EXHIBIT 10.104
PREPARED BY AND UPON RECORDATION RETURN TO: Tax Parcel No(s): __________
Kennedy Covington Lobdell & Hickman, L.L.P.
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 28202-4006
Attention: John Nicholas Suhr, Jr., Esq.
LOAN NO.: 26-5330848 SALT LAKE CITY, UTAH
HOMEWOOD SUITES
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APPLE SUITES SPE I, INC.,
as Grantor (Trustor)
to
METRO NATIONAL TITLE COMPANY,
as Trustee
For the benefit of
FIRST UNION NATIONAL BANK,
as Beneficiary
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DEED OF TRUST, SECURITY AGREEMENT
AND UCC FIXTURE FILING
---------------------------
Date: September 8, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I. COVENANTS OF GRANTOR...................................................................................6
1.1 Warranties of Grantor...........................................................................6
1.2 Defense of Title...............................................................................10
1.3 Performance of Obligations.....................................................................10
1.4 Insurance......................................................................................10
1.5 Payment of Taxes...............................................................................13
1.6 Tax and Insurance Impound Account..............................................................14
1.7 Intentionally Deleted..........................................................................15
1.8 Replacement Reserve............................................................................15
1.9 Casualty and Condemnation......................................................................18
1.10 Construction Liens.............................................................................21
1.11 Rents and Profits..............................................................................21
1.12 Percentage Lease...............................................................................22
1.13 Alienation and Further Encumbrances............................................................24
1.14 Payment of Utilities, Assessments, Charges, Etc................................................28
1.15 Access Privileges and Inspections..............................................................28
1.16 Waste; Alteration of Improvements..............................................................29
1.17 Zoning.........................................................................................29
1.18 Financial Statements and Books and Records.....................................................29
1.19 Further Documentation..........................................................................31
1.20 Payment of Costs; Reimbursement to Beneficiary.................................................31
1.21 Security Interest..............................................................................33
1.22 Security Agreement.............................................................................33
1.23 Easements and Rights-of-Way....................................................................35
1.24 Compliance with Laws...........................................................................35
1.25 Additional Taxes...............................................................................36
1.26 Secured Indebtedness...........................................................................36
1.27 Grantor's Waivers..............................................................................37
1.28 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL...............................................38
1.29 Attorney-in-Fact Provisions....................................................................38
1.30 Management.....................................................................................38
1.31 Hazardous Waste and Other Substances...........................................................40
1.32 Indemnification; Subrogation...................................................................44
1.33 Covenants with Respect to Indebtedness, Operations, Fundamental Changes of Grantor.............45
1.34 Intentionally Deleted..........................................................................49
1.35 Year 2000 Compatibility........................................................................49
1.36 ERISA..........................................................................................49
ARTICLE II. EVENTS OF DEFAULT....................................................................................50
2.1 Events of Default..............................................................................50
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ARTICLE III. REMEDIES............................................................................................52
3.1 Remedies Available.............................................................................52
3.2 Application of Proceeds........................................................................56
3.3 Right and Authority of Receiver or Beneficiary in the Event of Default; Power of Attorney......57
3.4 Occupancy After Foreclosure....................................................................58
3.5 Notice to Account Debtors......................................................................58
3.6 Cumulative Remedies............................................................................58
3.7 Payment of Expenses............................................................................59
ARTICLE IV. MISCELLANEOUS TERMS AND CONDITIONS...................................................................59
4.1 Time of Essence................................................................................59
4.2 Release of Deed of Trust.......................................................................59
4.3 Certain Rights of Beneficiary..................................................................59
4.4 Waiver of Certain Defenses.....................................................................59
4.5 Notices........................................................................................59
4.6 Statutory Notices..............................................................................60
4.7 Successors and Assigns; Joint and Several Liability............................................60
4.8 Severability...................................................................................60
4.9 Gender.........................................................................................60
4.10 Waiver; Discontinuance of Proceedings..........................................................61
4.11 Section Headings...............................................................................61
4.12 GOVERNING LAW..................................................................................61
4.13 Counting of Days...............................................................................61
4.14 Relationship of the Parties....................................................................62
4.15 Application of the Proceeds of the Note........................................................62
4.16 Unsecured Portion of Indebtedness..............................................................62
4.17 Cross-Default; Cross-Collateralization.........................................................62
4.18 Interest After Sale............................................................................62
4.19 Inconsistency with Other Loan Documents........................................................62
4.20 Construction of this Document..................................................................63
4.21 No Merger......................................................................................63
4.22 Rights With Respect to Junior Encumbrances.....................................................63
4.23 Beneficiary May File Proofs of Claim...........................................................63
4.24 Fixture Filing.................................................................................63
4.25 After-Acquired Trust Property..................................................................63
4.26 No Representation..............................................................................64
4.27 Counterparts...................................................................................64
4.28 Personal Liability.............................................................................64
4.29 Recording and Filing...........................................................................64
4.30 Entire Agreement and Modifications.............................................................64
4.31 Maximum Interest...............................................................................65
4.32 Interest Payable by Beneficiary................................................................65
4.33 Secondary Market...............................................................................65
4.34 Dissemination of Information...................................................................65
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4.35 Contemporaneous Notes, Contemporaneous Mortgages and Contemporaneous
Assignments of Leases and Rents................................................................66
ARTICLE V. CONCERNING THE TRUSTEE................................................................................66
5.1 Certain Rights.................................................................................66
5.2 Retention of Money.............................................................................67
5.3 Successor Trustees.............................................................................67
5.4 Perfection of Appointment......................................................................67
5.5 No Representation by Trustee or Beneficiary....................................................67
5.6 Acceptance of Trust............................................................................67
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DEED OF TRUST, SECURITY AGREEMENT
AND UCC FIXTURE FILING
THIS DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (this "Deed
of Trust") is made as of September 8, 2000 by APPLE SUITES SPE I, INC., a
Virginia corporation, as Trustor ("Grantor"), whose address is 9 North Third
Street, Richmond, Virginia 23219, to METRO NATIONAL TITLE COMPANY, as Trustee
("Trustee") with an address at 111 East Broadway, Suite 111, Salt Lake City,
Utah 84111, Attention: Rod Newman, for the benefit of FIRST UNION NATIONAL BANK,
a national banking association, as Beneficiary ("Beneficiary"), whose address is
One First Union Center DC-6 (NC0166), Charlotte, North Carolina 28288-0166,
Attention: William J. Cohane, Real Estate Capital Markets Contract Finance.
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS
($10), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH
ARE HEREBY ACKNOWLEDGED, GRANTOR HEREBY IRREVOCABLY GRANTS, BARGAINS, SELLS,
CONVEYS, WARRANTS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS, WITH POWER OF
SALE, all of Grantor's estate, right, title and interest (if any) in, to and
under any and all of the following described property, whether now owned or
hereafter acquired by Grantor (exclusive of any of the following owned or leased
by tenants leasing all or part of the Improvements (as hereinafter defined),
including, without limitation, the tenant under the Percentage Lease (as
hereinafter defined)) (Grantor's estate, right, title and interest in all such
property being referred to, collectively, as the "Trust Property"):
(A) All that certain real property situated in the County of Salt Lake,
State of Utah, more particularly described on Exhibit A attached hereto and
incorporated herein by this reference (the "Premises"), together with all of the
easements, rights, privileges, franchises, tenements, hereditaments and
appurtenances now or hereafter thereunto belonging or in any way appertaining
thereto, and all of the estate, right, title, interest, claim and demand
whatsoever of Grantor therein or thereto, either at law or in equity, in
possession or in expectancy, now or hereafter acquired;
(B) All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Premises (the
"Improvements", the Premises and the Improvements being referred to as the "Real
Property");
(C) All furniture, furnishings, fixtures, goods, equipment, inventory
or personal property owned by Grantor and now or hereafter located on, attached
to or used in and about the Improvements, including, but not limited to, all
machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all
appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Grantor and as are now or hereafter used or furnished in
operating the Improvements, or the activities conducted therein (including,
without limitation beds, bureaus, chiffoniers, chests, chairs, desks, lamps,
mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains,
shades, venetian blinds, screens, paintings, hangings, pictures, divans,
couches, luggage carts, luggage racks, stools, sofas, chinaware, linens,
pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities,
dining room wagons, keys or other entry systems, bars, bar fixtures, liquor and
other drink dispensers, icemakers, radios, television sets, intercom and paging
equipment, electric and electronic equipment, dictating equipment, private
telephone systems, facsimile machines, medical equipment, potted plants,
heating, lighting and plumbing fixtures, fire prevention and extinguishing
apparatus, cooling an air-conditioning systems, elevators, escalators, fittings,
plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools,
machinery, engines, dynamos, motors, boilers, incinerators, switchboards,
conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and
polishing equipment, call systems, brackets, electrical signs, bulbs, bells, ash
and fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment,
dishwashers, garbage disposals, washers and dryers), other customary hotel
equipment and all building materials and equipment hereafter situated on or
about the Premises or Improvements, and, to the extent assignable, all
warranties and guaranties relating thereto, and all additions thereto and
substitutions and replacements therefor;
(D) All easements, rights-of-way, strips and gores of land, vaults,
streets, ways, alleys, passages, sewer rights, and other emblements now or
hereafter located on the Premises or under or above the same or any part or
parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions and remainders whatsoever, in any
way belonging, relating or appertaining to the Real Property or any part
thereof, or which hereafter shall in any way belong, relate or be appurtenant
thereto, whether now owned or hereafter acquired by Grantor;
(E) To the extent assignable, all water, ditches, wells, reservoirs and
drains and all water, ditch, well, reservoir and drainage rights which are
appurtenant to, located on, under or above or used in connection with the
Premises or the Improvements, or any part thereof, together (i) with all
utilities, utility lines, utility commitments, utility capacity, capital
recovery charges, impact fees and other fees paid in connection with same, (ii)
reimbursements or other rights pertaining to utility or utility services
provided to the Premises and/or Improvements and (iii) the present or future use
or availability of waste water capacity, or other utility facilities to the
extent same pertain to or benefit the Premises and/or Improvements, including,
without limitation, all reservations of or commitments covering any such use in
the future whether now existing or hereafter created or acquired;
(F) All minerals, crops, timber, trees, shrubs, flowers and
landscaping features now or hereafter located on, under or above the Premises;
(G) All funds now or hereafter on deposit in the Impound Account and
the Replacement Reserve (each as hereinafter defined);
(H) (i) All leases, licenses, concessions and occupancy agreements of
all or any part of the Premises or the Improvements and any and all guarantees,
extensions, renewals,
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replacements and modifications thereof (collectively, the "Leases"), including,
without limitation, that certain Amended and Restated Hotel Lease Agreement
dated November 24, 1999, between Grantor, as lessor, and Apple Suites
Management, Inc., as lessee, with any guaranty of the performance and payment
thereunder (the "Percentage Lease"), and (ii) all rents, royalties, issues,
profits, revenue, income, all revenues and credit card receipts collected from
guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational
facilities, parking charges, and other benefits (collectively, the "Rents" or
"Rents and Profits") of the Premises, the Improvements or the fixtures or
equipment, now or hereafter arising from the use or enjoyment of all or any
portion thereof or rendering of services by Grantor or any operator or manager
of the hotel or the commercial space located in the Improvements (including,
without limitation, from the rental of any office space, retail space, guest
rooms or other space, halls, stores and offices), and (iii) all concession fees
and rentals, health club membership fees, food and beverage wholesale and retail
sales, service charges, vending machine sale or from any lease, license,
tenancy, concession, occupancy agreement or other agreement pertaining thereto
or arising from any of the Contracts (as hereinafter defined) or any of the
General Intangibles (as hereinafter defined) and any other items of revenue,
receipts or other income as identified in the Uniform System of Accounts for
Hotels, 9th Edition as published by the Hotel Association of New York City, Inc.
(1996) and (iv) all cash or securities (the "Security Deposits") deposited in
any security deposit account (the "Security Deposit Account") to secure
performance by the tenants, lessees or licensees, as applicable, of their
obligations under any such leases, licenses, concessions or occupancy
agreements, whether said cash or securities are to be held until the expiration
of the terms of said leases, licenses, concessions or occupancy agreements or
applied (exclusive of any of the foregoing owed to tenants or any third parties)
to one or more of the installments of rent coming due prior to the expiration of
said terms, subject to, however, the provisions contained in Section 1.11 of
this Deed of Trust;
(I) To the extent assignable: (i) all contracts and agreements now or
hereafter entered into by Grantor or binding upon Grantor relating to the
management, maintenance or operation of any part of the Premises or the
Improvements (collectively, the "Contracts") and all revenue, income and other
benefits thereof, including, without limitation, management agreements, service
contracts, maintenance contracts, equipment leases, personal property leases and
(ii) any contracts or documents relating to construction on any part of the
Premises or the Improvements (including plans, drawings, surveys, tests,
reports, bonds and governmental approvals);
(J) To the extent assignable, all present and future real estate tax
refunds and monetary deposits given to any public or private utility with
respect to utility services furnished to any part of the Premises or the
Improvements;
(K) To the extent assignable, all present and future funds, accounts,
instruments, accounts receivable, documents, causes of action, claims, general
intangibles (including, without limitation, trademarks, trade names, service
marks and symbols now or hereafter used in connection with any part of the
Premises or the Improvements, all names by which the Premises or the
Improvements may be operated or known, all rights to carry on business under
such names, and all rights, interest and privileges which Grantor has or may
have as developer or declarant under any covenants, restrictions or declarations
now or hereafter relating to the
3
Premises or the Improvements) and all notes or chattel paper relating to the
ownership, operation or maintenance of the Real Property (exclusive of any of
the foregoing owed to tenants or any other third parties) (collectively, the
"General Intangibles");
(L) To the extent assignable, all water taps, sewer taps, certificates
of occupancy, permits, licenses, franchises, certificates, consents, approvals
and other rights and privileges now or hereafter obtained in connection with the
Premises or the Improvements and all present and future warranties and
guaranties relating to the Improvements or to any equipment, fixtures,
furniture, furnishings, personal property or components of any of the foregoing
now or hereafter located or installed on the Premises or the Improvements;
(M) All building materials, supplies and equipment now or hereafter
placed on the Premises or in the Improvements and, to the extent assignable, all
architectural renderings, models, drawings, plans, specifications, studies and
data now or hereafter relating to the Premises or the Improvements;
(N) To the extent assignable, all right, title and interest of Grantor
in any insurance policies or binders now or hereafter relating to the Trust
Property, including any unearned premiums thereon;
(O) All proceeds, products, substitutions and accessions (including
claims and demands therefor) of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards; and
(P) All other or greater rights and interests of every nature in the
Premises or the Improvements and in the possession or use thereof and income
therefrom, whether now owned or hereafter acquired by Grantor.
FOR THE PURPOSE OF SECURING:
(1) The debt evidenced by that certain Promissory Note (such
Promissory Note, together with any and all renewals, amendments, modifications,
consolidations and extensions thereof, is hereinafter referred to as the "Note")
of even date with this Deed of Trust, made by Grantor payable to the order of
Beneficiary in the principal face amount of Two Million Five Hundred Thousand
and No/100 Dollars ($2,500,000.00), together with interest as therein provided;
(2) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and contained
in agreements, documents or instruments now or hereafter evidencing, securing or
otherwise relating to the Debt (as hereinafter defined) and described on Exhibit
C attached hereto, the Contemporaneous Notes (as hereinafter defined), the
Contemporaneous Mortgages (as hereinafter defined), the Contemporaneous
Assignments (as hereinafter defined), (together with any and all renewals,
amendments, extensions, modifications and restatements thereof, are hereinafter
collectively referred to as the "Loan Documents") and the payment of all other
sums herein or therein
4
covenanted to be paid, PROVIDED, HOWEVER, THIS DEED OF TRUST SHALL NOT SECURE
THE OBLIGATIONS PROVIDED UNDER EITHER THE INDEMNITY AND GUARANTY AGREEMENT OF
EVEN DATE HEREWITH EXECUTED IN CONNECTION WITH THE NOTE (THE "INDEMNITY
AGREEMENT"); OR THE ENVIRONMENTAL INDEMNITY AGREEMENT OF EVEN DATE HEREWITH
EXECUTED IN CONNECTION WITH THE NOTE (THE "ENVIRONMENTAL INDEMNITY AGREEMENT");
(3) Any and all additional advances made by Beneficiary to protect or
preserve the Trust Property or the lien or security interest created hereby on
the Trust Property, or for taxes, assessments or insurance premiums as
hereinafter provided or for performance of any of Grantor's obligations
hereunder or under the other Loan Documents or for any other purpose provided
herein or in the other Loan Documents; and
(4) Any and all other indebtedness now owing or which may hereafter be
owing by Grantor to Beneficiary under the Loan Documents, including, without
limitation, all prepayment fees, however and whenever incurred or evidenced,
whether express or implied, direct or indirect, absolute or contingent, or due
or to become due, and all renewals, modifications, consolidations, replacements
and extensions thereof.
(All of the sums referred to in Paragraphs (1) through (4) above are herein
referred to as the "Debt").
TO HAVE AND TO HOLD the Trust Property unto Trustee, its successors
and assigns forever, for the benefit of Beneficiary, its successors and assigns,
and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND
FOREVER DEFEND the title to the Real Property (and such other portion of the
Trust Property as may constitute real property under applicable law), subject to
the Permitted Encumbrances (as hereinafter defined), to Beneficiary and Trustee
against every person whomsoever lawfully claiming or to claim the same or any
part thereof;
PROVIDED, HOWEVER, that if the principal and interest and all other
sums due or to become due under the Note or under the other Loan Documents,
including, without limitation, any prepayment fees required pursuant to the
terms of the Note, shall have been paid at the time and in the manner stipulated
therein and the Debt shall have been paid and all other covenants contained in
the Loan Documents shall have been performed, then, in such case, the liens,
security interests, estates and rights granted by this Deed of Trust shall be
satisfied and the estate, right, title and interest of Beneficiary in the Trust
Property shall cease, and upon payment to Beneficiary of all costs and expenses
incurred for the preparation of the release hereinafter referenced and all
recording costs if allowed by law, Beneficiary shall promptly cause this Deed of
Trust to be released and reconveyed of record by proper instrument.
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ARTICLE I.
