not limited to reasonable legal fees).

2.              Right to Amend or Modify Guaranteed Obligations and/or Collateral.   Guarantor authorizes Bank, at its sole discretion, with or without notice and without affecting Guarantor's liability hereunder, from time to time to:  (a) change the time or manner of payment of any Guaranteed Obligation by renewal, extension, modification, acceleration or otherwise; (b) alter or change any provision of any Guaranteed Obligation including, but not limited to, the rate of interest thereon, and any document, instrument or agreement (other than this Limited Guaranty) evidencing, guaranteeing, securing or related to any Guaranteed Obligation; (c) release, discharge, exonerate, substitute or add one or more parties liable on any Guaranteed Obligation or one or more endorsers, cosigners or guarantors for any Guaranteed Obligation; (d) obtain collateral for the payment of any Guaranteed Obligation or any guaranty thereof; (e) release existing or after-acquired collateral on such terms as Bank, in its sole discretion, shall determine; (f) apply any sums received from Borrower, any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation or from the sale or collection of collateral or its proceeds to any Guaranteed Obligation whatsoever owed or to be owed to Bank by either Borrower in any order or amount and regardless of whether or not such Guaranteed Obligation is guaranteed hereby, is secured by collateral or is due and payable; and (g) apply any sums received from Guarantor or from the sale of collateral granted by Guarantor to any Guaranteed Obligation in any order or amount regardless of whether such Guaranteed Obligation is secured by collateral or is due and payable.

3.              Waivers.   Guarantor hereby unconditionally and irrevocably acknowledges and agrees to the matters set forth below:

(a)

Election of Remedies .  Guarantor waives all rights and defenses arising out of an election of remedies by Bank, including without limitation in connection with any bankruptcy or other debtor relief laws or under any other applicable federal, state or local law, including, but not limited to, those purporting to reduce Bank's right against Guarantor in proportion to the principal amount of the Guaranteed Obligations.

(b)

Statute of Limitations .  To the maximum extent permitted by law, Guarantor waives the benefit of the statute of limitations affecting Guarantor's liability hereunder or the enforcement hereof.

(c)

Action Against Borrowers and Collateral .  Guarantor waives all right to require Bank to:  (i) proceed against either Borrower, any endorser, cosigner, other guarantor or other person liable on any Guaranteed Obligation; (ii) join either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation in any action or actions that may be brought and prosecuted by Bank solely and separately against Guarantor on any Guaranteed Obligation; (iii) proceed against any item or items of collateral securing any Guaranteed Obligation or any guaranty thereof; or (iv) pursue or refrain from pursuing any other remedy whatsoever in Bank's power.

(d)

Borrower's Defenses .  Guarantor waives any defense arising by reason of any disability or other defense of either Borrower, either Borrower's successors or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation including, without limitation, any statute of limitation defense that may be available to either Borrower or such other Person.  Until all Guaranteed Obligations have been paid in full, even though it may be in excess of the liability incurred hereby and Bank has no further commitment to lend or extend financial accommodations to either Borrower, Guarantor shall not have any right of subrogation and Guarantor waives any benefit of and right to participate in any collateral now or hereafter held by Bank.  Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of sale of any collateral securing any Guaranteed Obligation or any guaranty thereof, and notice of the existence, creation or incurring of new or additional Guaranteed Obligations.

(e)

Borrower's Financial Condition .  Guarantor hereby recognizes, acknowledges and agrees that advances may be made from time to time with respect to any Guaranteed Obligation without authorization from or notice to Guarantor even though the financial condition of either Borrower, any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation may have deteriorated since the date of this Limited Guaranty.  Guarantor waives all right to require Bank to disclose any information with respect to any Guaranteed Obligation; the financial condition, credit or character of either Borrower, any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation; any collateral securing any Guaranteed Obligation or any guaranty thereof; or any action or inaction on the part of Bank, either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation.  Guarantor hereby assumes the responsibility for being informed of the financial condition, credit and character of either Borrower and of all circumstances bearing upon the risk of non-payment of any Guaranteed Obligation which diligent inquiry would reveal.

4.              No Right of Set-off or Grant of Security Interest.   Bank shall have no, and herby waives any right to, a security interest in or a right to set off against any monies, securities or other property of Guarantor now or hereafter in the possession of or on deposit with Bank, Bank's agents or any one or more of them, whether held in general or special account or deposit or for safekeeping or otherwise.