COVENANTS OF GRANTOR
For the purpose of further securing the Debt and for the protection of
the security of this Deed of Trust, for so long as the Debt or any part thereof
remains unpaid, Grantor covenants and agrees as follows:
1.1 Warranties of Grantor. Grantor, for itself and its successors and
assigns, does hereby represent, warrant and covenant to and with Beneficiary,
its successors and assigns, that:
(a) Grantor has good, marketable and indefeasible fee simple title
to the Real Property, subject only to those matters expressly set forth as
exceptions to or subordinate matters in the title insurance policy insuring the
lien of this Deed of Trust delivered as of the date hereof (the "Title Insurance
Policy"), excepting therefrom all preprinted and/or standard exceptions (such
items being the "Permitted Encumbrances"), and has full power and lawful
authority to grant, bargain, sell, convey, assign, transfer, encumber and
mortgage its interest in the Trust Property in the manner and form hereby done
or intended. Grantor will preserve its interest in and title to the Real
Property and will forever warrant and defend the same to Beneficiary against any
and all claims whatsoever and will forever warrant and defend the validity and
priority of the lien and security interest created herein against the claims of
all persons and parties whomsoever, subject to the Permitted Encumbrances. The
foregoing warranty of title shall survive the foreclosure of this Deed of Trust
and shall inure to the benefit of and be enforceable by Beneficiary in the event
Beneficiary acquires title to or ownership of the Trust Property pursuant to any
foreclosure;
(b) No bankruptcy or insolvency proceedings are pending or
contemplated by Grantor or, to the best knowledge of Grantor, against Grantor or
by or against any endorser or cosigner of the Note or of any portion of the
Debt, or any guarantor or indemnitor under the Indemnity Agreement and the
Environmental Indemnity Agreement or the loan evidenced thereby and secured
hereby (the "Indemnitor");
(c) All written certificates, written affidavits and written
statements made by Grantor to Beneficiary in connection with the loan evidenced
by the Note are true and correct in all material respects and do not omit to
state any fact or circumstance necessary to make the statements contained
therein not materially misleading;
(d) The execution, delivery and performance of this Deed of Trust,
the Note and all of the other Loan Documents have been duly authorized by all
necessary action to be, and are, binding and enforceable against Grantor in
accordance with the respective terms thereof and do not in any material respect
contravene, result in a breach of or constitute a default (nor upon the giving
of notice or the passage of time or both will same constitute a default) under
the partnership agreement, articles of incorporation, operating agreement or
other organizational documents of Grantor or any material contract or agreement
to which Grantor is a party or by which Grantor or any of its property may be
bound and do not violate or contravene in any material respect any law, order,
decree, rule or regulation to which Grantor is subject;
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(e) Grantor is not required to obtain any consent, approval or
authorization from or to file any declaration or statement with, any
governmental authority or agency in connection with or as a condition to the
execution, delivery or performance of this Deed of Trust, the Note or the other
Loan Documents which has not been so obtained or filed;
(f) Grantor has obtained or made all necessary (i) consents,
approvals and authorizations and registrations and filings of or with all
governmental authorities or agencies and (ii) consents, approvals, waivers and
notifications of partners, stockholders, members, creditors, lessors and other
non-governmental persons and/or entities, in each case, which are required to be
obtained or made by Grantor in connection with the execution and delivery of,
and the performance by Grantor of its obligations under, the Loan Documents;
(g) Grantor is not an "investment company", or a company
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended;
(h) No part of the proceeds of the indebtedness secured hereby
will be used for the purpose of purchasing or acquiring any "margin stock"
within the meaning of Regulation T, U or X of the Board of Governors of the
Federal Reserve System or for any other purpose which would be inconsistent with
such Regulation T, U or X or any other Regulations of such Board of Governors,
or for any purpose prohibited by legal requirements or by the terms and
conditions of the Loan Documents;
(i) Grantor and, if Grantor is a partnership, any general partner
of Grantor, has filed all federal, state and local tax returns required to be
filed as of the date hereof and has paid or made adequate provision for the
payment of all federal, state and local taxes, charges and assessments payable
by Grantor and its general partner, if any as of the date hereof. Grantor and
its general partners, if any, believe that their respective tax returns properly
reflect the income and taxes of Grantor and said general partners, if any, for
the periods covered thereby, subject only to reasonable adjustments required by
the Internal Revenue Service or other applicable tax authority upon audit;
(j) Grantor is not an "employee benefit plan", as defined in
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA and the assets of Grantor do not
constitute "plan assets" of one or more such plans within the meaning of 29
C.F.R. Section 2510.3-101;
(k) The Premises and the Improvements and the current intended use
thereof by Grantor comply in all material respects with all applicable
restrictive covenants, zoning ordinances, subdivision and building codes, flood
disaster laws, health and environmental laws and regulations and all other
ordinances, orders or requirements issued by any state, federal or municipal
authorities having or claiming jurisdiction over the Trust Property. The
Premises and Improvements constitute one or more separate tax parcels for
purposes of ad valorem taxation. To the best of Borrower's knowledge,
information and belief, the Premises and Improvements do not require any rights
over, or restrictions against, other property in order to comply with any of the
aforesaid governmental ordinances, orders or requirements;
7
(l) All utility services necessary and sufficient for the use,
occupancy and operation of the Premises and the Improvements for their current
intended purposes are available to the Real Property, including water, storm
sewer, sanitary sewer, gas, electric, cable and telephone facilities;
(m) All streets, roads, highways and bridges necessary for access
for the current use, occupancy and operation of the Premises and the
Improvements have been completed, to the best of Grantor's knowledge,
information and belief, have been dedicated to and accepted by the appropriate
municipal authority and are open and available to the Premises and the
Improvements without further condition or cost to Grantor;
(n) All curb cuts, driveways and traffic signals (if any) shown on
the survey delivered to Beneficiary prior to the execution and delivery of this
Deed of Trust (the "Survey") are existing and, to the best of Grantor's
knowledge, information and belief, have been fully approved by the appropriate
governmental authority;
(o) There are no judicial, administrative, mediation or
arbitration actions, suits or proceedings pending or threatened against or
affecting Grantor (or, if Grantor is a partnership or a limited liability
company, any of its general partners or members) or the Trust Property which, if
adversely determined, would have a material adverse effect on (a) the Trust
Property, (b) the business, prospects, profits, operations or condition
(financial or otherwise) of Grantor, (c) the enforceability, validity,
perfection or priority of the lien of any Loan Document, or (d) the ability of
Grantor to perform any obligations under any Loan Document (collectively, a
"Material Adverse Effect");
(p) The Trust Property is free from delinquent water charges,
sewer rents, taxes and assessments;
(q) As of the date of this Deed of Trust, the Trust Property is
free from unrepaired material damage caused by fire, flood, accident or other
casualty;
(r) As of the date of this Deed of Trust, no part of the Premises
or the Improvements has been taken in condemnation, eminent domain or like
proceeding nor is any such proceeding pending or, to Grantor's knowledge and
belief, threatened;
(s) Grantor possesses all material franchises, patents,
copyrights, trademarks, trade names, licenses and permits necessary for the
conduct of its business substantially as now conducted;
(t) Except as may otherwise be disclosed in the Engineering Report
of the Real Property entitled Property Condition Assessment, dated July 14,
2000, and prepared by Jones, Hill, McFarland & Ellis, (i) the Improvements are
in good repair and (ii) all major building systems located within the
Improvements, including, without limitation, the heating and air conditioning
systems and the electrical and plumbing systems, are in good working order and
condition;
8
(u) Grantor has delivered to Beneficiary true, correct and
complete copies of all Contracts and all amendments thereto or modifications
thereof;
(v) Each Contract constitutes the legal, valid and binding
obligation of Grantor and, to the best of Grantor's knowledge and belief, is
enforceable against any other party thereto. No default exists, or with the
passing of time or the giving of notice or both would exist, under any Contract
which would, in the aggregate, have a Material Adverse Effect;
(w) Grantor and the Trust Property are free from any past due
obligations for sales and payroll taxes;
(x) There are no security agreements or financing statements
affecting all or any portion of the Trust Property of Grantor other than (i) as
disclosed in writing by Grantor to Beneficiary prior to the date hereof and (ii)
the Loan Documents;
(y) Grantor has delivered to Beneficiary a true, correct and
complete copy of the Percentage Lease;
(z) The Percentage Lease constitutes the legal, valid and binding
obligation of Grantor and, to the best of Grantor's knowledge and belief, is
enforceable against the tenant thereof. No default exists, or with the passing
of time or the giving of notice or both would exist, under the Percentage Lease
which would, in the aggregate, have a Material Adverse Effect;
(aa) The rents under the Percentage Lease have not been waived,
released, or otherwise discharged or compromised;
(bb) All work to be performed by Grantor under the Percentage
Lease has been substantially performed, all contributions to be made by Grantor
to the tenant thereunder have been made and all other conditions precedent to
each such tenant's obligations thereunder have been satisfied;
(cc) To the best of Grantor's knowledge and belief, the tenant
under the Percentage Lease is free from bankruptcy, reorganization or
arrangement proceedings or a general assignment for the benefit of creditors;
(dd) There are no outstanding options or rights of first offer or
refusal to purchase all or any portion of the Trust Property or Grantor's
interest therein or ownership thereof;
(ee) Grantor is not a "foreign person" within the meaning of
ss.1445(f)(3) of the Internal Revenue Code of 1986, as amended, and the related
Treasury Department regulations, including temporary regulations; and
(ff) As of the date hereof, the sole shareholder of Grantor is
Apple Suites, Inc., a Virginia corporation (the "REIT"). The REIT's interest in
Grantor is owned by the REIT free
9
and clear of all mortgages, assignments, pledges and security interests and free
and clear of all warrants, options and rights to purchase, except as otherwise
consented to in writing by Beneficiary, which such consent may be granted or
withheld in Beneficiary's sole discretion.
1.2 Defense of Title. If, while this Deed of Trust is in force, the
title to the Real Property or the interest of Beneficiary in the Trust Property
shall be the subject, directly or indirectly, of any action at law or in equity,
or be attached directly or indirectly, or endangered, clouded or adversely
affected in any manner except for the Permitted Encumbrances, Grantor, at
Grantor's expense, shall take all necessary and proper steps for the defense of
said title or interest, including the employment of counsel reasonably approved
by Beneficiary, the prosecution or defense of litigation, and the compromise or
discharge of claims made against said title or interest. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing under this
Section, Beneficiary may, without limiting or waiving any other rights or
remedies of Beneficiary hereunder, take such steps with respect thereto as
Beneficiary shall deem necessary or proper and any and all costs and expenses
incurred by Beneficiary in connection therewith, together with interest thereon
at the Default Interest Rate (as defined in the Note) from the date incurred by
Beneficiary until actually paid by Grantor, shall be immediately paid by Grantor
on demand and shall be secured by this Deed of Trust and by all of the other
Loan Documents securing all or any part of the indebtedness evidenced by the
Note.
1.3 Performance of Obligations. Grantor shall pay when due the
principal of and the interest on the Debt in accordance with the terms of the
Note. Grantor shall also pay all charges, fees and other sums required to be
paid by Grantor as provided in the Loan Documents, in accordance with the terms
of the Loan Documents, and shall observe, perform and discharge all obligations,
covenants and agreements to be observed, performed or discharged by Grantor set
forth in the Loan Documents in accordance with their terms. Further, Grantor
shall promptly perform and comply in all material respects with all covenants,
conditions, obligations and prohibitions required of Grantor in connection with
any other document or instrument affecting title to the Real Property or
Grantor's interest in the Trust Property, or any part thereof, regardless of
whether such document or instrument is superior or subordinate to this Deed of
Trust.
1.4 Insurance. Grantor shall, at Grantor's expense, maintain in force
and effect on the Trust Property at all times while this Deed of Trust continues
in effect the following insurance:
(a) Insurance against loss or damage to the Trust Property by
fire, windstorm, tornado and hail and against loss and damage by such other,
further and additional risks as may be now or hereafter embraced by an
"all-risk" or "special form" type of insurance policy. The amount of such
insurance shall be not less than one hundred percent (100%) of the full
replacement cost (insurable value) of the Improvements (as established by an MAI
appraisal), without reduction for depreciation. The determination of the
replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing such coverage or, at Beneficiary's election,
by reference to such indices, appraisals or information as Beneficiary
determines in its reasonable discretion in order to reflect increased value due
to inflation. Absent such annual adjustment, each policy shall contain inflation
guard coverage insuring that the policy limit will be increased over time to
reflect the effect of inflation. Full replacement cost, as
10
used herein, means, with respect to the Improvements, the cost of replacing the
Improvements without regard to deduction for depreciation, exclusive of the cost
of excavations, foundations and footings below the lowest basement floor.
Grantor shall also maintain insurance against loss or damage to furniture,
furnishings, fixtures, equipment and other items (whether personalty or
fixtures) owned by Grantor and included in the Trust Property and owned by
Grantor from time to time to the extent applicable. Each policy shall contain a
replacement cost endorsement and either an agreed amount endorsement (to avoid
the operation of any co-insurance provisions) or a waiver of any co-insurance
provisions, all subject to Beneficiary's approval. The maximum deductible shall
be $10,000.00.
(b) Commercial General Liability Insurance against claims for
personal injury, bodily injury, death and property damage occurring on, in or
about the Premises or the Improvements in amounts not less than $1,000,000.00
per occurrence and $2,000,000.00 in the aggregate plus umbrella coverage in an
amount not less than $2,000,000. Beneficiary hereby retains the right to
periodically review the amount of said liability insurance being maintained by
Grantor and to require an increase in the amount of said liability insurance
should Beneficiary deem an increase to be reasonably prudent under then existing
circumstances.
(c) Boiler and machinery insurance is required if steam boilers or
other pressure-fired vessels are in operation at the Premises. Minimum liability
coverage per accident must equal the greater of the replacement cost (insurable
value) of the Improvements housing such boiler or pressure-fired machinery or
$2,000,000.00. If one or more large HVAC units is in operation at the Premises,
"Systems Breakdowns" coverage shall be required, as determined by Beneficiary.
Minimum liability coverage per accident must equal the value of such unit(s).
(d) If the Improvements or any part thereof is situated in an area
designated by the Federal Emergency Management Agency ("FEMA") as a special
flood hazard area (Zone A or Zone V), flood insurance in an amount equal to the
lesser of: (i) the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid balance
of the Debt if replacement cost coverage is not available for the type of
building insured), or (ii) the maximum insurance available under the appropriate
National Flood Insurance Administration program. The maximum deductible shall be
$3,000.00 per building or a higher minimum amount as required by FEMA or other
applicable law.
(e) During the period of any construction, renovation or
alteration of the existing Improvements which exceeds the lesser of 10% of the
original principal amount of the Note or $500,000, at Beneficiary's request, a
completed value, "All Risk" Builder's Risk form or "Course of Construction"
insurance policy in non-reporting form, in an amount reasonably approved by
Beneficiary, may be required. During the period of any construction of any
addition to the existing Improvements, a completed value, "All Risk" Builder's
Risk form or "Course of Construction" insurance policy in non-reporting form, in
an amount reasonably approved by Beneficiary, shall be required
(f) When required by applicable law, ordinance or other
regulation, Worker's Compensation and Employer's Liability Insurance covering
all persons subject to the worker's compensation laws of the state in which the
Trust Property is located.
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(g) Business income (loss of rents) insurance in amounts
sufficient to compensate Grantor for all Rents or income during a period of not
less than twelve (12) months. The amount of coverage shall be adjusted annually
to reflect the Rents under the Percentage Lease (or otherwise) or income payable
during the succeeding twelve (12) month period.
(h) Such other insurance on the Trust Property or on any
replacements or substitutions thereof or additions thereto as may from time to
time be required by Beneficiary against other insurable hazards or casualties
which at the time are commonly insured against in the case of property similarly
situated including, without limitation, Sinkhole, Mine Subsidence, Earthquake
and Environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
All such insurance shall (i) be with insurers fully licensed and
authorized to do business in the state within which the Premises is located and
who have and maintain a rating of at least A from Standard & Poors, or
equivalent, (ii) contain the complete address of the Premises (or a complete
legal description), (iii) be for terms of at least one year, with premium
prepaid, and (iv) be subject to the approval of Beneficiary as to insurance
companies (provided such approval as to a particular company shall not be
withheld if the foregoing minimum rating requirement is satisfied), amounts,
content, forms of policies, method by which premiums are paid and expiration
dates, and (v) include a standard, non-contributory, mortgagee clause naming
EXACTLY:
First Union National Bank,
its Successors and Assigns ATIMA
Attn.: Structured Products Servicing
8739 Research Drive, URP-4
Charlotte, NC 28262-1075
(A) as an additional insured under all liability insurance policies, (B) as the
first mortgagee on all property insurance policies and (C) as the loss payee on
all loss of rents or loss of business income insurance policies.
Grantor shall, as of the date hereof, deliver to Beneficiary evidence
that said insurance policies have been prepaid as required above and certified
copies of such insurance policies and original certificates of insurance signed
by an authorized agent of the applicable insurance companies evidencing such
insurance satisfactory to Beneficiary. Grantor shall renew all such insurance
and deliver to Beneficiary certificates and policies evidencing such renewals at
least thirty (30) days before any such insurance shall expire. Grantor further
agrees that each such insurance policy: (i) shall provide for at least thirty
(30) days' prior written notice to Beneficiary prior to any policy reduction or
cancellation for any reason other than non-payment of premium and at least ten
(10) days' prior written notice to Beneficiary prior to any cancellation due to
non-payment of premium; (ii) shall contain an endorsement or agreement by the
insurer that any loss shall be payable to Beneficiary in accordance with the
terms of such policy notwithstanding any act or negligence of Grantor which
might otherwise result in forfeiture of such insurance; (iii) shall waive all
rights of subrogation against Beneficiary; (iv) in the event that the Premises
12
or the Improvements constitutes a legal non-conforming use under applicable
building, zoning or land use laws or ordinances, shall include an ordinance or
law coverage endorsement which will contain Coverage A: "Loss Due to Operation
of Law" (with a minimum liability limit equal to Replacement Cost With Agreed
Value Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased
Cost of Construction" coverages; and (v) may be in the form of a blanket policy
provided that, in the event that any such coverage is provided in the form of a
blanket policy, Grantor hereby acknowledges and agrees that failure to pay any
portion of the premium therefor which is not allocable to the Trust Property or
by any other action not relating to the Trust Property which would otherwise
permit the issuer thereof to cancel the coverage thereof, would require the
Trust Property to be insured by a separate, single-property policy. The blanket
policy must properly identify and fully protect the Trust Property as if a
separate policy were issued for 100% of Replacement Cost at the time of loss and
otherwise meet all of Beneficiary's applicable insurance requirements set forth
in this Section 1.4. To the extent permitted by applicable law, in the event of
foreclosure of this Deed of Trust, or other transfer of title to the Trust
Property in extinguishment in whole or in part of the Debt, all right, title and
interest of Grantor in and to all proceeds payable under such policies then in
force concerning the Trust Property shall thereupon vest in the purchaser at
such foreclosure, or in Beneficiary or other transferee in the event of such
other transfer of title. Approval of any insurance by Beneficiary shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance. In the event Grantor fails to provide, maintain, keep in force or
deliver and furnish to Beneficiary the policies of insurance required by this
Deed of Trust or evidence of their renewal as required herein, Beneficiary may,
but shall not be obligated to, procure such insurance and Grantor shall pay all
amounts advanced by Beneficiary therefor, together with interest thereon at the
Default Interest Rate from and after the date advanced by Beneficiary until
actually repaid by Grantor, promptly upon demand by Beneficiary. Any amounts so
advanced by Beneficiary, together with interest thereon, shall be secured by
this Deed of Trust and by all of the other Loan Documents securing all or any
part of the Debt. Beneficiary shall not be responsible for nor incur any
liability for the insolvency of the insurer or other failure of the insurer to
perform, even though Beneficiary has caused the insurance to be placed with the
insurer after failure of Grantor to furnish such insurance. Grantor shall not
obtain insurance for the Trust Property in addition to that required by
Beneficiary without the prior written consent of Beneficiary, which consent will
not be unreasonably withheld provided that (i) Beneficiary is a named insured on
such insurance, (ii) Beneficiary receives complete copies of all policies
evidencing such insurance, and (iii) such insurance complies with all of the
applicable requirements set forth herein.
1.5 Payment of Taxes. Grantor shall pay or cause to be paid, except to
the extent Beneficiary is to pay the same pursuant to Section 1.6(a) of this
Deed of Trust, all taxes and assessments which are or may become a lien on the
Trust Property or which are assessed against or imposed upon the Trust Property.
If paid by Grantor, Grantor shall furnish Beneficiary with receipts (or if
receipts are not immediately available, with copies of canceled checks
evidencing payment with receipts to follow promptly after they become available)
showing payment of such taxes and assessments at least fifteen (15) days prior
to the applicable delinquency date therefor. Notwithstanding the foregoing,
Grantor may, in good faith, by appropriate proceedings and upon notice to
Beneficiary, contest the validity, applicability or amount of any asserted tax
or assessment so long as (a) such contest is diligently pursued, (b) Beneficiary
determines, in its
13
reasonable subjective opinion, that such contest suspends the obligation to pay
the tax and that nonpayment of such tax or assessment will not result in the
sale, loss, forfeiture or diminution of the Trust Property or any part thereof
or any interest of Beneficiary therein, and (c) prior to the earlier of the
commencement of such contest or the delinquency date of the asserted tax or
assessment, Grantor deposits in the Impound Account (as hereinafter defined) an
amount determined by Beneficiary to be reasonably adequate to cover the payment
of such tax or assessment and a reasonable additional sum to cover possible
interest, costs and penalties; provided, however, that Grantor shall promptly
cause to be paid any amount adjudged by a court of competent jurisdiction to be
due, with all interest, costs and penalties thereon, promptly after such
judgment becomes final; and provided further that in any event each such contest
shall be concluded and the taxes, assessments, interest, costs and penalties
shall be paid prior to the date any writ or order is issued under which the
Trust Property may be sold, lost or forfeited.
1.6 Tax and Insurance Impound Account. (a) Grantor shall establish and
maintain at all times while this Deed of Trust continues in effect an impound
account (the "Impound Account") with Beneficiary for payment of real estate
taxes and assessments and insurance on the Trust Property and as additional
security for the Debt. Simultaneously with the execution hereof, Grantor shall
deposit in the Impound Account an amount determined by Beneficiary to be
necessary to ensure that there will be on deposit with Beneficiary an amount
which, when added to the monthly payments subsequently required to be deposited
with Beneficiary hereunder on account of real estate taxes, assessments and
insurance premiums, will result in there being on deposit with Beneficiary in
the Impound Account an amount sufficient to pay the next due installment of real
estate taxes and assessments on the Trust Property at least one (1) month prior
to the earlier of (a) the due date thereof or (b) any such date by which Grantor
or Beneficiary is required by law to pay same and the next due annual insurance
premiums with respect to the Trust Property at least one (1) month prior to the
due date thereof. Commencing on the first monthly payment date under the Note
and continuing thereafter on each monthly payment date under the Note, Grantor
shall pay to Beneficiary, concurrently with and in addition to the monthly
payment due under the Note and until the Debt is fully paid and performed,
deposits in an amount equal to one-twelfth (1/12) of the amount of the annual
real estate taxes and assessments that will next become due and payable on the
Trust Property, plus one-twelfth (1/12) of the amount of the annual premiums
that will next become due and payable on insurance policies which Grantor is
required to maintain hereunder, each as estimated and determined by Beneficiary.
So long as no Event of Default has occurred, and no event has occurred or failed
to occur which with the passage of time, the giving of notice, or both would
constitute an Event of Default (a "Default"), all sums in the Impound Account
shall be held by Beneficiary in the Impound Account to pay said taxes,
assessments and insurance premiums before the same become delinquent. Grantor
shall be responsible for ensuring the receipt by Beneficiary, at least thirty
(30) days prior to the respective due date for payment thereof, of all bills,
invoices and statements for all taxes, assessments and insurance premiums to be
paid from the Impound Account, and so long as no Event of Default has occurred,
Beneficiary shall pay the governmental authority or other party entitled thereto
directly to the extent funds are available for such purpose in the Impound
Account. In making any payment from the Impound Account, Beneficiary shall be
entitled to rely on any bill, statement or estimate procured from the
appropriate public office or insurance company or agent without any inquiry into
the accuracy of such bill, statement or estimate and without any inquiry into
the accuracy, validity, enforceability
14
or contestability of any tax, assessment, valuation, sale, forfeiture, tax lien
or title or claim thereof. No interest on funds contained in the Impound
Account, if any, shall be paid by Beneficiary to Grantor.
(b) Notwithstanding anything herein or in any other Loan Document
to the contrary, at any time prior to the Maturity Date (as defined in the
Note), unless and until an Event of Default shall have occurred and be
continuing, Grantor shall not be required to make deposits to the Impound
Account as required by Section 1.6(a) of this Deed of Trust with respect to
insurance premiums (the "Insurance Obligations") provided that each of the
following conditions is satisfied at all times:
(i) Simultaneously with the execution hereof, Grantor shall
deposit in the Impound Account the equivalent of six (6) months of insurance
premiums; and
(ii) Grantor timely delivers satisfactory evidence of payment for
and renewal of the insurance policy or policies as required hereunder.
(c) If an Event of Default shall have occurred and be continuing,
including, without limitation, with respect to Grantor's obligations under
Section 1.4 and Section 1.6(a) (as modified by Section 1.6(b)) hereof, upon
Beneficiary's request, Grantor shall promptly commence making full payments to
the Impound Account pursuant to Section 1.6(a) above.
(d) Notwithstanding anything to the contrary herein, Beneficiary
shall not require Grantor to commence making payments to the Impound Account if
a default occurs with regard to the payment and performance of the Insurance
Obligations so long as such default shall not have resulted in the expiration,
termination or lapse of insurance as required under Section 1.4 hereof and so
long as Grantor shall have cured such default by the earlier of (1) seven (7)
days after written notice thereof from Beneficiary to Grantor or (2) prior to
the date on which nonpayment of premiums would result in the lapse, expiration
or termination of insurance as required by Section 1.4 hereof.
1.7 Intentionally Deleted.
1.8 Replacement Reserve.
(a) The Trust Property is currently managed by Promus Hotels, Inc.
("Promus"), pursuant to that Management Agreement dated November 29, 1999,
between Promus and Apple Suites Management, Inc. (the "Promus Management
Agreement"). If the Promus Management Agreement is terminated, then, as
additional security for the Debt, Grantor shall establish and maintain a repair
and replacement reserve (the "Replacement Reserve") with Beneficiary for payment
of costs and expenses incurred by Grantor in connection with the repair,
replacement and maintenance of the furniture, fixtures and equipment at the
Trust Property and the performance of work to the roofs, chimneys, gutters,
downspouts, paving, curbs, ramps, driveways, balconies, porches, patios,
exterior walls, exterior doors and doorways, windows, carpets, appliances,
fixtures, furnishings, elevators and mechanical and HVAC equipment
(collectively, the "Repairs"). The Replacement Reserve shall be maintained for
so long as this
15
Deed of Trust continues in effect after the termination of the Promus Management
Agreement; provided, however, no monthly deposits will be required to the
Replacement Reserve if and for so long as the Trust Property is managed pursuant
to a Management Agreement (as hereinafter defined) subsequently entered into in
accordance with the provisions of Section 1.30 hereof. If deposits to the
Replacement Reserve are required hereunder, deposits shall be made on each
monthly Payment Date under the Note, concurrently with and in addition to the
monthly payments due under the Note. Deposits to the Replacement Reserve, when
required, shall be in an amount equal to five percent (5.0%) of the gross
revenues of the Trust Property based upon the most recent annual balance sheets
and statement of operations for the Trust Property. Notwithstanding the
foregoing, if a Management Agreement reserves funds for Repairs in an amount
less than five percent (5%) of the gross revenues of the Trust Property as
calculated above, then a Replacement Reserve deposit shall be required in an
amount equal to the difference between such Management Agreement reserve
percentage and five percent (5%) of the gross revenues of the Property as
calculated above. So long as no Default or Event of Default has occurred and is
continuing, Beneficiary shall, to the extent funds are available for such
purpose in the Replacement Reserve, disburse to Grantor the amount paid or
incurred by Grantor in performing such Repairs within ten (10) days following:
(a) the receipt by Beneficiary of a written request from Grantor for
disbursement from the Replacement Reserve and a certification by Grantor in a
form reasonably approved in writing by Beneficiary that the applicable item of
Repair has been completed; (b) the delivery to Beneficiary of invoices, receipts
or other evidence reasonably satisfactory to Beneficiary, verifying the cost of
performing the Repairs; (c) for disbursement requests in excess of $25,000.00,
the delivery to Beneficiary of affidavits, lien waivers or other evidence
reasonably satisfactory to Beneficiary showing that all materialmen, laborers,
subcontractors and any other parties who might or could claim statutory or
common law liens and are furnishing or have furnished material or labor to the
Trust Property have been paid all amounts due for labor and materials furnished
to the Trust Property; (d) for disbursement requests in excess of $25,000.00,
delivery to Beneficiary of a certification from an inspecting architect or other
third party acceptable to Beneficiary describing the completed Repairs and
verifying the completion of the Repairs and the value of the completed Repairs;
and (e) for disbursement requests in excess of $25,000.00, delivery to
Beneficiary of a new certificate of occupancy or local equivalent for the
portion of the Improvements covered by such Repairs, if said new certificate of
occupancy is required by law, or a certification by Grantor that no new
certificate of occupancy is required. Beneficiary shall not be required to make
advances from the Replacement Reserve more frequently than once in any ninety
(90) day period. In making any payment from the Replacement Reserve, Beneficiary
shall be entitled to rely on such request from Grantor without any inquiry into
the accuracy, validity or contestability of any such amount. Beneficiary may, at
Grantor's expense, make or cause to be made during the term of this Deed of
Trust an annual inspection of the Trust Property to determine the need, as
determined by Beneficiary in its reasonable judgment, for further Repairs of the
Trust Property. In the event that such inspection reveals that further Repairs
of the Trust Property are required, Beneficiary shall provide Grantor with a
written description of the required Repairs and Grantor shall complete such
Repairs to the reasonable satisfaction of Beneficiary within ninety (90) days
after the receipt of such description from Beneficiary, or such later date as
may be approved by Beneficiary in its reasonable discretion. Interest on the
funds contained in the Replacement Reserve shall be credited to Grantor as
provided in Section 4.32 hereof.
16
(b) As additional security for the payment and performance by
Grantor of all duties, responsibilities and obligations under the Note and the
other Loan Documents, Grantor hereby unconditionally and irrevocably assigns,
conveys, pledges, mortgages, transfers, delivers, deposits, sets over and
confirms unto Beneficiary, and hereby grants to Beneficiary a security interest
in Grantor's right, title and interest in, (i) the Impound Account and the
Replacement Reserve (as hereinafter defined) and any other reserve or escrow
account established pursuant to the terms hereof or of any other Loan Document
(collectively, the "Reserves"), (ii) the accounts into which the Reserves have
been deposited, (iii) all insurance on said accounts, (iv) all accounts,
contract rights and general intangibles or other rights and interests pertaining
thereto, (v) all sums now or hereafter therein or represented thereby, (vi) all
replacements, substitutions or proceeds thereof, (vii) all instruments and
documents now or hereafter evidencing the Reserves or such accounts, (viii) all
powers, options, rights, privileges and immunities pertaining to the Reserves
(including the right to make withdrawals therefrom), and (ix) all proceeds of
the foregoing. Grantor hereby authorizes and consents to the account into which
the Reserves have been deposited being held in Beneficiary's name or the name of
any entity servicing the Note for Beneficiary and hereby acknowledges and agrees
that Beneficiary, or at Beneficiary's election, such servicing agent, shall have
exclusive control over said account. Notice of the assignment and security
interest granted to Beneficiary herein may be delivered by Beneficiary at any
time to the financial institution wherein the Reserves have been established,
and Beneficiary, or such servicing entity, shall have possession of all
passbooks or other evidences of such accounts. Grantor hereby assumes all risk
of loss with respect to amounts on deposit in the Reserves, unless finally
determined by a court of competent jurisdiction to have been caused by the gross
negligence or willful misconduct of Beneficiary. Grantor hereby knowingly,
voluntarily and intentionally stipulates, acknowledges and agrees that the
advancement of the funds from the Reserves as set forth herein is at Grantor's
direction and is not the exercise by Beneficiary of any right of set-off or
other remedy upon a Default or an Event of Default. If an Event of Default shall
occur hereunder or under any other of the Loan Documents and shall be
continuing, Beneficiary may, without notice or demand on Grantor, at its option:
(A) withdraw any or all of the funds (including, without limitation, interest)
then remaining in the Reserves and apply the same, after deducting all costs and
expenses of safekeeping, collection and delivery (including, but not limited to,
reasonable attorneys' fees, costs and expenses) to the Debt or any other
obligations of Grantor under the other Loan Documents in such manner as
Beneficiary shall deem appropriate in its sole discretion, and the excess, if
any, shall be paid to Grantor, (B) exercise any and all rights and remedies of a
secured party under any applicable Uniform Commercial Code, or (C) exercise any
other remedies available at law or in equity. No such use or application of the
funds contained in the Reserves shall be deemed to cure any Default or Event of
Default.
(c) The Reserves shall not, unless otherwise explicitly required
by applicable law, be or be deemed to be escrow or trust funds, but, at
Beneficiary's option and in Beneficiary's discretion, may either be held in a
separate account or be commingled by Beneficiary with the general funds of
Beneficiary. The Reserves are solely for the protection of Beneficiary and
entail no responsibility on Beneficiary's part beyond the payment of the
respective items for which they are held following receipt of bills, invoices or
statements therefor in accordance with the terms hereof and beyond the allowing
of due credit for the sums actually received. Upon assignment of this Deed of
Trust by Beneficiary and assumption by assignee of
17
Beneficiary's obligations hereunder, any funds in the Reserves shall be turned
over to the assignee and any responsibility of Beneficiary, as assignor, with
respect thereto shall terminate. If the funds in the applicable Reserve shall
exceed the amount of payments actually applied by Beneficiary for the purposes
and items for which the applicable Reserve is held, such excess may be credited
by Beneficiary on subsequent payments to be made hereunder or, at the option of
Beneficiary, refunded to Grantor. If, however, the applicable Reserve shall not
contain sufficient funds to pay the sums required by the dates on which such
sums are required to be on deposit in such account, Grantor shall, within thirty
(30) days after receipt of written notice thereof, deposit with Beneficiary the
full amount of any such deficiency. If Grantor shall fail to deposit with
Beneficiary the full amount of such deficiency as provided above, Beneficiary
shall have the option, but not the obligation, to make such deposit, and all
amounts so deposited by Beneficiary, together with interest thereon at the
Default Interest Rate from the date so deposited by Beneficiary until actually
paid by Grantor, shall be immediately paid by Grantor on demand and shall be
secured by this Deed of Trust and by all of the other Loan Documents securing
all or any part of the Debt. If there is an Event of Default under this Deed of
Trust that shall have occurred and be continuing, Beneficiary may, but shall not
be obligated to, apply at any time the balance then remaining in any or all of
the Reserves against the Debt in whatever order Beneficiary shall subjectively
determine. No such application of any or all of the Reserves shall be deemed to
cure any Event of Default. Upon full payment of the Debt in accordance with its
terms or at such earlier time as Beneficiary may elect, the balance of any or
all of the Reserves then in Beneficiary's possession shall be paid over to
Grantor and no other party shall have any right or claim thereto.
1.9 Casualty and Condemnation. Grantor shall give Beneficiary prompt
written notice of the occurrence of any casualty affecting, or the institution
of any proceedings for eminent domain or for the condemnation of, the Trust
Property or any portion thereof. Subject to the following sentence, all
insurance proceeds on the Trust Property, and all causes of action, claims,
compensation, awards and recoveries for any damage, condemnation or taking of
all or any part of the Trust Property or for any damage or injury to it for any
loss or diminution in value of the Trust Property, shall be paid to Beneficiary.
Beneficiary may participate in any suits or proceedings relating to any such
proceeds, causes of action, claims, compensation, awards or recoveries, and
Beneficiary is hereby authorized, in its own name or in Grantor's name, to
adjust any loss covered by insurance or any condemnation claim or cause of
action, and to settle or compromise any claim or cause of action in connection
therewith, and Grantor shall from time to time deliver to Beneficiary any
instruments required to permit such participation; provided, however, that, so
long as no Default or Event of Default shall have occurred, Beneficiary shall
not have the right to participate in the adjustment of any loss or the receipt
of any sums hereunder which is not in excess of the lesser of (i) five percent
(5%) of the then outstanding principal balance of the Note and (ii) $200,000,
and Grantor may receive such funds from any loss not in excess of the foregoing
directly to be used for repair or restoration of the Trust Property in
accordance with the terms hereof. Beneficiary shall apply any sums received by
it under this Section first to the payment of all of its costs and expenses
(including, but not limited to, reasonable legal fees and disbursements)
incurred in obtaining those sums, and then, as follows:
18
(a) In the event that less than seventy percent (70%) of the
Improvements located on the Premises have been taken or destroyed, then if and
so long as:
(1) no Default or Event of Default has occurred and is
continuing hereunder or under any of the other Loan Documents, and
(2) the Trust Property can, in Beneficiary's reasonable
judgment, with diligent restoration or repair, be returned in all
material respects to a condition substantially the same as the
condition thereof that existed prior to the casualty or partial
taking causing the loss or damage within the earlier to occur of
(i) nine (9) months after the receipt of insurance proceeds or
condemnation awards by either Grantor or Beneficiary, and (ii)
sixty (60) days prior to the stated maturity date of the Note, and
(3) all necessary governmental approvals can be obtained to
allow the rebuilding and reoccupancy of the Trust Property as
described in Section (a)(2) above, and
(4) there are sufficient sums available (through insurance
proceeds or condemnation awards and contributions by Grantor or
otherwise, the full amount of which shall, at Beneficiary's
option, have been deposited with Beneficiary) for such restoration
or repair (including, without limitation, for any reasonable costs
and expenses of Beneficiary to be incurred in administering said
restoration or repair) and for payment of principal and interest
to become due and payable under the Note during such restoration
or repair, and
(5) the economic feasibility of the Improvements after such
restoration or repair will be such that income from their
operation is reasonably anticipated to be sufficient to pay
operating expenses of the Trust Property and debt service on the
Debt in full with the same coverage ratio considered by
Beneficiary in its determination to make the loan secured hereby,
and
(6) in the event that the insurance proceeds or condemnation
awards received as a result of such casualty or partial taking
exceed the lesser of (i) five percent (5%) of the then outstanding
principal balance of the Note and (ii) $200,000, Grantor shall
have delivered to Beneficiary, at Grantor's sole cost and expense,
an appraisal report in form and substance reasonably satisfactory
to Beneficiary appraising the value of the Trust Property as
proposed to be restored or repaired to be not less than the
appraised value of the Trust Property considered by Beneficiary in
its determination to make the loan secured hereby, and
(7) Grantor so elects by written notice delivered to
Beneficiary within fifteen (15) days after settlement of the
aforesaid insurance or condemnation claim, then, Beneficiary
shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required
for such restoration or repair, and any funds deposited by Grantor
therefor, to Grantor in the manner and upon such terms and
conditions as would be required by a prudent interim construction
lender, including, but
19
not limited to, the reasonable prior approval by Beneficiary of
plans and specifications, contractors and form of construction
contracts and the furnishing to Beneficiary of permits, bonds,
lien waivers, invoices, receipts and affidavits from contractors
and subcontractors, in form and substance reasonably satisfactory
to Beneficiary in its discretion, with any remainder being applied
by Beneficiary for payment of the Debt in whatever order
Beneficiary directs in its absolute discretion.
(b) In all other cases, namely, in the event that seventy percent
(70%) or more of the Improvements located on the Premises have been taken or
destroyed or Grantor does not elect to restore or repair the Trust Property
pursuant to clause (a) above or otherwise fails to meet the requirements of
clause (a) above, then, in any of such events, Beneficiary shall elect, in
Beneficiary's absolute discretion and without regard to the adequacy of
Beneficiary's security, to do either of the following: (1) apply the remainder
of such sums received pursuant to this Section to the payment of the Debt in
whatever order Beneficiary directs in its absolute discretion (and, if required
under applicable law so to do, to accelerate the maturity date of the Note and
declare any and all of the Debt to be immediately due and payable), with any
remainder being paid to Grantor, or (2) notwithstanding that Grantor may have
elected not to restore or repair the Trust Property pursuant to the provisions
of Section 1.9(a)(7) above, require Grantor to restore or repair the Trust
Property in the manner and upon such terms and conditions as would be required
by a prudent interim construction lender, including, but not limited to, the
deposit by Grantor with Beneficiary, within thirty (30) days after demand
therefor, of any deficiency reasonably determined by Beneficiary to be necessary
in order to assure the availability of sufficient funds to pay for such
restoration or repair, including Beneficiary's costs and expenses to be incurred
in connection therewith, the reasonable prior approval by Beneficiary of plans
and specifications, contractors and form of construction contracts and the
furnishing to Beneficiary of permits, bonds, lien waivers, invoices, receipts
and affidavits from contractors and subcontractors, in form and substance
reasonably satisfactory to Beneficiary in its discretion, and apply the
remainder of such sums toward such restoration and repair, with any balance
thereafter remaining being applied by Beneficiary for payment of the Debt in
whatever order Beneficiary directs in its absolute discretion. Notwithstanding
Section 1.9(b)(2) hereof, Beneficiary shall not accelerate the maturity date of
the Note pursuant to Section 1.9(b)(2) if the Trust Property is released from
the lien of this Deed of Trust in connection with a Defeasance (as defined in
the Note) in accordance with Section 1.5(d) of the Note.