5.              Subordination.   Any indebtedness of either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation now or hereafter owed to Guarantor is hereby subordinated to the Guaranteed Obligations.  Such indebtedness owed to Guarantor shall, if Bank so requests, be collected, enforced and received by Guarantor as trustee for Bank and be paid over to Bank on account of the Guaranteed Obligations but without reducing or affecting in any manner the liability of Guarantor set forth herein.  Should Guarantor fail to collect the proceeds of any such indebtedness owed to it and pay the proceeds to Bank, Bank, as Guarantor's attorney-in-fact, may do such acts and sign such documents in Guarantor's name as Bank considers necessary to effect such collection, and Guarantor hereby appoints Bank as Guarantor’s attorney-in-fact for such purposes.

6.              Invalid, Fraudulent or Preferential Payments.   Guarantor agrees that, to the extent either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation makes a payment or payments to, or is credited for any payment or payments made for or on behalf of either Borrower to Bank, which payment or payments, or any part thereof, is subsequently invalidated, determined to be fraudulent or preferential, set aside or required to be repaid to any trustee, receiver, assignee or any other party whether under any bankruptcy, state or federal law or under any common law or equitable cause or otherwise, then, to the extent thereof, the obligation or part thereof intended to be satisfied thereby shall be revived, reinstated and continued in full force and effect as if such payment or payments had not originally been made or credited.

7.              Joint and Several Obligations; Independent Obligations.   If more than one Guarantor signs this Limited Guaranty, the obligations hereunder are joint and several.  Guarantor's obligations hereunder are independent of the obligations of either Borrower or any endorser, cosigner, other guarantor or other Person liable on any Guaranteed Obligation and a separate action or actions may be brought and prosecuted against Guarantor on any Guaranteed Obligation.

8.              Reporting Requirements .  Guarantor hereby agrees to deliver the following to Bank, a s soon as available and in any event:

(a)

within fifty (50) days after the end of each fiscal quarter, copies of Guarantor's SEC Form 10-Q;

(b)

within ninety-five (95) days after the end of each fiscal year, copies of Guarantor's SEC Form 10-K and the operating statement for the Hotel that is used in preparing Guarantor's consolidated audit by KMPG;

(c)

Within one hundred twenty (120) days after the end of each fiscal year, a copy of Guarantor's annual financial statements audited by independent public accountants reasonably acceptable to Bank and otherwise in a form and substance reasonably satisfactory to Bank;

(d)

Within forty-five (45) days after submission to the Internal Revenue Service, a copy of Guarantor's annual federal tax return, including all schedules attached thereto; and

(e)

Guarantor will maintain as of the end of each fiscal quarter a "Condor Debt Service Coverage Ratio" (as defined in the Loan Agreement) of at least 1.05 to 1.00.  Any violations of the Condor Debt Service Coverage Ratio may be cured in accordance with the terms of Section 5.01(l) of the Loan Agreement.

9.              Events of Default.   Bank may declare all Guaranteed Obligations to be due and payable under this Limited Guaranty upon the occurrence and during the continuance of any of the following events (" Events of Default "):

(a)

The occurrence of an "Event of Default" (as defined in the Loan Agreement) under the Loan Agreement; or

(b)

Guarantor fails to perform any of its obligations under this Limited Guaranty, within 30 days after written notice from Bank; or

(c)

Guarantor attempts to revoke this Limited Guaranty or this Limited Guaranty becomes ineffective for any reason; or

(d)

any representation or warranty made or given by Guarantor to Bank proves to be false or misleading in any material respect; or

(e)

Guarantor becomes insolvent or the subject of any bankruptcy proceeding or other debtor relief proceeding which remains undismissed or unstayed for a period of 60 days.

If an Event of Default shall occur and be continuing, Bank may declare all Guaranteed Obligations to be due and payable, in which event Guarantor shall provide for immediate payment of all Guaranteed Obligations, and Bank may proceed to enforce this Limited Guaranty in accordance with the terms and provisions of this Limited Guaranty and pursue all rights and remedies as provided by applicable law.

10.              Acknowledgment of Receipt.   Receipt of a true copy of this Limited Guaranty is hereby acknowledged by Guarantor.  Guarantor understands and agrees that this Limited Guaranty shall not constitute a commitment of any nature whatsoever by Bank to renew or hereafter extend credit to either Borrower. Guarantor agrees that this Limited Guaranty shall be effective with or without notice from Bank of Bank's acceptance hereof.