Any reduction in the Debt resulting from Beneficiary's application of any sums
received by it hereunder shall take effect only when Beneficiary actually
receives such sums and elects to apply such sums to the Debt and, in any event,
the unpaid portion of the Debt shall remain in full force and effect and Grantor
shall not be excused in the payment thereof. Partial payments received by
Beneficiary, as described in the preceding sentence, shall be applied first to
the final payment due under the Note and thereafter to installments due under
the Note in the inverse order of their due date. If Grantor elects or
Beneficiary directs Grantor to restore or repair the Trust Property after the
occurrence of a casualty or partial taking of the Trust Property as provided
above, Grantor shall promptly and diligently, at Grantor's sole cost and expense
and regardless of whether the insurance proceeds or condemnation award, as
appropriate, shall be sufficient for the purpose, restore, repair, replace and
rebuild the Trust Property as nearly as practicable to its value, condition and
character immediately prior to such casualty or partial taking in accordance
20
with the foregoing provisions and Grantor shall pay to Beneficiary all costs and
expenses of Beneficiary incurred in administering said rebuilding, restoration
or repair, provided that Beneficiary makes such proceeds or award available for
such purpose. Grantor agrees to execute and deliver from time to time such
further instruments as may be requested by Beneficiary to confirm the foregoing
assignment to Beneficiary of any award, damage, insurance proceeds, payment or
other compensation. Beneficiary is hereby irrevocably constituted and appointed
the attorney-in-fact of Grantor (which power of attorney shall be irrevocable so
long as any portion of the Debt is outstanding, shall be deemed coupled with an
interest, shall survive the voluntary or involuntary dissolution of Grantor and
shall not be affected by any disability or incapacity suffered by Grantor
subsequent to the date hereof), with full power of substitution, subject to the
terms of this Section, to settle for, collect and receive any such awards,
damages, insurance proceeds, payments or other compensation from the parties or
authorities making the same, to appear in and prosecute any proceedings therefor
and to give receipts and acquittances therefor.
1.10 Construction Liens. Grantor shall pay when due all claims and
demands of mechanics, materialmen, laborers and others for any work performed or
materials delivered for the Premises or the Improvements; provided, however,
that, Grantor shall have the right to contest in good faith any such claim or
demand, so long as it does so diligently, by appropriate proceedings and without
prejudice to Beneficiary and provided that neither the Trust Property nor any
interest therein would be in any danger of sale, loss or forfeiture as a result
of such proceeding or contest. In the event Grantor shall contest any such claim
or demand, Grantor shall promptly notify Beneficiary of such contest and
thereafter shall, upon Beneficiary's reasonable request, if an Event of Default
shall have occurred and is continuing, promptly provide a bond, cash deposit or
other security sufficient to pay such claim to Beneficiary to protect
Beneficiary's interest and security should the contest be unsuccessful. If
Grantor shall fail to immediately discharge or provide security against any such
claim or demand as aforesaid, Beneficiary may do so and any and all expenses
incurred by Beneficiary, together with interest thereon at the Default Interest
Rate from the date incurred by Beneficiary until actually paid by Grantor, shall
be immediately paid by Grantor on demand and shall be secured by this Deed of
Trust and by all of the other Loan Documents securing all or any part of the
Debt.
1.11 Rents and Profits. As additional and collateral security for the
payment of the Debt and cumulative of any and all rights and remedies herein
provided for, Grantor hereby absolutely and presently assigns to Beneficiary
Grantor's right, title and interest (if any) in all existing and future Rents
and Profits. Grantor hereby grants to Beneficiary the sole, exclusive and
immediate right, without taking possession of the Trust Property, to demand,
collect (by suit or otherwise), receive and give valid and sufficient receipts
for any and all of said Rents and Profits, for which purpose Grantor does hereby
irrevocably make, constitute and appoint Beneficiary its attorney-in-fact with
full power to appoint substitutes or a trustee to accomplish such purpose (which
power of attorney shall be irrevocable so long as any portion of the Debt is
outstanding, shall be deemed to be coupled with an interest, shall survive the
voluntary or involuntary dissolution of Grantor and shall not be affected by any
disability or incapacity suffered by Grantor subsequent to the date hereof).
Beneficiary shall be without liability for any loss which may arise from a
failure or inability to collect Rents, proceeds or other payments. However,
until the occurrence and continuance of an Event of Default under this Deed of
Trust or under any other of the Loan Documents, Grantor shall have a license to
collect, receive, use
21
and enjoy the Rents and Profits when due and prepayments thereof for not more
than one (1) month prior to due date thereof, except as otherwise may be
expressly permitted or provided in the Percentage Lease. Upon the occurrence and
continuance of an Event of Default, Grantor's license shall automatically
terminate without notice to Grantor and Beneficiary may thereafter, without
taking possession of the Trust Property, collect the Rents and Profits itself or
by an agent or receiver. From and after the termination of such license, Grantor
shall be the agent of Beneficiary in collection of the Rents and Profits, and
all of the Rents and Profits so collected by Grantor shall be held in trust by
Grantor for the sole and exclusive benefit of Beneficiary, and Grantor shall,
within three (3) business days after receipt of any Rents and Profits, pay the
same to Beneficiary to be applied by Beneficiary as hereinafter set forth.
Neither the demand for or collection of Rents and Profits by Beneficiary shall
constitute any assumption by Beneficiary of any obligations under any agreement
relating thereto. Beneficiary is obligated to account only for such Rents and
Profits as are actually collected or received by Beneficiary. Grantor
irrevocably agrees and consents that the respective payors of the Rents and
Profits shall, upon demand and notice from Beneficiary of the occurrence and
continuance of an Event of Default, pay said Rents and Profits to Beneficiary
without liability to determine the actual existence of any Event of Default
claimed by Beneficiary. Grantor hereby waives any right, claim or demand which
Grantor may now or hereafter have against any such payor by reason of such
payment of Rents and Profits to Beneficiary, and any such payment shall
discharge such payor's obligation to make such payment to Grantor. All Rents
collected or received by Beneficiary may be applied against all expenses of
collection, including, without limitation, reasonable attorneys' fees, against
costs of operation and management of the Trust Property and against the Debt, in
whatever order or priority as to any of the items so mentioned as Beneficiary
directs in its sole subjective discretion and without regard to the adequacy of
its security. Neither the exercise by Beneficiary of any rights under this
Section nor the application of any Rents to the Debt shall cure or be deemed a
waiver of any Event of Default. The assignment of Rents and Profits hereinabove
granted shall continue in full force and effect during any period of foreclosure
or redemption with respect to the Trust Property. Grantor has executed an
Assignment of Leases and Rents dated of even date herewith (the "Assignment") in
favor of Beneficiary covering all of the right, title and interest of Grantor,
as landlord, lessor or licensor, in and to any Leases. All rights and remedies
granted to Beneficiary under the Assignment shall be in addition to and
cumulative of all rights and remedies granted to Beneficiary hereunder.
1.12 Percentage Lease .
(a) Grantor represents that the Percentage Lease is the only Lease
affecting the Trust Property and that as of the date hereof the Percentage Lease
has at least eight (8) years remaining on its term and is unmodified and in full
force and effect, and to Grantor's best knowledge, no event of default has
occurred and is continuing under the Percentage Lease. The Percentage Lease is
and shall remain subordinate to the Deed of Trust (either by the terms of the
Percentage Lease or pursuant to a subordination agreement). Either party to the
Percentage Lease may terminate the Percentage Lease upon an Event of Default
under the Loan Documents. Grantor shall cause the lessee under the Percentage
Lease to comply with the terms and conditions of the Percentage Lease.
22
(b) Grantor shall not do or suffer to be done any act, or omit to
take any action, that might result in a default by the landlord, lessor or
licensor under the Percentage Lease or allow the tenant thereunder to withhold
payment of rent or cancel or terminate same and shall not further assign any
such Lease or any such Rents and Profits. Grantor, at no cost or expense to
Beneficiary, shall enforce, short of termination, the performance and observance
of each and every condition and covenant of each of the parties under the
Percentage Lease and Grantor shall not anticipate, discount, release, waive,
compromise or otherwise discharge any rent payable under any of the Leases.
Grantor shall not, without the prior written consent of Beneficiary, modify the
Percentage Lease, terminate or accept the surrender of the Percentage Lease,
waive or release any other party from the performance or observance of any
obligation or condition under the Percentage Lease except in the normal course
of business in a manner which is consistent with sound and customary leasing and
management practices for similar properties in the community in which the Trust
Property is located. Beneficiary acknowledges that Grantor shall be permitted to
terminate or modify the Percentage Lease in connection with the REIT
Modernization Act in order for Grantor to avail itself of certain beneficial
provisions therein following such act's effective date of December 31, 2000
and/or as contemplated by Section 3.5 and Section 3.6 of the Percentage Lease.
Grantor shall not permit the prepayment of any rents under the Percentage Lease
for more than one (1) month prior to the due date thereof, except as may be
expressly permitted or provided therein.
(c) Upon the occurrence and continuance of an Event of Default
under this Deed of Trust, whether before or after the whole principal sum
secured hereby is declared to be immediately due or whether before or after the
institution of legal proceedings to foreclose this Deed of Trust, forthwith,
upon demand of Beneficiary, Grantor shall surrender to Beneficiary, and
Beneficiary shall be entitled to take actual possession of, the Trust Property
or any part thereof personally, or by its agent or attorneys. The power and
authority hereby given and granted by Grantor to Beneficiary shall be deemed to
be coupled with an interest, shall not be revocable by Grantor so long as any
portion of the Debt is outstanding, shall survive the voluntary or involuntary
dissolution of Grantor and shall not be affected by any disability or incapacity
suffered by Grantor subsequent to the date hereof. In connection with any action
taken by Beneficiary pursuant to this Section, Beneficiary shall not be liable
for any loss sustained by Grantor resulting from any act or omission of
Beneficiary in managing the Trust Property, nor shall Beneficiary be obligated
to perform or discharge any obligation, duty or liability under the Percentage
Lease covering the Trust Property (if not terminated by Beneficiary) or any part
thereof or under or by reason of this instrument or the exercise of rights or
remedies hereunder. Grantor shall, and does hereby, indemnify Beneficiary for,
and hold Beneficiary harmless from, any and all claims, actions, demands,
liabilities, loss or damage which may or might be incurred by Beneficiary under
the Percentage Lease or under this Deed of Trust or by the exercise of rights or
remedies hereunder and from any and all claims and demands whatsoever which may
be asserted against Beneficiary by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in the Percentage Lease other than those finally determined
by a court of competent jurisdiction to have resulted solely from the gross
negligence or willful misconduct of Beneficiary. Should Beneficiary incur any
such liability, the amount thereof, including, without limitation, costs,
expenses and reasonable attorneys' fees, together with interest thereon at the
Default Interest Rate from the date incurred by Beneficiary until actually paid
by Grantor, shall
23
be immediately due and payable to Beneficiary by Grantor on demand and shall be
secured hereby and by all of the other Loan Documents securing all or any part
of the Debt. Nothing in this Section shall impose on Beneficiary any duty,
obligation or responsibility for the control, care, management or repair of the
Trust Property, or for the carrying out of any of the terms and conditions of
the Percentage Lease, nor shall it operate to make Beneficiary responsible or
liable for any waste committed on the Trust Property by the tenant thereunder or
by any other parties or for any dangerous or defective condition of the Trust
Property, or for any negligence in the management, upkeep, repair or control of
the Trust Property. Grantor hereby assents to, ratifies and confirms any and all
actions of Beneficiary with respect to the Trust Property taken under this
Section.
1.13 Alienation and Further Encumbrances.
(a) Grantor acknowledges that Beneficiary has relied upon the
principals of Grantor and their experience in owning and operating the Trust
Property and properties similar to the Trust Property in connection with the
closing of the loan evidenced by the Note. Accordingly, except as specifically
allowed hereinbelow in this Section and notwithstanding anything to the contrary
contained in Section 4.6 hereof, in the event that the Trust Property or any
part thereof or interest therein shall be sold, conveyed, disposed of,
alienated, hypothecated, leased (except pursuant to the Percentage Lease and
except for condemnation), assigned, pledged, mortgaged, further encumbered or
otherwise transferred or Grantor shall be divested of its title to the Trust
Property or any interest therein, in any manner or way, whether voluntarily or
involuntarily, without the prior written consent of Beneficiary being first
obtained, which consent may be withheld in Beneficiary's sole discretion, then
the same shall constitute an Event of Default and Beneficiary shall have the
right, at its option, to declare any or all of the Debt, irrespective of the
maturity date specified in the Note, immediately due and payable and to
otherwise exercise any of its other rights and remedies contained in Article III
hereof. For the purposes of this Section: (i) in the event either Grantor or any
of its general partners or members is a corporation or trust, the sale,
conveyance, transfer or disposition of more than 50% of the issued and
outstanding capital stock of Grantor or any of its general partners or members
or of the beneficial interest of such trust (or the issuance of new shares of
capital stock in Grantor or any of its general partners or managing members so
that immediately after such issuance (in one or a series of transactions) the
total capital stock then issued and outstanding is more than 150% of the total
immediately prior to such issuance) shall be deemed to be a transfer of an
interest in the Trust Property; and (ii) in the event Grantor or any general
partner or managing member of Grantor is a limited or general partnership, a
joint venture or a limited liability company, a change of more than 50% in the
ownership interests in any general partner, any joint venturer or any managing
member, either voluntarily, involuntarily or otherwise, or the sale, conveyance,
transfer, disposition or alienation of more than 50% of, or the hypothecation or
encumbering of all or any portion of the interest of any such general partner,
joint venturer or managing member in Grantor or such general partner or managing
member (whether in the form of a beneficial or partnership interest or in the
form of a power of direction, control or management, or otherwise), shall be
deemed to be a transfer of an interest in the Trust Property. Notwithstanding
the foregoing, however, (i) limited partnership interests in Grantor or in any
general partner or member of Grantor shall be freely transferable without the
consent of Beneficiary, (ii) any involuntary transfer caused by the death of
Grantor or any general partner, shareholder, joint
24
venturer, member or beneficial owner of a trust shall not be an Event of Default
under this Deed of Trust so long as Grantor is reconstituted, if required,
following such death and so long as those persons primarily responsible for the
management of the Trust Property and Grantor remain unchanged as a result of
such death or any replacement management is approved by Beneficiary, (iii)
shares in the REIT may be offered and sold to investors in a public offering of
such shares which has been registered with the Securities and Exchange
Commission without regard to the limits referred to above and (iv) gifts for
estate planning purposes of any individual's interests in Grantor or in any of
Grantor's general partners, managing members or joint venturers to the spouse or
any lineal descendant of such individual, or to a trust for the benefit of any
one or more of such individual, spouse or lineal descendant, shall not be an
Event of Default under this Deed of Trust so long as Grantor is reconstituted,
if required, following such gift and so long as those persons primarily
responsible for the management of the Trust Property and Grantor remain
unchanged following such gift or any replacement management is approved by
Beneficiary.
(b) Notwithstanding the foregoing provisions of this Section,
Beneficiary shall consent to an unlimited number of sales, conveyances or
transfers of the Trust Property in its entirety, together with all Other
Mortgaged Properties (as defined in Section 4.35 hereof) (hereinafter, each a
"Sale") to any person or entity provided that each of the following terms and
conditions are satisfied as to each Sale:
(1) No Default and no Event of Default is then continuing
hereunder or under any of the other Loan Documents;
(2) Grantor, or its successor pursuant to a prior Sale under
the terms and conditions hereof, gives Beneficiary written notice
of the terms of such prospective Sale not less than sixty (60)
days before the date on which such Sale is scheduled to close and,
concurrently therewith, gives Beneficiary all such information
concerning the proposed transferee of the Trust Property
(hereinafter, "Buyer") as Beneficiary would require in evaluating
an initial extension of credit to a borrower under a loan
comparable to the Loan and pays to Beneficiary a non-refundable
application fee in the amount of $5,000. Beneficiary shall have
the right to approve or disapprove the proposed Buyer. In
determining whether to give or withhold its approval of the
proposed Buyer, Beneficiary shall consider the Buyer's experience
and track record in owning and operating facilities similar to the
Trust Property, the Buyer's financial strength, the Buyer's
general business standing and the Buyer's relationships and
experience with contractors, vendors, tenants, lenders and other
business entities; provided, however, that, notwithstanding
Beneficiary's agreement to consider the foregoing factors in
determining whether to give or withhold such approval, such
approval shall be given or withheld based on what Beneficiary
reasonably determines to be commercially reasonable in
Beneficiary's sole discretion and, if given, may be given subject
to such reasonable conditions as Beneficiary may deem appropriate;
(3) Grantor, or its successor pursuant to a prior Sale under
the terms and conditions hereof, pays Beneficiary, concurrently
with the closing of such Sale, a non-refundable assumption fee in
an amount equal to all out-of-pocket costs
25
and expenses, including, without limitation, reasonable attorneys'
fees, incurred by Beneficiary in connection with the Sale, plus an
amount equal to three quarters of one percent (0.75%) of the then
outstanding principal balance of the Note;
(4) The Buyer assumes and agrees to pay the Debt subject to
the provisions of Section 4.28 hereof and, prior to or
concurrently with the closing of such Sale, the Buyer executes,
without any cost or expense to Beneficiary, such assumption
documents and agreements as Beneficiary shall reasonably require
to evidence and effectuate said assumption and delivers such legal
opinions as Beneficiary may reasonably require;
(5) A party associated with the Buyer approved by Beneficiary
in its sole discretion assumes the obligations of the current
Indemnitor under its guaranty or indemnity agreement and such
party associated with the Buyer executes, without any cost or
expense to Beneficiary, a new guaranty or indemnity agreement in
form and substance reasonably satisfactory to Beneficiary and
delivers such legal opinions as Beneficiary may reasonably
require;
(6) Grantor, or its successor pursuant to a prior Sale under
the terms and conditions hereof, and the Buyer execute, without
any cost or expense to Beneficiary, new financing statements or
financing statement amendments and any additional documents
reasonably requested by Beneficiary;
(7) Grantor, or its successor pursuant to a prior Sale under
the terms and conditions hereof, delivers to Beneficiary, without
any cost or expense to Beneficiary, such endorsements to
Beneficiary's title insurance policy, hazard insurance policy
endorsements or certificates as Beneficiary may deem reasonably
necessary at the time of the Sale, all in form and substance
reasonably satisfactory to Beneficiary, including, without
limitation, an endorsement or endorsements to Beneficiary's title
insurance policy insuring the lien of this Deed of Trust,
extending the effective date of such policy to the date of
execution and delivery (or, if later, of recording) of the
assumption agreement referenced above in subparagraph (4) of this
Section, with no additional exceptions added to such policy except
those approved by Beneficiary in its discretion, and insuring that
fee simple title to the Real Property is vested in the Buyer;
(8) Grantor, or its successor pursuant to a prior Sale under
the terms and conditions hereof, executes and delivers to
Beneficiary, without any cost or expense to Beneficiary, a release
of Beneficiary, its officers, directors, employees and agents,
from all claims and liability relating to the transactions
evidenced by the Loan Documents, through and including the date of
the closing of the Sale, which agreement shall be in form and
substance reasonably satisfactory to Beneficiary and shall be
binding upon the Buyer;
(9) Subject to the provisions of Section 4.28 hereof, such
Sale is not construed so as to relieve Grantor, or its successor
pursuant to a prior Sale under the terms and conditions hereof, of
any personal liability under the Note or any of the other
26
Loan Documents for any acts or events occurring or obligations
arising prior to or simultaneously with the closing of such Sale,
whether or not same is discovered prior or subsequent to the
closing of such Sale, and Grantor, or its successor pursuant to a
prior Sale under the terms and conditions hereof, executes,
without any cost or expense to Beneficiary, such documents and
agreements as Beneficiary shall reasonably require to evidence and
effectuate the ratification of said personal liability. Grantor
shall be released from and relieved of any personal liability
under the Note or any of the other Loan Documents for any acts or
events occurring or obligations arising after the closing of such
Sale which are not caused by or arising out of any acts or events
occurring or obligations arising prior to or simultaneously with
the closing of such Sale;
(10) Such Sale is not construed so as to relieve any current
Indemnitor of its obligations under any guaranty or indemnity
agreement for any acts or events occurring or obligations arising
prior to or simultaneously with the closing of such Sale, and each
such current Indemnitor executes, without any cost or expense to
Beneficiary, such documents and agreements as Beneficiary shall
reasonably require to evidence and effectuate the ratification of
each such guaranty and indemnity agreement. Each such current
Indemnitor shall be released from and relieved of any of its
obligations under any guaranty or indemnity agreement executed in
connection with the loan secured hereby for any acts or events
occurring or obligations arising after the closing of such Sale
which are not caused by or arising out of any acts or events
occurring or obligations arising prior to or simultaneously with
the closing of such Sale;
(11) The Buyer shall furnish, if the Buyer is a corporation,
partnership or other entity, all documents evidencing the Buyer's
capacity and good standing, and the qualification of the signers
to execute the assumption of the indebtedness secured hereby,
which documents shall include, but not in any way be limited to,
certified copies of all documents relating to the organization and
formation of the Buyer and of the entities, if any, which are
partners of the Buyer. The Buyer and such constituent partners,
members or shareholders of Buyer (as the case may be), as
Beneficiary may require, shall be single-purpose, single-asset
"bankruptcy remote" entities, whose formation documents shall be
approved by counsel to Beneficiary. An individual recommended by
the Buyer and approved by Beneficiary shall serve as an
Independent Director (as defined in Section 1.33(z) of this Deed
of Trust) of the Buyer (if the Buyer is a corporation) or the
Buyer's corporate general partner or an independent member or, in
Beneficiary's discretion, manager of Buyer if the Buyer is a
limited liability company. Unanimous consent of the board of
directors (including the Independent Director) shall be required
for, among other things, any merger, consolidation, dissolution,
bankruptcy or insolvency of any such constituent partner, member
or shareholder of the Buyer (as the case may be) or of the Buyer;
(12) The Buyer, if required by Beneficiary and, in the case of
clauses (i) and (ii) herein only if the outstanding principal
balance of the Loan is in excess of $7,500,000, shall furnish an
opinion of counsel satisfactory to Beneficiary and its counsel (i)
that the Buyer's formation documents provide for the matters
described in subparagraph (11) of this Section 1.13(b), (ii) that
the assets of the Buyer will not be
27
consolidated with the assets of any other entity (including the
Buyer's general partner or members, if any), as applicable, having
an interest in, or affiliation with, the Buyer, in the event of
bankruptcy or insolvency of any such entity or such general
partner or members, (iii) that the assumption of the indebtedness
evidenced hereby has been duly authorized, executed and delivered,
and that the Loan Documents are valid, binding and enforceable
against the Buyer in accordance with their terms, (iv) that the
Buyer and any entity which is a controlling stockholder, general
partner or member of Buyer, have been duly organized, and are in
existence and good standing, and (v) with respect to such other
matters, as Beneficiary may request; and
(13) If required under the operative documents with respect to
a Secondary Market Transaction (as hereinafter defined),
Beneficiary shall have received evidence in writing from the
Rating Agency to the effect that the proposed transfer will not
result in a re-qualification, reduction, downgrade or withdrawal
of any rating initially assigned or to be assigned in a Secondary
Market Transaction or, if no such rating has been issued, in
Beneficiary's good faith judgment, such transfer shall not have an
adverse effect on the level of rating obtainable in connection
with the loan secured hereby.
1.14 Payment of Utilities, Assessments, Charges, Etc. Grantor shall
pay when due all utility charges which are incurred by Grantor or which may
become a charge or lien against any portion of the Trust Property for gas,
electricity, water and sewer services furnished to the Premises and/or the
Improvements and all other assessments or charges of a similar nature (excluding
taxes and assessments escrowed in the Impound Account), or assessments payable
pursuant to any restrictive covenants, whether public or private, affecting the
Premises and/or the Improvements or any portion thereof, whether or not such
assessments or charges are or may become liens thereon. Notwithstanding the
foregoing, Grantor may, in good faith, by appropriate proceedings and upon
notice to Beneficiary, contest the validity, applicability or amount of any
asserted utilities, assessments or other charges that may become a charge or
lien against any portion of the Trust Property as long as (a) such contest is
diligently pursued, (b) Beneficiary determines, in its reasonable subjective
opinion, that such contest suspends the obligation to pay such utility charges
or assessments and that non-payment of such charges or assessments will not
result in the sale, loss, forfeiture or diminution of the Trust Property or any
part thereof or any interest of Beneficiary therein, and (c) prior to the
earlier of commencement of such contest or the delinquency date of the asserted
charge or assessment, Grantor deposits the Impound Account an amount determined
by Beneficiary to be reasonably adequate to cover payment of such charge or
assessment and a reasonable additional sum to cover possible interest, costs and
penalties; provided, however, that Grantor shall promptly cause to be paid any
amount adjudged by a court of competent jurisdiction be due, with all interest,
costs and penalties thereon, promptly after such judgment becomes final beyond
any appeal period; and provided, further, that in any event such contest shall
be concluded and the charges or assessments shall be paid prior to the date any
writ or order is issued under which the Trust Property may be sold, lost or
forfeited.
1.15 Access Privileges and Inspections. Beneficiary and the agents,
representatives and employees of Beneficiary shall, subject to the rights of
Tenants, have full and free access to the Premises and the Improvements and any
other location where books and records concerning
28
the Trust Property are kept at all reasonable times and, except in the event of
an emergency, upon not less than three (3) days prior notice (which notice may
be telephonic) for the purposes of inspecting the Trust Property and of
examining, copying and making extracts from the books and records of Grantor
relating to the Trust Property. Grantor shall lend assistance to all such
agents, representatives and employees of Beneficiary.
1.16 Waste; Alteration of Improvements. Grantor shall not commit,
suffer or permit any waste on the Trust Property nor take any actions that might
invalidate any insurance carried on the Trust Property. Grantor shall maintain
the Trust Property in good condition and repair. No part of the Improvements may
be removed, demolished or materially altered, without the prior written consent
of Beneficiary except as provided herein. Without the prior written consent of
Beneficiary, Grantor shall not commence construction of any improvements on the
Premises other than improvements required for the maintenance or repair of the
Trust Property or as otherwise provided herein.
1.17 Zoning. Without the prior written consent of Beneficiary, not to
be unreasonably withheld or delayed, Grantor shall not seek, make, suffer,
consent to or acquiesce in any change in the zoning or conditions of use of the
Premises or the Improvements. Grantor shall have the same right to contest
zoning, conditions on use and other land use matters and/or any proposed changes
in the same in a manner similar to the provisions relating to the contests of
Environmental Laws as provided for in Section 1.31 hereof. Grantor shall comply
with and make all payments required under the provisions of any covenants,
conditions or restrictions affecting the Premises or the Improvements. Grantor
shall comply with all existing and future requirements of all governmental
authorities having jurisdiction over the Real Property. Grantor shall keep all
licenses, permits, franchises and other approvals necessary for the operation of
the Trust Property in full force and effect. Grantor shall operate the Real
Property as a an upscale, extended stay suite hotel or other lawful use approved
by Beneficiary for so long as the Debt is outstanding. If, under applicable
zoning provisions, the use of all or any part of the Premises or the
Improvements is or becomes a nonconforming use, Grantor shall not cause or
permit such use to be discontinued or abandoned without the prior written
consent of Beneficiary. Further, without Beneficiary's prior written consent,
Grantor shall not file or subject any part of the Premises or the Improvements
to any declaration of condominium or co-operative or convert any part of the
Premises or the Improvements to a condominium, co-operative or other form of
multiple ownership and governance.
1.18 Financial Statements and Books and Records. Grantor shall keep
accurate books and records of account of the Trust Property and its own
financial affairs sufficient to permit the preparation of financial statements
therefrom in accordance with generally accepted accounting principles.
Beneficiary and its duly authorized representatives shall have the right to
examine, copy and audit Grantor's records and books of account at all reasonable
times. Prior to the first Sale hereunder, and for so long as this Deed of Trust
continues in effect, Grantor shall provide to Beneficiary, in addition to any
other financial statements required hereunder or under any of the other Loan
Documents, the following financial statements and information, all of which must
be certified to Beneficiary as being true and correct by the chief financial
officer of the REIT, and, with respect to the financial statements and
information set forth in subsection (e) hereof, audited by an independent
certified public accountant, be prepared in accordance with generally accepted
29
accounting principles consistently applied and be in form and substance
acceptable to Beneficiary:
(a) monthly balance sheets and statement of operations for the Trust
Property, within thirty (30) days after the end of each of the first (1st)
twelve (12) calendar months following the date hereof; and
(b) quarterly balance sheets and statement of operations for the Trust
Property, within thirty (30) days after the end of each March, June, September
and December commencing with the first (1st) of such months to occur following
the first (1st) anniversary of the date hereof;
(c) copy of the REIT's 10-Q as filed with the Securities and Exchange
Commission, within forty-five (45) days after the end of each calendar quarter
following the date hereof;
(d) annual balance sheets and statement of operations for the Trust
Property;
(e) the REIT's annual financial statements, within ninety (90) days
after the end of each calendar year;
(f) annual occupancy summary for the Real Property setting forth the
occupancy rates, average daily room rates and room revenues for each month of
the preceding calendar year, as well as annual averages of the same, and such
other information as may customarily be reflected thereon or reasonably
requested by Beneficiary.
Following the first Sale hereunder, and for so long as this Deed of Trust
continues in effect, Grantor shall provide to Beneficiary, in addition to any
other financial statements required hereunder or under any of the other Loan
Documents, the following financial statements and information, all of which must
be certified to Beneficiary as being true and correct by Grantor or the person
or entity to which they pertain, as applicable, and, with respect to the
financial statements and information set forth in subsection (d) hereof, audited
by an independent certified public accountant, be prepared in accordance with
generally accepted accounting principles consistently applied and be in form and
substance acceptable to Beneficiary:
(a) copies of all tax returns filed by Grantor, within thirty (30)
days after the date of filing;
(b) monthly operating statements for the Trust Property, within
fifteen (15) days after the end of each of the first (1st) twelve (12) calendar
months following the date hereof; and
(c) quarterly operating statements for the Trust Property, within
thirty (30) days after the end of each March, June, September and December
commencing with the first (1st) of such months to occur following the first
(1st) anniversary of the date hereof;
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(d) annual balance sheets for the Trust Property and annual financial
statements for Grantor, each principal or general partner in Grantor, and each
Indemnitor, within ninety (90) days after the end of each calendar year;
(e) annual occupancy summary for the Trust Property setting forth the
occupancy rates, average daily room rates and room revenues for each month of
the preceding calendar year, as well as annual averages of the same, and such
other information as may customarily be reflected thereon or reasonably
requested by Beneficiary; and
(f) such other information with respect to the Trust Property,
Grantor, the principals or general partners in Grantor, and each Indemnitor,
which may be reasonably requested from time to time by Beneficiary, within a
reasonable time after the applicable request.
If any of the aforementioned materials are not furnished to Beneficiary
within the applicable time periods or Beneficiary is dissatisfied with the
contents of any of the foregoing and has notified Grantor of its
dissatisfaction, in addition to any other rights and remedies of Beneficiary
contained herein, Beneficiary shall have the right, but not the obligation,
after Grantor's failure to cure such satisfaction within thirty (30) business
days following Grantor's receipt of such notice, to obtain the same by means of
an audit by an independent certified public accountant selected by Beneficiary,
in which event Grantor agrees to pay, or to reimburse Beneficiary for, any
expense of such audit and further agrees to provide all necessary information to
said accountant and to otherwise cooperate in the making of such audit.
1.19 Further Documentation. Grantor shall, on the request of
Beneficiary and at the expense of Grantor: (a) promptly correct any defect,
error or omission which may be discovered in the contents of this Deed of Trust
or in the contents of any of the other Loan Documents; (b) promptly execute,
acknowledge, deliver and record or file such further instruments (including,
without limitation, further mortgages, deeds of trust, security deeds, security
agreements, financing statements, continuation statements and assignments of
rents or leases) and promptly do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes of this Deed of
Trust and the other Loan Documents and to subject to the liens and security
interests hereof and thereof any property intended by the terms hereof and
thereof to be covered hereby and thereby, including specifically, but without
limitation, any renewals, additions, substitutions, replacements or
appurtenances to the Trust Property; (c) promptly execute, acknowledge, deliver,
procure and record or file any document or instrument (including specifically,
without limitation, any financing statement) reasonably deemed advisable by
Beneficiary to protect, continue or perfect the liens or the security interests
hereunder against the rights or interests of third persons; and (d) promptly
furnish to Beneficiary, upon Beneficiary's request, a duly acknowledged written
statement and estoppel certificate addressed to such party or parties as
directed by Beneficiary and in form and substance supplied by Beneficiary,
setting forth all amounts due under the Note, stating whether any Event of
Default has occurred hereunder and is continuing, and stating whether any
offsets or defenses exist against the Debt.
1.20 Payment of Costs; Reimbursement to Beneficiary. Grantor shall pay
all reasonable costs and expenses of every character reasonably incurred in
connection with the closing of the loan evidenced by the Note and secured hereby
or otherwise attributable
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or chargeable to Grantor as the owner of the Trust Property, including, without
limitation, appraisal fees, recording fees, documentary, stamp, mortgage or
intangible taxes, brokerage fees and commissions, title policy premiums and
title search fees, uniform commercial code/tax lien/litigation search fees,
escrow fees and reasonable attorneys' fees. If Grantor defaults in any such
payment, which default is not cured within any applicable grace or cure period,
Beneficiary may, after reasonable prior written notice to Grantor, pay the same
and Grantor shall reimburse Beneficiary on demand for all such costs and
expenses incurred or paid by Beneficiary, together with such interest thereon at
the Default Interest Rate from and after the date of Beneficiary's making such
payment until reimbursement thereof by Grantor. Any such sums disbursed by
Beneficiary, together with such interest thereon, shall be additional
indebtedness of Grantor secured by this Deed of Trust and by all of the other
Loan Documents securing all or any part of the Debt. Further, Grantor shall
promptly notify Beneficiary in writing of any litigation or threatened
litigation affecting the Trust Property, or any other demand or claim which, if
enforced, could impair or threaten to impair Beneficiary's security hereunder.
Without limiting or waiving any other rights and remedies of Beneficiary
hereunder, if Grantor fails to perform any of its covenants or agreements
contained in this Deed of Trust or in any of the other Loan Documents and such
failure is not cured within any applicable grace or cure period, or if any
action or proceeding of any kind (including, but not limited to, any bankruptcy,
insolvency, arrangement, reorganization or other debtor relief proceeding) is
commenced which might adversely affect Beneficiary's interest in the Trust
Property or Beneficiary's right to enforce its security, then Beneficiary may,
at its option, with or without notice to Grantor, make any appearances, disburse
any sums and take any actions as may be necessary or desirable to protect or
enforce the security of this Deed of Trust or to remedy the failure of Grantor
to perform its covenants and agreements (without, however, waiving any default
of Grantor). Grantor agrees to pay on demand all expenses of Beneficiary or
Trustee incurred with respect to the foregoing (including, but not limited to,
reasonable fees and disbursements of counsel), together with interest thereon at
the Default Interest Rate from and after the date on which Beneficiary or
Trustee incurs such expenses until reimbursement thereof by Grantor. Any such
expenses so incurred by Beneficiary, together with interest thereon as provided
above, shall be additional indebtedness of Grantor secured by this Deed of Trust
and by all of the other Loan Documents securing all or any part of the Debt. The
necessity for any such actions and of the amounts to be paid shall be determined
by Beneficiary in its discretion. Beneficiary is hereby empowered to enter and
to authorize others to enter upon the Trust Property or any part thereof for the
purpose of performing or observing any such defaulted term, covenant or
condition without thereby becoming liable to Grantor or any person in possession
holding under Grantor. Grantor hereby acknowledges and agrees that the remedies
set forth in this Section 1.20 shall be exercisable by Beneficiary, and any and
all payments made or costs or expenses incurred by Beneficiary in connection
therewith shall be secured hereby and shall be, without demand, immediately
repaid by Grantor with interest thereon at the Default Interest Rate,
notwithstanding the fact that such remedies were exercised and such payments
made and costs incurred by Beneficiary after the filing by Grantor of a
voluntary case or the filing against Grantor of an involuntary case pursuant to
or within the meaning of the Bankruptcy Reform Act of 1978, as amended, Title 11
U.S.C., or after any similar action pursuant to any other debtor relief law
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable to
Grantor, Beneficiary, any Indemnitor, the Debt or any of the Loan Documents.
Grantor hereby indemnifies and holds Beneficiary harmless from and against all
32
loss, cost and expenses with respect to any Event of Default hereof, any liens
(i.e., judgments, mechanics' and materialmen's liens, or otherwise), charges and
encumbrances filed against the Trust Property, and from any claims and demands
for damages or injury, including claims for property damage, personal injury or
wrongful death, arising out of or in connection with any accident or fire or
other casualty on the Premises or the Improvements or any nuisance made or
suffered thereon, except those that are due to Beneficiary's gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction,
including, without limitation, in any case, reasonable attorneys' fees, costs
and expenses as aforesaid, whether at pretrial, trial or appellate level, and
such indemnity shall survive payment in full of the Debt. This Section shall not
be construed to require Beneficiary to incur any expenses, make any appearances
or take any actions.
1.21 Security Interest. This Deed of Trust is also intended to
encumber and create a security interest in, and Grantor hereby grants to
Beneficiary a security interest in, Grantor's right, title and interest (if any)
in all sums on deposit with Beneficiary pursuant to the provisions of Section
1.6, Section 1.8 and Section 1.34 hereof or any other Section hereof or of any
other Loan Document and Grantor's right, title and interest (if any) in all
fixtures, chattels, accounts, equipment, inventory, contract rights, general
intangibles and other personal property included within the Trust Property, all
renewals, replacements of any of the aforementioned items, or articles in
substitution therefor or in addition thereto or the proceeds thereof (said
property is hereinafter referred to collectively as the "Collateral"), whether
or not the same shall be attached to the Premises or the Improvements in any
manner. It is hereby agreed that to the extent permitted by law, all of the
foregoing Collateral consisting of furniture, fixtures and equipment ("FF&E") is
to be deemed and held to be a part of and affixed to the Premises and the
Improvements. The foregoing security interest shall also cover Grantor's
leasehold interest in any of the foregoing property which is leased by Grantor.