11.              Non-Reliance.   In executing this Limited Guaranty, Guarantor is not relying, and has not relied, upon any statement or representation made by Bank, or any employee, agent or representative of Bank, with respect to the status, financial condition or other matters related to either Borrower or the relationship between either Borrower and Bank.

12.              Multiple Guaranties.   If Guarantor has executed or does execute more than one guaranty of the Guaranteed Obligations of either Borrower to Bank, the limits of liability thereunder and hereunder shall be cumulative.

13.              Irrevocable Guaranty.   This Limited Guaranty is an irrevocable continuing guaranty.

14.              Assignment.   Bank may, with or without notice, assign this Limited Guaranty in whole or in part.  This Limited Guaranty shall inure to the benefit of Bank, its successors and assigns, and shall bind Guarantor and Guarantor’s heirs, executors, administrators, successors and assigns.

15.              WAIVER OF JURY TRIAL.   GUARANTOR AND BANK HEREBY EXPRESSLY WAIVE ANY AND ALL RIGHTS, WHETHER ARISING UNDER THE STATE CONSTITUTION, ANY RULES OF CIVIL PROCEDURE, COMMON LAW OR OTHERWISE, TO DEMAND A TRIAL BY JURY IN ANY ACTION, MATTER, CLAIM OR CAUSE OF ACTION WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATED TO THIS LIMITED GUARANTY OR ANY OTHER AGREEMENT, DOCUMENT OR TRANSACTION CONTEMPLATED HEREBY WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. GUARANTOR AND BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, BANK AND GUARANTOR FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS LIMITED GUARANTY OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LIMITED GUARANTY.

16.              Notices.   Unless otherwise expressly provided herein, all notices, certificates, requests, demands, and other communications provided for under this Limited Guaranty shall be in writing and shall be mailed, faxed, or delivered to the address or facsimile number set forth in this Section.  All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt  by the intended recipient and (ii) (A) if delivered by hand or by courier, upon delivery; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; and (C) if delivered by facsimile, when sent and appropriate answerback has been received by the sender.  Notices and other communications to Bank, however, shall not be effective until actually received by Bank.

17.              Miscellaneous.

(a)

Governing Law .  This Limited Guaranty shall be governed by and construed according to the internal laws of the State of Nebraska without regard to conflict of law principles. Guarantor hereby submits to the jurisdiction of the Nebraska state courts sitting in Douglas County, Nebraska and the United States District Court for the District of Nebraska.

(b)

Headings .  The headings used herein are solely for the purpose of identification and have no legal significance.

(c)

Entire Agreement .  This Limited Guaranty constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and undertaking both written and orally between the parties with respect to the subject matter contained in this Limited Guaranty.

(d)

Severability .  Should any one or more provisions of this Limited Guaranty be determined to be illegal or unenforceable, all other provisions shall remain effective.

(e)

Drafting of Agreement .  This Limited Guaranty, as a matter of convenience for all parties, has been prepared by Bank.  The parties hereto agree that in the event of any ambiguity in this Limited Guaranty, such ambiguity shall not be construed against Bank.  It is the express intention of the parties that all aspects of this Limited Guaranty shall be construed and interpreted in as broad a manner as possible to the benefit and protection of Bank.

(f)

Interpretation .  If there is more than one Guarantor executing this Limited Guaranty, the term " Guarantor " shall mean all and any one or more of them.  As used in this Limited Guaranty, neuter terms include the masculine and feminine, and vice versa.  The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.  Terms used, but not defined herein, shall have the meaning set forth in the Loan Agreement.

(g)

Attorney's Fees . Guarantor shall pay to Bank all costs and expenses, including, but not limited to reasonable attorney fees, incurred by Bank in connection with the administration, enforcement, including any bankruptcy, at trial and on appeal, or the enforcement of any judgment or any refinancing or restructuring of Guarantor’s obligations under this Limited Guaranty or any document, instrument of agreement executed with respect to, evidencing or securing the indebtedness hereunder.

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[SIGNATURE PAGE TO LIMITED GUARANTY]

Executed by the undersigned Guarantor as of the first date set forth above.

GUARANTOR:

CONDOR HOSPITALITY TRUST, INC. , a Maryland corporation

By:  /s/ Jonathan J. Gantt ________________

Name: Jonathan J. Gantt

Title:    Senior Vice President and
Chief Financial Officer