Grantor shall, from time to time upon the request of Beneficiary, supply
Beneficiary with a current inventory of all of the Collateral consisting of FF&E
in which Beneficiary is granted a security interest hereunder, in such detail as
Beneficiary may reasonably require. Subject to the same being taken care of by
the tenant under the Percentage Lease, Grantor shall promptly replace all of the
Collateral subject to the lien or security interest of this Deed of Trust when
worn or obsolete with Collateral comparable to the worn out or obsolete
Collateral when new and will not, without the prior written consent of
Beneficiary, remove from the Premises or the Improvements any of the Collateral
subject to the lien or security interest of this Deed of Trust except such as is
replaced by an article of similar suitability and value as above provided, owned
by Grantor free and clear of any lien or security interest except that created
by this Deed of Trust and the other Loan Documents. All of the Collateral shall
be kept at the location of the Premises except as otherwise required by the
terms of the Loan Documents. Grantor shall not use any of the Collateral in
violation of any applicable statute, ordinance or insurance policy.
1.22 Security Agreement. This Deed of Trust constitutes a security
agreement between Grantor and Beneficiary with respect to the Collateral in
which Beneficiary is granted a security interest hereunder, and, cumulative of
all other rights and remedies of Beneficiary hereunder, Beneficiary shall have
all of the rights and remedies of a secured party under any applicable Uniform
Commercial Code. Grantor hereby agrees to execute and deliver on demand and
hereby irrevocably constitutes and appoints Beneficiary the attorney-in-fact of
Grantor to
33
execute and deliver and, if appropriate, to file with the appropriate filing
officer or office, such security agreements, financing statements, continuation
statements or other instruments as Beneficiary may request or require in order
to impose, perfect or continue the perfection of the lien or security interest
created hereby. To the extent specifically provided herein and subject to the
rights of tenant under the Percentage Lease and the terms and provisions
thereof, Beneficiary shall have the right of possession of all cash, securities,
instruments, negotiable instruments, documents, certificates and any other
evidences of cash or other property or evidences of rights to cash rather than
property, which are now or hereafter a part of the Trust Property, and Grantor
shall promptly deliver the same to Beneficiary, endorsed to Beneficiary, without
further notice from Beneficiary. Grantor agrees to furnish Beneficiary with
notice of any change in the name, identity, organizational structure, residence,
or principal place of business or mailing address of Grantor within ten (10)
days of the effective date of any such change. Upon the occurrence of any Event
of Default, Beneficiary shall have the rights and remedies as prescribed in this
Deed of Trust, or as prescribed by general law, or as prescribed by any
applicable Uniform Commercial Code, all at Beneficiary's election. Any
disposition of the Collateral following the occurrence and continuance of an
Event of Default may be conducted by an employee or agent of Beneficiary. Any
person, including both Grantor and Beneficiary, shall be eligible to purchase
any part or all of the Collateral at any such disposition. Expenses of retaking,
holding, preparing for sale, selling or the like (including, without limitation,
Beneficiary's reasonable attorneys' fees and legal expenses), together with
interest thereon at the Default Interest Rate from the date incurred by
Beneficiary until actually paid by Grantor, shall be paid by Grantor on demand
and shall be secured by this Deed of Trust and by all of the other Loan
Documents securing all or any part of the Debt. Beneficiary shall have the right
to enter upon the Premises and the Improvements or any real property where any
of the property which is the subject of the security interest granted herein is
located to take possession of, assemble and collect the same or to render it
unusable, or Grantor, upon demand of Beneficiary, shall assemble such property
and make it available to Beneficiary at the Premises, or at a place which is
mutually agreed upon or, if no such place is agreed upon, at a place reasonably
designated by Beneficiary to be reasonably convenient to Beneficiary and
Grantor. If notice is required by law, Beneficiary shall give Grantor at least
ten (10) days' prior written notice of the time and place of any public sale of
such property, or adjournments thereof, or of the time of or after which any
private sale or any other intended disposition thereof is to be made, and if
such notice is sent to Grantor, as the same is provided for the mailing of
notices herein, it is hereby deemed that such notice shall be and is reasonable
notice to Grantor. No such notice is necessary for any such property which is
perishable, threatens to decline speedily in value or is of a type customarily
sold on a recognized market. Any sale made pursuant to the provisions of this
Section shall be deemed to have been a public sale conducted in a commercially
reasonable manner if held contemporaneously with a foreclosure sale as provided
in Section 3.1(e) hereof upon giving the same notice with respect to the sale of
the Trust Property hereunder as is required under said Section 3.1(e).
Furthermore, to the extent permitted by law, in conjunction with, in addition to
or in substitution for the rights and remedies available to Beneficiary pursuant
to any applicable Uniform Commercial Code:
(a) In the event of a foreclosure sale, the Trust Property may, at
the option of Beneficiary, be sold as a whole; and
34
(b) It shall not be necessary that Beneficiary take possession of
the aforementioned Collateral, or any part thereof, prior to the time that any
sale pursuant to the provisions of this Section is conducted and it shall not be
necessary that said Collateral, or any part thereof, be present at the location
of such sale; and
(c) Beneficiary may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Beneficiary, including the sending of notices and the conduct of the sale, but
in the name and on behalf of Beneficiary.
The name and address of Grantor (as Debtor under any applicable Uniform
Commercial Code) are:
APPLE SUITES SPE I, INC.
9 North Third Street
Richmond, Virginia 23219
The name and address of Beneficiary (as Secured Party under any applicable
Uniform Commercial Code) are:
FIRST UNION NATIONAL BANK
Commercial Real Estate Finance Group
One First Union Center
301 South College Street
Mailcode NC 0166
Loan Number: 26-5330848
Charlotte, North Carolina 28288
Attention: Contract Finance
1.23 Easements and Rights-of-Way. Grantor shall not grant any easement
or right-of-way with respect to all or any portion of the Premises or the
Improvements without the prior written consent of Beneficiary, which shall not
be unreasonably withheld or delayed. The purchaser at any foreclosure sale
hereunder may, at its discretion, disaffirm any easement or right-of-way granted
in violation of any of the provisions of this Deed of Trust and may take
immediate possession of the Trust Property free from, and despite the terms of,
such grant of easement or right-of-way. If Beneficiary consents to the grant of
an easement or right-of-way, Beneficiary agrees to grant such consent without
charge to Grantor other than reasonable expenses, including, without limitation,
reasonable attorneys' fees, incurred by Beneficiary in the review of Grantor's
request and in the preparation of documents effecting the subordination.
1.24 Compliance with Laws. (a) Grantor shall at all times comply with
all statutes, ordinances, regulations and other governmental or
quasi-governmental requirements and private covenants now or hereafter relating
to the ownership, construction, use or operation of the Trust Property,
including, but not limited to, those concerning employment and compensation of
persons engaged in operation and maintenance of the Trust Property and any
environmental or ecological requirements, even if such compliance shall require
structural changes to the Trust Property; provided, however, that, Grantor may,
upon providing Beneficiary with security
35
satisfactory to Beneficiary, proceed diligently and in good faith to contest the
validity or applicability of any such statute, ordinance, regulation or
requirement so long as during such contest the Trust Property shall not be
subject to any lien, charge, fine or other liability and shall not be in danger
of being forfeited, lost or closed. Grantor shall not use or occupy, or allow
the use or occupancy of, the Trust Property in any manner which violates any
Lease of or any other agreement applicable to the Trust Property or any
applicable law, rule, regulation or order or which constitutes a public or
private nuisance or which makes void, voidable or cancelable, or increases the
premium of, any insurance then in force with respect thereto.
(b) Grantor agrees that the Trust Property shall at all times
comply to the extent applicable with the requirements of the Americans with
Disabilities Act of 1990, the Fair Housing Amendments Act of 1988 and all other
state and local laws and ordinances related to handicapped access and all rules,
regulations, and orders issued pursuant thereto including, without limitation,
the Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities (collectively, the "Access Laws"). Grantor agrees to give prompt
notice to Beneficiary of the receipt by Grantor of any complaints related to
violations of any Access Laws and of the commencement of any proceedings or
investigations which relate to compliance with applicable Access Laws.
1.25 Additional Taxes. In the event of the enactment after the date
hereof of any law of the state in which the Trust Property is located or of any
other governmental entity deducting from the value of the Trust Property for the
purpose of taxing any lien or security interest thereon, or imposing upon
Beneficiary the payment of the whole or any part of the taxes or assessments or
charges or liens herein required to be paid by Grantor, or changing in any way
the laws relating to the taxation of deeds of trust, mortgages or security
agreements or debts secured by deeds of trust, mortgages or security agreements
or the interest of the beneficiary, Beneficiary or secured party in the property
covered thereby, or the manner of collection of such taxes, so as to adversely
affect this Deed of Trust or the Debt or Beneficiary, then, and in any such
event, Grantor, upon demand by Beneficiary, shall pay such taxes, assessments,
charges or liens, or reimburse Beneficiary therefor; provided, however, that if
in the opinion of counsel for Beneficiary (a) it might be unlawful to require
Grantor to make such payment, or (b) the making of such payment might result in
the imposition of interest beyond the maximum amount permitted by law, then and
in either such event, Beneficiary may elect, by notice in writing given to
Grantor, to declare all of the Debt to be and become due and payable in full
thirty (30) days from the giving of such notice, and, in connection with the
payment of such Debt, no prepayment premium or fee shall be due unless, at the
time of such payment, an Event of Default or a Default shall have occurred and
is continuing, which Default or Event of Default is unrelated to the provisions
of this Section 1.25, in which event any applicable prepayment premium or fee in
accordance with the terms of the Note shall be due and payable.
1.26 Secured Indebtedness. It is understood and agreed that this Deed
of Trust shall secure payment of not only the indebtedness evidenced by the Note
but also any and all substitutions, replacements, renewals and extensions of the
Note, any and all indebtedness and obligations arising pursuant to the terms
hereof and any and all indebtedness and obligations arising pursuant to the
terms of any of the other Loan Documents, excluding the Indemnity Agreement and
the Environmental Indemnity Agreement, all of which indebtedness is equally
36
secured with and has the same priority as any amounts advanced as of the date
hereof. It is agreed that any future advances made by Beneficiary to or for the
benefit of Grantor from time to time under this Deed of Trust or the other Loan
Documents and whether or not such advances are obligatory or are made at the
option of Beneficiary, or otherwise, made for any purpose, within twenty (20)
years from the date hereof, and all interest accruing thereon, shall be equally
secured by this Deed of Trust and shall have the same priority as all amounts,
if any, advanced as of the date hereof and shall be subject to all of the terms
and provisions of this Deed of Trust.
1.27 Grantor's Waivers. To the full extent permitted by law, Grantor
agrees that Grantor shall not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the Debt prior to any sale
of the Trust Property to be made pursuant to any provisions contained herein or
prior to the entering of any decree, judgment or order of any court of competent
jurisdiction, or any right under any statute to redeem all or any part of the
Trust Property so sold. Grantor, for Grantor and Grantor's successors and
assigns, and for any and all persons ever claiming any interest in the Trust
Property, to the full extent permitted by law, hereby knowingly, intentionally
and voluntarily, with and upon the advice of competent counsel: (a) waives,
releases, relinquishes and forever forgoes all rights of valuation,
appraisement, stay of execution, reinstatement and notice of election or
intention to mature or declare due the Debt (except such notices as are
specifically provided for herein); (b) waives, releases, relinquishes and
forever forgoes all right to a marshaling of the assets of Grantor, including
the Trust Property, to a sale in the inverse order of alienation, or to direct
the order in which any of the Trust Property shall be sold in the event of
foreclosure of the liens and security interests hereby created and agrees that
any court having jurisdiction to foreclose such liens and security interests may
order the Trust Property sold as an entirety; and (c) waives, releases,
relinquishes and forever forgoes all rights and periods of redemption provided
under applicable law. To the full extent permitted by law, Grantor shall not
have or assert any right under any statute or rule of law pertaining to the
exemption of homestead or other exemption under any federal, state or local law
now or hereafter in effect, the administration of estates of decedents or other
matters whatever to defeat, reduce or affect the right of Beneficiary under the
terms of this Deed of Trust to a sale of the Trust Property, for the collection
of the Debt without any prior or different resort for collection, or the right
of Beneficiary under the terms of this Deed of Trust to the payment of the Debt
out of the proceeds of sale of the Trust Property in preference to every other
claimant whatever. Furthermore, Grantor hereby knowingly, intentionally and
voluntarily, with and upon the advice of competent counsel, waives, releases,
relinquishes and forever forgoes all present and future statutes of limitations
as a defense to any action to enforce the provisions of this Deed of Trust or to
collect any of the Debt to the fullest extent permitted by law. Grantor
covenants and agrees that upon the commencement of a voluntary or involuntary
bankruptcy proceeding by or against Grantor, Grantor shall not seek a
supplemental stay or otherwise shall not seek pursuant to 11 U.S.C. ss.105 or
any other provision of the Bankruptcy Reform Act of 1978, as amended, or any
other debtor relief law (whether statutory, common law, case law, or otherwise)
of any jurisdiction whatsoever, now or hereafter in effect, which may be or
become applicable, to stay, interdict, condition, reduce or inhibit the ability
of Beneficiary to enforce any rights of Beneficiary against any guarantor or
indemnitor of the secured obligations or any other party liable with respect
thereto by virtue of any indemnity, guaranty or otherwise.
37
1.28 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) GRANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PREMISES
IS LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THE NOTE, THIS DEED OF TRUST OR ANY OTHER OF THE LOAN DOCUMENTS,
(ii) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE COUNTY IN WHICH THE
PREMISES IS LOCATED, (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (iv)
TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING ANY
ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT
THE RIGHT OF BENEFICIARY TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER
FORUM).
(b) GRANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING
TO THE DEBT OR ANY CONDUCT, ACT OR OMISSION OF BENEFICIARY OR GRANTOR, OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR
ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH BENEFICIARY OR GRANTOR, IN EACH
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
1.29 Attorney-in-Fact Provisions. With respect to any provision of
this Deed of Trust or any other Loan Document whereby Grantor grants to
Beneficiary a power-of-attorney, provided no Event of Default has occurred under
this Deed of Trust, Beneficiary shall first give Grantor written notice at least
five (5) days prior to acting under such power, which notice shall demand that
Grantor first take the proposed action within such period and advising Grantor
that if it fails to do so, Beneficiary will so act under the power; provided,
however, that, in the event that a Default or an Event of Default has occurred,
or if necessary to prevent imminent death, serious injury, damage, loss,
forfeiture or diminution in value to the Trust Property or any surrounding
property or to prevent any adverse affect on Beneficiary's interest in the Trust
Property, Beneficiary may act immediately and without first giving such notice.
In such event, Beneficiary will give Grantor notice of such action as soon
thereafter as reasonably practical.
1.30 Management. (a) Grantor shall cause the operation and management
of the Trust Property to be by either: (i) the lessee under and in accordance
with the terms of the Percentage Lease; (ii) Promus Hotels, Inc., its successors
or assigns, and/or Apple Suites Management, Inc., its successors or assigns, or
(iii) such other professional property management company reasonably approved by
Beneficiary. Such management by an affiliated entity or a professional property
management company shall be pursuant to a written agreement reasonably
38
approved by Beneficiary (any such person or entity which manages the Trust
Property, including the lessee under the Percentage Lease, is hereinafter
referred to as the "Manager", and any such written agreement approved by
Beneficiary is hereinafter referred to as the "Management Agreement"). In no
event shall any Manager be removed or replaced or the terms of the Percentage
Lease or any Management Agreement modified or amended without the prior written
consent of Beneficiary, except as otherwise provided herein. In the event (x) an
Event of Default has occurred and is continuing hereunder or under any other
Loan Document or under any Management Agreement or the Percentage Lease then in
effect, which default is not cured within any applicable grace or cure period,
Beneficiary shall have the right, solely to the extent provided therein or in
any separate subordination agreement by the lessee under the Percentage Lease or
by consent agreement by Promus, to terminate, or to direct Grantor to terminate,
solely to the extent provided therein or in any separate subordination agreement
by the lessee under the Percentage Lease or by consent agreement by Promus, the
Percentage Lease or such Management Agreement upon thirty (30) days' notice or
(y) (1) of a change in control (fifty percent or more) of the ownership of
Manager or (2) in the event Manager provides cause for termination, including,
without limitation, gross negligence, willful misconduct or fraud, Beneficiary
shall have the right, solely to the extent provided therein or in any separate
subordination agreement by the lessee under the Percentage Lease or consent
agreement by Promus, to terminate, or direct Grantor to terminate, solely to the
extent provided therein or in any separate subordination agreement by the lessee
under the Percentage Lease or consent agreement by Promus, the Percentage Lease
or such Management Agreement at any time and, in any such event of the
termination of the Percentage Lease or Management Agreement, to retain, or to
direct Grantor to retain, a new lessee or management agent reasonably approved
by Beneficiary. Any such successor manager shall be a reputable management
company having a senior executive with at least seven (7) years' experience in
the management of similar extended stay suite hotels in the state in which the
Trust Property is located, shall be the manager of at least five (5) projects
comparable to the Trust Property and shall be reasonably acceptable to
Beneficiary.
(b) Grantor shall, or shall cause the Manager to (i) operate the
hotel located on the Trust Property in accordance with the terms of the
Franchise Agreement; (ii) promptly perform and observe (or cause to be performed
or observed) all of the covenants required to be performed and observed by it
under the Franchise Agreement and do all things necessary to preserve and to
keep unimpaired its material rights thereunder; (iii) promptly notify
Beneficiary of any Event of Default under the Franchise Agreement of which it is
aware; (iv) promptly deliver to Beneficiary a copy of each financial statement,
business plan, capital expenditures plan, notice, report and estimate received
by it under the Franchise Agreement; and (v) promptly enforce the performance
and observance of all of the covenants required to be performed and observed by
the franchisor under the Franchise Agreement. Without Beneficiary's prior
consent, Grantor shall not and shall not permit the Lessee under the Percentage
Lease or any Manager to: (i) surrender, terminate or cancel the Franchise
Agreement; (ii) reduce or consent to the reduction of the term of the Franchise
Agreement; (iii) increase or consent to the increase of the amount of any
charges under the Franchise Agreement; (iv) otherwise modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies
under, the Franchise Agreement or (v) suffer or permit the occurrence of
continuance a default beyond any applicable cure period under the Franchise
Agreement (or any successor franchise agreement
39
with a national hotel chain approved by the Beneficiary) if such default permits
the franchiser to terminate or cancel the Franchise Agreement (or any successor
franchise agreement with a national hotel chain approved by Beneficiary);
1.31 Hazardous Waste and Other Substances.
(a) Grantor hereby represents and warrants to Beneficiary that, as
of the date hereof: (i) to the best of Grantor's knowledge, information and
belief, none of Grantor nor the Trust Property nor any Tenant at the Premises
nor the operations conducted thereon is in direct or indirect violation of or
otherwise exposed to any liability under any local, state or federal law, rule
or regulation or common law duty pertaining to human health as affected by the
environment, natural resources or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C.ss.9601 et seq.), the Resource Conservation and Recovery
Act of 1976 (42 U.S.C.ss.6901 et seq.), the Federal Water Pollution -- --- --
- --- Control Act (33 U.S.C. ss.1251 et seq.), the Clean Air Act (42 U.S.C.
ss.7401 et seq.), the Emergency Planning and -- --- -- ---
Community-Right-to-Know Act (42 U.S.C.ss.11001 et seq.), the Endangered Species
Act (16 U.S.C.ss.1531 et seq.), the Toxic Substances -- ---- -- --- Control Act
(15 U.S.C.ss.2601 et seq.), the Occupational Safety and Health Act (29
U.S.C.ss.651 et seq.) and the Hazardous Materials -- --- -- ---- Transportation
Act (49 U.S.C.ss.1801 et seq.), including any regulations promulgated pursuant
to said laws, all as amended from time -- --- to time ("Environmental Laws") or
otherwise exposed to any liability under any Environmental Law relating to or
affecting the Trust ------------------- Property, whether or not used by or
within the control of Grantor; (ii) to the best of Grantor's knowledge,
information and belief, no hazardous, toxic or harmful substances, wastes,
materials, pollutants or contaminants (including, without limitation, materials
containing more than 1% asbestos, lead based paint, polychlorinated biphenyls,
petroleum or petroleum products or byproducts, flammable explosives, radioactive
materials, infectious substances or raw materials which include hazardous
constituents) or any other substances or materials which are included under or
regulated by Environmental Laws (collectively, "Hazardous Substances") are
- --------------------- located on, in or under or have been handled, generated,
stored, processed or disposed of on or released or discharged from the Trust
Property (including underground contamination), except for those substances used
by Grantor or any Tenant in the ordinary course of their respective businesses
and in compliance with all Environmental Laws and where such would not
reasonably be expected to give rise to liability under Environmental Laws; (iii)
to the best of Grantor's knowledge, information and belief, radon is not present
at the Trust Property in excess or in violation of any applicable thresholds or
standards or in amounts that require under applicable law disclosure to any
tenant or occupant of or invitee to the Trust Property or to any governmental
agency or the general public; (iv) to the best of Grantor's knowledge,
information and belief, the Trust Property is not subject to any private or
governmental lien or judicial or administrative notice or action arising under
Environmental Laws; (v) there is no pending, nor, to Grantor's knowledge,
information or belief, threatened litigation arising under Environmental Laws
affecting Grantor or the Trust Property; (vi) to the best of Grantor's
knowledge, information and belief, there are no and have been no existing or
closed underground storage tanks or other underground storage receptacles for
Hazardous Substances or landfills or dumps on the Trust Property; (vii) Grantor
has received no notice of, and to the best of Grantor's knowledge and belief,
there exists no investigation, action, proceeding or claim by any agency,
authority or unit of government or by any third party which
40
could result in any liability, penalty, sanction or judgment under any
Environmental Laws with respect to any condition, use or operation of the Trust
Property, nor does Grantor know of any basis for such an investigation, action,
proceeding or claim; (viii) Grantor has received no notice of and, to the best
of Grantor's knowledge and belief, there has been no claim by any party that any
use, operation or condition of the Trust Property has caused any nuisance or any
other liability or adverse condition on any other property, nor does Grantor
know of any basis for such an investigation, action, proceeding or claim.
(b) Grantor has not received nor to the best of Grantor's
knowledge, information and belief has there been issued, any notice,
notification, demand, request for information, citation, summons, or order in
any way relating to any actual, alleged or potential violation or liability
arising under Environmental Laws.
(c) To the best of Grantor's knowledge, information and belief,
the Trust Property is not listed or, to the best of Grantor's knowledge,
information and belief, proposed for listing on the National Priorities List
promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any
similar federal or state list of sites requiring environmental investigation or
clean-up.
(d) Grantor shall comply with all applicable Environmental Laws.
Grantor shall keep or cause the Trust Property to be kept free from Hazardous
Substances (except those substances used by Grantor or any Tenant in the
ordinary course of their respective businesses and except in compliance with all
Environmental Laws and where such would not reasonably be expected to give rise
to liability under Environmental Laws) and in compliance with all Environmental
Laws, Grantor shall not install or use any underground storage tanks, shall
expressly prohibit the use, generation, handling, storage, production,
processing and disposal of Hazardous Substances by all Tenants in quantities or
conditions that would violate or give rise to any obligation to take remedial or
other action under any applicable Environmental Laws. Without limiting the
generality of the foregoing, during the term of this Deed of Trust, Grantor
shall not install in the Improvements or permit to be installed in the
Improvements any asbestos or asbestos-containing materials.
(e) Grantor shall promptly notify Beneficiary if Grantor shall
become aware of (i) the actual or potential existence of any Hazardous
Substances on the Trust Property other than those occurring in the ordinary
course of Grantor's business and which do not violate, or would not otherwise
give rise to liability under Environmental Laws, (ii) any direct or indirect
violation of, or other exposure to liability under, any Environmental Laws,
(iii) any lien, action or notice affecting the Trust Property or Grantor
resulting from any violation or alleged violation of or liability or alleged
liability under any Environmental Laws, (iv) the institution of any
investigation, inquiry or proceeding concerning Grantor or the Trust Property
pursuant to any Environmental Laws or otherwise relating to Hazardous
Substances, or (v) the discovery of any occurrence, condition or state of facts
which would render any representation or warranty contained in this Deed of
Trust incorrect in any material respect if made at the time of such discovery.
Immediately upon receipt of same, Grantor, shall deliver to Beneficiary copies
of any and all requests for information, complaints, citations, summonses,
orders, notices, reports or other communications, documents or instruments in
any way relating to any actual, alleged or
41
potential violation or liability of any nature whatsoever arising under
Environmental Laws and relating to the Trust Property or to Grantor. Grantor
shall remedy or cause to be remedied in a timely manner (and in any event within
the time period permitted by applicable Environmental Laws) any violation of
Environmental Laws or any condition that could give rise to liability under
Environmental Laws. Without limiting the foregoing, Grantor shall, at its own
expense, take all actions as required by applicable Environmental Laws, for the
clean-up of any and all portions of the Trust Property or other affected
property, including, without limitation, all investigative, monitoring, removal,
containment and remedial actions in accordance with all applicable Environmental
Laws (and in all events in a manner reasonably satisfactory to Beneficiary) and
shall further pay or cause to be paid, at no expense to Beneficiary, all
clean-up, administrative and enforcement costs of applicable governmental
agencies which may be asserted against the Trust Property. Notwithstanding the
foregoing, Grantor may, in good faith, by appropriate proceedings and upon
notice to Beneficiary, contest the validity or applicability of any such
Environmental Laws to any portion of the Trust Property as long as (a) such
contest is diligently pursued, (b) Beneficiary determines, in its reasonable
subjective opinion, that such contest suspends the requirement for Grantor to
comply with such Environmental Laws. Prior to the earlier commencement of such
contest or the delinquency date of any asserted costs related thereto, Grantor
shall deposit into the Impound Account an amount determined by Beneficiary to
the reasonably adequate covered payment of such costs and a reasonable
additional sum to cover possible interest, costs and penalties; provided,
however, that Grantor shall promptly cause to be paid any amount adjudged by a
court of competent jurisdiction be due, with all interest, costs and penalties
thereon, promptly after such judgment becomes final; and provided, further, that
in any event such contest shall be concluded and the charges or assessments
shall be paid prior to the date any writ or order is issued under which the
Trust Property may be sold, lost or forfeited. In the event Grantor fails to do
so, Beneficiary may, if required by Environmental Laws (and after reasonable
prior written notice to Grantor), but shall not be obligated to, cause the Trust
Property or other affected property to be freed from any Hazardous Substances or
otherwise brought into conformance with Environmental Laws and any and all costs
and expenses incurred by Beneficiary in connection therewith, together with
interest thereon at the Default Interest Rate from the date incurred by
Beneficiary until actually paid by Grantor, shall be immediately paid by Grantor
on demand and shall be secured by this Deed of Trust and by all of the other
Loan Documents securing all or any part of the Debt. Grantor hereby grants to
Beneficiary and its agents and employees access to the Trust Property and a
license to remove any items deemed by Beneficiary to be Hazardous Substances and
to do all things Beneficiary shall deem necessary to bring the Trust Property
into conformance with Environmental Laws.
(f) Grantor covenants and agrees, at Grantor's sole cost and
expense, to indemnify, defend (at trial and appellate levels, and with
attorneys, consultants and experts reasonably acceptable to Beneficiary), and
hold Beneficiary harmless from and against any and all liens, damages (including
without limitation, punitive or exemplary damages), losses, liabilities
(including, without limitation, strict liability), obligations, settlement
payments, penalties, fines, assessments, citations, directives, claims,
litigation, demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses of any kind as required by applicable Environmental
Laws or of any nature whatsoever (including, without limitation, reasonable
attorneys', consultants' and experts' fees and disbursements actually incurred
in investigating, defending, settling or prosecuting any claim, litigation or
proceeding) which may
42
at any time be imposed upon, incurred by or asserted or awarded against
Beneficiary or the Trust Property, and arising from or out of: (i) any violation
or alleged violation of, or liability or alleged liability under, any
Environmental Law; (ii) the presence, release or threat of release of or
exposure to any Hazardous Substances or radon on, in, under or affecting all or
any portion of the Trust Property or any surrounding areas, regardless of
whether or not caused by or within the control of Grantor; (iii) any transport,
treatment, recycling, storage, disposal or arrangement therefor of Hazardous
Substances whether on the Trust Property, originating from the Trust Property,
or otherwise associated with Grantor or any operations conducted on the Trust
Property at any time; (iv) the failure by Grantor to comply fully with the terms
and conditions of this Section 1.31; (v) the breach of any representation or
warranty contained in this Section 1.31 in any material respect; (vi) the
enforcement of this Section 1.31, including, without limitation, the cost of
assessment, investigation, containment, removal and/or remediation of any and
all Hazardous Substances from all or any portion of the Trust Property or any
surrounding areas as required by applicable Environmental Laws, the cost of any
actions taken in response to the presence, release or threat of release of any
Hazardous Substances on, in, under or affecting any portion of the Trust
Property or any surrounding areas to prevent or minimize such release or threat
of release so that it does not migrate or otherwise cause or threaten danger to
present or future public health, safety, welfare or the environment, and costs
incurred to comply with Environmental Laws in connection with all or any portion
of the Trust Property or any surrounding areas. The indemnity set forth in this
Section 1.31 shall also include any diminution in the value of the security
afforded by the Trust Property or any future reduction in the sales price of the
Trust Property by reason of any matter set forth in this Section 1.31. The
foregoing indemnity shall specifically not include any such costs relating to
Hazardous Substances which are initially placed on, in or under the Trust
Property after foreclosure or other taking of title to the Trust Property by
Beneficiary or its successor or assigns. Beneficiary's rights under this Section
shall survive payment in full of the Debt and shall be in addition to all other
rights of Beneficiary under this Deed of Trust, the Note and the other Loan
Documents.
(g) Upon Beneficiary's request, at any time during the continuance
of an Event of Default or at such other time as Beneficiary has reasonable
grounds to believe, and so notifies Grantor, that Hazardous Substances are or
have been released, stored or disposed of on the Trust Property, or on property
contiguous with the Trust Property, or that the Trust Property may be in
violation of the Environmental Laws, Grantor shall perform or cause to be
performed, at Grantor's sole cost and expense and in scope, form and substance
reasonably satisfactory to Beneficiary, an inspection or audit of the Trust
Property prepared by a hydrogeologist or environmental engineer or other
appropriate consultant approved by Beneficiary indicating the presence or
absence of Hazardous Substances on the Trust Property, the compliance or
non-compliance status of the Trust Property and the operations conducted thereon
with applicable Environmental Laws, or an inspection or audit of the Trust
Property prepared by an engineering or consulting firm reasonably approved by
Beneficiary indicating the presence or absence of friable asbestos or substances
containing asbestos in excess of 1% or lead or substances containing lead or
lead based paint ("Lead Based Paint") on the Trust Property. If Grantor fails to
provide reports of such inspection or audit within thirty (30) days after such
request, Beneficiary may order the same, and Grantor hereby grants to
Beneficiary and its employees and agents access to the Trust Property and an
irrevocable license to undertake such inspection or audit. The cost of such
inspection or audit, together with interest thereon at the Default Interest
43
Rate from the date incurred by Beneficiary until actually paid by Grantor, shall
be immediately paid by Grantor on demand and shall be secured by this Deed of
Trust and by all of the other Loan Documents securing all or any part of the
Debt.
(h) If, prior to the date hereof, it was determined that the Trust
Property contains Lead Based Paint, Grantor had prepared an assessment report
describing the location and condition of the Lead Based Paint (a "Lead Based
Paint Report"). If, at any time hereafter, Lead Based Paint is suspected of
being present on the Trust Property, Grantor agrees, at its sole cost and
expense and within sixty (60) days thereafter, to cause to be prepared a Lead
Based Paint Report prepared by an expert, and in form, scope and substance,
acceptable to Beneficiary.
(i) Grantor agrees that if it has been, or if at any time
hereafter it is, determined that the Trust Property contains Lead Based Paint,
on or before thirty (30) days following (i) the date hereof, if such
determination was made prior to the date hereof or (ii) such determination, if
such determination is hereafter made, as applicable, Grantor shall, at its sole
cost and expenses, develop and implement, and thereafter diligently and
continuously carry out (or cause to be developed and implemented and thereafter
diligently and continually to be carried out), an operations, abatement and
maintenance plan for the Lead Based Paint on the Trust Property, which plan
shall be prepared by an expert, and be in form, scope and substance, acceptable
to Beneficiary (together with any Lead Based Paint Report, the "O&M Plan"). (If
an O&M Plan has been prepared prior to the date hereof, Grantor agrees to
diligently and continually carry out (or cause to be carried out) the provisions
thereof.) Compliance with the O&M Plan shall require or be deemed to require,
without limitation, the proper preparation and maintenance of all records,
papers and forms required under the Environmental Laws.
1.32 Indemnification; Subrogation.
(a) Grantor shall indemnify, defend and hold Beneficiary harmless
against: (i) any and all claims for brokerage, leasing, finders or similar fees
which may be made relating to the Trust Property or the Debt, and (ii) any and
all liability, obligations, losses, damages, penalties, claims, actions, suits,
costs and expenses (including Beneficiary's reasonable attorneys' fees) of
whatever kind or nature which may be asserted against, imposed on or incurred by
Beneficiary in connection with the Debt, this Deed of Trust, the Trust Property,
or any part thereof, or the exercise by Beneficiary of any rights or remedies
granted to it under this Deed of Trust; provided, however, that nothing herein
shall be construed to obligate Grantor to indemnify, defend and hold harmless
Beneficiary from and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, costs and expenses enacted against,
imposed on or incurred by Beneficiary by reason of Beneficiary's willful
misconduct or gross negligence or in connection with Beneficiary effecting a
Secondary Market Transaction.
(b) If Beneficiary is made a party defendant to any litigation or
any claim is threatened or brought against Beneficiary concerning the making or
enforcement of the Debt, this Deed of Trust, the Trust Property, or any part
thereof, or any interest therein, or the construction, maintenance, operation or
occupancy or use thereof, then Grantor shall indemnify, defend and hold
Beneficiary harmless from and against all liability by reason of said litigation
or claims, including reasonable attorneys' fees and expenses incurred by
Beneficiary in any such
44
litigation or claim, whether or not any such litigation or claim is prosecuted
to judgment. If Beneficiary commences an action against Grantor to enforce any
of the terms hereof or to prosecute any breach by Grantor of any of the terms
hereof or to recover any sum secured hereby, Grantor shall pay to Beneficiary
its reasonable attorneys' fees and expenses. The right to such attorneys' fees
and expenses shall be deemed to have accrued on the commencement of such action,
and shall be enforceable whether or not such action is prosecuted to judgment.
If Grantor breaches any term of this Deed of Trust, Beneficiary may engage the
services of an attorney or attorneys to protect its rights hereunder, and in the
event of such engagement following any breach by Grantor, Grantor shall pay
Beneficiary reasonable attorneys' fees and expenses incurred by Beneficiary,
whether or not an action is actually commenced against Grantor by reason of such
breach. All references to "attorneys" in this Subsection and elsewhere in this
Deed of Trust shall include, without limitation, any attorney or law firm
engaged by Beneficiary and Beneficiary's in-house counsel, and all references to
"fees and expenses" in this Subsection and elsewhere in this Deed of Trust shall
include, without limitation, any fees of such attorney or law firm, any
appellate counsel fees, if applicable, and any allocation charges and allocation
costs of Beneficiary's in-house counsel.
(c) A waiver of subrogation shall be obtained by Grantor from its
insurance carrier and, consequently, Grantor waives any and all right to claim
or recover against Beneficiary, its officers, employees, agents and
representatives, for loss of or damage to Grantor, the Trust Property, Grantor's
property or the property of others under Grantor's control from any cause
insured against or required to be insured against by the provisions of this Deed
of Trust.
1.33 Covenants with Respect to Indebtedness, Operations, Fundamental
Changes of Grantor. Grantor hereby represents, warrants and covenants as of the
date hereof and until such time as the Debt is paid in full, that Grantor has
been, is, and shall remain a Single-Purpose Entity (as hereinafter defined).
Grantor has complied and will at all times comply, or if Grantor is a limited
partnership or a limited liability company, each general partner or the SPE
Member (as hereinafter defined) of Grantor (each, an "SPE Equity Owner"), has
complied, will at all times comply, and will cause Grantor to comply, with each
of the representations, warranties and covenants contained in this Section 1.33
as if such representation, warranty or covenant was made directly by Grantor or
such SPE Equity Owner, as the case may be. A "Single-Purpose Entity" or "SPE"
means a corporation, limited partnership, or limited liability company that:
(a) if a corporation, must have at least one Independent Director
(as hereinafter defined), or if requested by Beneficiary (which request Grantor
shall comply with within five (5) business days) in connection with a Secondary
Market Transaction, two Independent Directors, and must not take any action
that, under the terms of any certificate or articles of incorporation, by-laws,
or any voting trust agreement with respect to such entity's common stock,
requires the unanimous affirmative vote of 100% of the members of the board of
directors unless all of the directors, including, without limitation, all
Independent Directors, shall have participated in such vote ("SPE Corporation");
(b) if a limited partnership, must have each general partner be an
SPE Corporation;
45
(c) if a limited liability company, must have one managing member
(the "SPE Member") and such managing member must be an SPE Corporation. Only the
SPE Member may be designated as a manager under the Grantor's operating
agreement and pursuant to the law where the Grantor is organized. Grantor may be
a single member Delaware limited liability company without an SPE Corporation
managing member so long as Grantor has two "special members" who shall serve as
Independent Directors of Grantor;
(d) was and will be organized solely for the purpose of (i) owning
an interest in the Trust Property and the Other Mortgaged Properties, (ii)
acting as a general partner of a limited partnership that owns an interest in
the Trust Property and the Other Mortgaged Properties, or (iii) acting as the
member of a limited liability company that owns an interest in the Trust
Property and the Other Mortgaged Properties;
(e) will not, nor will any partner, limited or general, member or
shareholder thereof, as applicable, amend, modify or otherwise change its
partnership certificate, partnership agreement, articles of incorporation,
by-laws, operating agreement, articles of organization, or other formation
agreement or document, as applicable, in any material term or manner, or in a
manner which adversely affects Grantor's existence as a single purpose entity,
bankruptcy-remote entity;
(f) will not liquidate or dissolve (or suffer any liquidation or
dissolution), or enter into any transaction of merger or consolidation, or
acquire by purchase or otherwise all or substantially all the business or assets
of, or any stock or other evidence of beneficial ownership of any entity;
(g) has not and will not guarantee, pledge its assets for the
benefit of, or otherwise become liable on or in connection with, any obligation
of any other person or entity;
(h) does not own and will not own any asset other than (i) the
Trust Property, (ii) the Other Mortgaged Properties and (iii) incidental
personal property necessary for the operation of the Trust Property and the
Other Mortgaged Properties;
(i) is not engaged and will not engage, either directly or
indirectly, in any business other than the ownership, management and operation
of the Trust Property and the Other Mortgaged Properties;
(j) will not enter into any contract or agreement with any general
partner, principal, affiliate or member of Grantor, as applicable, or any
affiliate of any general partner, principal or member of Grantor, except upon
terms and conditions that are intrinsically fair and substantially similar to
those that would be available on an arms-length basis with third parties other
than an affiliate;
(k) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the Debt, (ii) affiliate advances or trade payables or accrued expenses
incurred in the ordinary course of business of operating the Trust Property and
the Other Mortgaged Properties customarily satisfied within
46
thirty (30) days in an aggregate amount, as to the Trust Property or each of
Other Mortgaged Properties, not to exceed one percent (1%) of the outstanding
principal balance of the Note or the respective Contemporaneous Note, as
applicable, and no other debt will be secured (senior, subordinate or pari
passu) by the Trust Property;
(l) has not made and will not make any loans or advances to any
third party (including any affiliate);
(m) is and will be solvent and pay its debts from its assets as
the same shall become due;
(n) has done or caused to be done and will do all things necessary
to preserve its existence, and will observe all formalities applicable to it;
(o) will conduct and operate its business in its own name and as
presently conducted and operated;
(p) will maintain financial statements, books and records and bank
accounts separate from those of its affiliates, including, without limitation,
its general partners or members, as applicable;
(q) will be, and at all times will hold itself out to the public
as, a legal entity separate and distinct from any other entity (including,
without limitation, any affiliate, general partner, or member, as applicable, or
any affiliate of any general partner or member of Grantor, as applicable);
(r) will file its own tax returns; provided that for so long as
the Grantor is a qualified REIT subsidiary or includible on a consolidated basis
in the tax return of the REIT, Grantor shall only be required to have its own
employer identification number;
(s) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;
(t) will establish and maintain an office through which its
business will be conducted separate and apart from those of its affiliates and
shall allocate fairly and reasonably any overhead and expense for shared office
space;
(u) will not commingle the funds and other assets of Grantor with
those of any general partner, member, affiliate, principal or any other person;
(v) has and will maintain its assets in such a manner that it is
not costly or difficult to segregate, ascertain or identify its individual
assets from those of any affiliate or any other person;
47
(w) does not and will not hold itself out to be responsible for
the debts or obligations of any other person;
(x) will pay any liabilities out of its own funds, including
salaries of its employees, not funds of any affiliate;
(y) will use stationery, invoices, and checks separate from its
affiliates; and
(z) As used in this Section 1.33, "Independent Director" shall
mean a duly appointed member of the board of directors of an SPE Corporation or
single member Delaware limited liability company who has not been at any time
during the five (5) years preceding his or her initial appointment, and shall
not be at any time while serving as Independent Director any of the following:
(a) a stockholder, director (other than in his or her capacity as an Independent
Director), officer, employee, partner, or member of Grantor, any SPE Equity
Owner, any partner, shareholder or member of any SPE Equity Owner, or any
affiliate of any of the foregoing; (b) a stockholder, director, officer,
employee, partner, or member of any customer of, supplier or service provider
(including professionals) to, or other person who derives more than 10% of its
purchases, revenues, compensation, or other financial remuneration from its
activities with Grantor, any SPE Equity Owner, any partner, shareholder or
member of any SPE Equity Owner, any affiliate of any of the foregoing, or any
person or entity who otherwise is financially dependent upon an officer,
director, or employee of Grantor, any SPE Equity Owner, any partner or member of
any SPE Equity Owner, or any family member (by blood or marriage) of any such
officer, director, or employee, or a business entity owned or controlled by any
of the foregoing; (c) a person or other entity controlling or under common
control with any such stockholder, director, officer, employee, partner, member,
customer, supplier or other person; or (d) a member of the immediate family of
any individual described in clause (a), (b) or (c) above. Notwithstanding
anything to the contrary contained herein, the Independent Director of a general
partner or managing member of Grantor shall be permitted to serve as an
Independent Director of other Special Purpose Entities which are now, or may in
the future be, established by any affiliate of Grantor, or any partner or member
of Grantor. As used in this subsection, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through ownership of
voting securities, by contract or otherwise. As used herein, the term
"affiliate" shall mean:
(aa) any person or entity directly or indirectly owning,
controlling or holding with power to vote ten percent (10%) or more of the
outstanding voting securities or interests of such other person or entity;
(bb) any person or entity ten percent (10%) or more of whose
outstanding voting securities are directly or indirectly owned, controlled or
held with power to vote by such other person or entity;
(cc) any person or entity directly or indirectly controlling,
controlled by or under common control with such other person or entity;
(dd) any officer, director or partner of such other person or
entity;
48
(ee) if such other person or entity is an officer, director or
partner, any company for which such person or entity acts in any such capacity;
and
(ff) any close relative or spouse of the specified person.
1.34 Intentionally Deleted.
1.35 Year 2000 Compatibility. Grantor shall take all action necessary
to assure that Grantor's computer-based systems are able to operate and
effectively process data including dates on and after January 1, 2000. At the
request of Beneficiary, Grantor shall provide Beneficiary with assurance
acceptable to Beneficiary of Grantor's Year 2000 compatibility.
1.36 ERISA.
(a) Grantor shall not engage in any transaction which would cause
any obligation, or action taken or to be taken, hereunder (or the exercise by
Beneficiary of any of its rights under the Note, this Deed of Trust or any of
the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under ERISA.
(b) Grantor further covenants and agrees to deliver to Beneficiary
such certifications or other evidence from time to time throughout the term of
this Deed of Trust, as requested by Beneficiary in its sole discretion, that (i)
Grantor is not an "employee benefit plan" as defined in Section 3(32) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(3) of ERISA; (ii) Grantor is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans; and (iii) one or more of the following circumstances is true:
(1) Equity interests in Grantor are publicly offered
securities within the meaning of 29 C.F.R. Section
2510.3-101(b)(2);
(2) Less than 25 percent of each outstanding class of equity
interests in Grantor are held by "benefit plan investors" within
the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or
(3) Grantor qualifies as an "operating company" within the
meaning of 29 C.F.R. Section 2510.3-101 or an investment company
registered under the Investment Company Act of 1940.
(c) Grantor shall indemnify Beneficiary and defend and hold
Beneficiary harmless from and against all civil penalties, excise taxes, or
other loss, cost damage and expense (including, without limitation, reasonable
attorneys' fees and disbursements and costs incurred in the investigation,
defense and settlement of claims and losses incurred in correcting any
prohibited transaction or in the sale of a prohibited loan, and in obtaining any
individual prohibited transaction exemption under ERISA that may be required, in
Beneficiary's sole
49
discretion) that Beneficiary may incur, directly or indirectly, as a result of a
default under this Section. This indemnity shall survive any termination,
satisfaction or foreclosure of this Deed of Trust.
ARTICLE II.
EVENTS OF DEFAULT
2.1 Events of Default. The occurrence of any of the following events
shall be an Event of Default hereunder:
(a) Grantor fails to pay any money to Beneficiary required
hereunder at the time or within any applicable grace period set forth herein or
in any other Loan Document, or if no grace period is set forth herein or
therein, then within seven (7) days after the date of Beneficiary's written
notice to Grantor that such payment is due (except those regarding payments to
be made under the Note, which failure is subject to any grace periods set forth
in the Note).
(b) Grantor fails to provide insurance as required by Section 1.4
hereof or fails to perform any material covenant, agreement, obligation, term or
condition set forth in Section 1.31 or Section 1.33 hereof (provided, however,
so long as Grantor shall be undertaking any obligations required under Section
1.31 in accordance with Environmental Laws, Grantor shall be entitled to such
time as may reasonably required to fulfill such obligations so long as the same
are completed within any timeframe established under applicable law or
governmental authority).
(c) Grantor fails to perform any other covenant, agreement,
obligation, term or condition set forth herein or in any other Loan Document,
other than those otherwise described in this Section 2.1, and, to the extent
such failure or default is susceptible of being cured, the continuance of such
failure or default for thirty (30) days after written notice thereof from
Beneficiary to Grantor; provided, however, that if such default is susceptible
of cure but such cure cannot be accomplished with reasonable diligence within
said period of time, and if Grantor commences to cure such default promptly
after receipt of written notice thereof from Beneficiary, and thereafter
prosecutes the curing of such default with reasonable diligence, such period of
time shall be extended for such period of time as may be necessary to cure such
default with reasonable diligence, but not to exceed an additional ninety (90)
days.
(d) Any representation or warranty made herein, in or in
connection with any application or commitment relating to the loan evidenced by
the Note, or in any of the other Loan Documents to Beneficiary by Grantor, by
any general partner, manager or member in Grantor, or by any Indemnitor is
determined by Beneficiary to have been false or misleading in any material
respect at the time made and any such false or misleading representation or
warranty has resulted in a Material Adverse Effect.
(e) There shall be a sale, conveyance, disposition, alienation,
hypothecation, leasing, assignment, pledge, mortgage, granting of a security
interest in or other transfer
50
or further encumbrancing of the Trust Property, Grantor or its general partners
or managing members, or any portion thereof or any interest therein, in
violation of Section 1.13 hereof.
(f) Grantor, general partner or managing member in Grantor or any
Indemnitor becomes insolvent, or makes a transfer in fraud of creditors, or
makes an assignment for the benefit of creditors, or files a petition in
bankruptcy, or is voluntarily adjudicated insolvent or bankrupt or admits in
writing the inability to pay its debts as they mature, or petitions or applies
to any tribunal for or consents to or fails to contest the appointment of a
receiver, trustee, custodian or similar officer for Grantor, for any such
general partner or managing member of Grantor or for any Indemnitor or for a
substantial part of the assets of Grantor, of any such general partner or
managing member of Grantor or of any Indemnitor, or commences any case,
proceeding or other action under any bankruptcy, reorganization, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect.
(g) A petition is filed or any case, proceeding or other action is
commenced against Grantor, against any general partner or managing member, as
the case may be, of Grantor or against any Indemnitor seeking to have an order
for relief entered against it as debtor or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts or other
relief under any law relating to bankruptcy, insolvency, arrangement,
reorganization, receivership or other debtor relief under any law or statute of
any jurisdiction, whether now or hereafter in effect, or a court of competent
jurisdiction enters an order for relief against Grantor, against any general
partner or managing member, as the case may be, of Grantor or against any
Indemnitor, as debtor, or an order, judgment or decree is entered appointing,
with or without the consent of Grantor, of any such general partner or managing
member, as the case may be, of Grantor or of any Indemnitor, a receiver,
trustee, custodian or similar officer for Grantor, for any such general partner
or managing member, as the case may be, of Grantor or for any Indemnitor, or for
any substantial part of any of the properties of Grantor, of any such general
partner or managing member, as the case may be, of Grantor or of any Indemnitor,
and if any such event shall occur, such petition, case, proceeding, action,
order, judgment or decree is not dismissed within sixty (60) days after being
commenced.
(h) The Trust Property or any part thereof is taken on execution
or other process of law in any final and non-appealable legal proceeding,
without the right of redemption against Grantor, other than in connection a
condemnation or the exercise of the power of eminent domain or police power.
(i) Grantor abandons all or a material portion of the Trust
Property for a period in excess of thirty (30) consecutive days other than as a
result of a force majeure.
(j) The holder of any lien or security interest on the Trust
Property (without implying the consent of Beneficiary to the existence or
creation of any such lien or security interest), whether superior or subordinate
to this Deed of Trust or any of the other Loan Documents, declares a default and
such default is not cured within any applicable grace or cure period set forth
in the applicable document or such holder institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder.
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(k) The Trust Property, or any part thereof, is subjected to waste
or to removal, demolition or material alteration so that the value of the Trust
Property is materially diminished thereby and Beneficiary determines that it is
not adequately protected from any loss, damage or risk associated therewith.
(l) Any dissolution, termination, partial or complete liquidation,
merger or consolidation of Grantor, any general partner or any managing member,
or any Indemnitor.
(m) The occurrence and continuance of an Event of Default under
any of the Contemporaneous Notes, the Contemporaneous Mortgages or the
Contemporaneous Assignments.
(n) Except as otherwise provided herein, if without Beneficiary's
prior consent, (a) the Percentage Lease is amended, modified or terminated or
(b) the ownership, management or control of the lessee thereunder is transferred
to a person other than Grantor or an affiliate of Grantor.
(o) If, so long as lessee under the Percentage Lease is an
affiliate of any Grantor, an Event of Default as defined in the Percentage Lease
occurs thereunder.
(p) If lessee under the Percentage Lease shall default in the
performance or observance of any of the obligations under the subordination and
attornment agreement delivered to Beneficiary beyond any applicable period of
notice and grace thereunder.
(q) If, without Beneficiary's prior consent, there is any material
adverse change in the Franchise Agreement or Management Agreement or the
Franchise Agreement or Management Agreement is terminated, except as otherwise
provided herein.
(r) If a default has occurred and for so long as it continues
beyond any applicable cure period under the Franchise Agreement or the
Management Agreement if such default permits the franchisor or Manager to
terminate or cancel such Franchise Agreement or Management Agreement.
ARTICLE III.
REMEDIES
3.1 Remedies Available. If there shall occur and be continuing an
Event of Default under this Deed of Trust, then this Deed of Trust is subject to
foreclosure as provided by law and Beneficiary may, at its option and by or
through a trustee, nominee, assignee or otherwise (including, without
limitation, the Trustee), to the fullest extent permitted by law, exercise any
or all of the following rights, remedies and recourses, either successively or
concurrently:
(a) Acceleration. Accelerate the maturity date of the Note and
declare any or all of the Debt to be immediately due and payable without any
presentment, demand, protest,
52
notice or action of any kind whatever (each of which is hereby expressly waived
by Grantor), whereupon the same shall become immediately due and payable. Upon
any such acceleration, payment of such accelerated amount shall constitute a
prepayment of the principal balance of the Note and any applicable prepayment
fee provided for in the Note shall then be immediately due and payable.
(b) Entry on the Trust Property. Either in person or by agent,
with or without bringing any action or proceeding, or by a receiver appointed by
a court and without regard to the adequacy of its security, enter upon and take
possession of the Trust Property, or any part thereof, without force or with
such force as is permitted by law and without notice or process or with such
notice or process as is required by law, unless such notice and process is
waivable, in which case Grantor hereby waives such notice and process, and do
any and all acts and perform any and all work which may be desirable or
necessary in Beneficiary's judgment to complete any unfinished construction on
the Premises, to preserve the value, marketability or rentability of the Trust
Property, to increase the income therefrom, to manage and operate the Trust
Property or to protect the security hereof, and all sums expended by Beneficiary
therefor, together with interest thereon at the Default Interest Rate, shall be
immediately due and payable to Beneficiary by Grantor on demand and shall be
secured hereby and by all of the other Loan Documents securing all or any part
of the Debt.
(c) Collect Rents. With or without taking possession of the Trust
Property, sue or otherwise collect the Rents, including those past due and
unpaid.
(d) Appointment of Receiver. Upon, or at any time prior or after,
initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, make
application to a court of competent jurisdiction for appointment of a receiver
for all or any part of the Trust Property, as a matter of strict right and
without notice to Grantor and without regard to the adequacy of the Trust
Property for the repayment of the Debt or the solvency of Grantor or any person
or persons liable for the payment of the Debt, and Grantor does hereby
irrevocably consent to such appointment, waive any and all notices of and
defenses to such appointment and agree not to oppose any application therefor by
Beneficiary, but nothing herein is to be construed to deprive Beneficiary of any
other right, remedy or privilege Beneficiary may now have under the law to have
a receiver appointed, provided, however, that the appointment of such receiver,
trustee or other appointee by virtue of any court order, statute or regulation
shall not impair or in any manner prejudice the rights of Beneficiary to receive
payment of the Rents pursuant to other terms and provisions hereof. Any such
receiver shall have all of the usual powers and duties of receivers in similar
cases, including, without limitation, the full power to hold, develop, rent,
lease, manage, maintain, operate and otherwise use or permit the use of the
Trust Property upon such terms and conditions as said receiver may deem to be
prudent and reasonable under the circumstances as more fully set forth in
Section 3.3 below. Such receivership shall, at the option of Beneficiary,
continue until full payment of all of the Debt or until title to the Trust
Property subject to foreclosure shall have passed by foreclosure sale under this
Deed of Trust or deed in lieu of foreclosure.
53
(e) Foreclosure. Immediately commence an action to foreclose this
Deed of Trust or to specifically enforce its provisions with respect to any of
the Debt, pursuant to applicable law, and sell the Trust Property or cause the
Trust Property subject to foreclosure hereunder to be sold in accordance with
the requirements and procedures provided by said statutes in a single parcel or
in several parcels at the option of Beneficiary. In the event foreclosure
proceedings are instituted by Beneficiary, all expenses incident to such
proceedings, including, but not limited to, reasonable attorneys' fees and
costs, shall be paid by Grantor and secured by this Deed of Trust and by all of
the other Loan Documents securing all or any part of the Debt. The Debt and all
other obligations secured by this Deed of Trust, including, without limitation,
interest at the Default Interest Rate, any prepayment charge, fee or premium
required to be paid under the Note in order to prepay principal (to the extent
permitted by applicable law), reasonable attorneys' fees and any other amounts
due and unpaid to Beneficiary under the Loan Documents, may be bid by
Beneficiary in the event of a foreclosure sale hereunder. In the event of a
judicial sale pursuant to a foreclosure decree, it is understood and agreed that
Beneficiary or its assigns may become the purchaser of such Trust Property or
any part thereof.
(f) Judicial Remedies. Proceed by suit or suits, at law or in
equity, instituted by or on behalf of Beneficiary, upon written request of
Beneficiary, to enforce the payment of the Debt or the other obligations of
Grantor hereunder or pursuant to the Loan Documents, to foreclose the liens and
security interests of this Deed of Trust as against all or any part of the Trust
Property, and to have all or any part of the Trust Property sold under the
judgment or decree of a court of competent jurisdiction. This remedy shall be
cumulative of any other non-judicial remedies available to Beneficiary with
respect to the Loan Documents. Proceeding with the request or receiving a
judgment for legal relief shall not be or be deemed to be an election of
remedies or bar any available non-judicial remedy of Beneficiary. If this Deed
of Trust is foreclosed judicially, as a mortgage, Beneficiary shall be entitled
to possession of the Trust Property sold during any period of redemption.
Grantor hereby waives any right it or its successors in interest may have in the
event of acceleration or entry of a decree of foreclosure; to obtain a partial
release of the Trust Property from the lien of this Deed of Trust by paying less
than the entire amount then secured hereby; or to partially redeem the Trust
Property by paying less than the amount necessary to effect redemption in full.
(g) Sale of Property. (i) Trustee, at the request of Beneficiary,
shall have the power to sell the Trust Property subject to foreclosure hereunder
or any part thereof at public auction, in such manner, at such time, and place,
upon such terms and conditions, and upon such notice as is required or permitted
by applicable law. The proceeds or avails of any sale made under or by virtue of
this paragraph, together with any other sums which then may be held by
Beneficiary under this Deed of Trust, whether under the provisions of this
paragraph or otherwise, shall be applied as provided in Section 3.2 hereof.
Beneficiary, Trustee and any receiver or custodian of the Trust Property or any
part thereof shall be liable to account for only those rents, issues, proceeds
and profits actually received by it.
(ii) Trustee may adjourn from time to time any sale by it to be
made under or by virtue of this Deed of Trust by announcement at the time and
place appointed for such sale or for such adjourned sale or sales and, except as
otherwise provided by any applicable law,
54
Trustee, without further notice or publication, may make such sale at the time
and place to which the same shall be so adjourned.
(iii) Upon the completion of any sale or sales ordered by
Beneficiary and made by Trustee under or by virtue of this paragraph, Trustee
shall execute and deliver to the accepted purchaser or purchasers a good and
sufficient deed or other instrument, or good and sufficient deed or other
instruments, granting, conveying, assigning and transferring all estate, right,
title and interest in and to the property and rights sold. Each such deed or
other instrument from Trustee may contain recitals of compliance with any
requirements of applicable law relating to exercise of the Power of Sale or to
the sale. Such recitals shall constitute conclusive evidence of such compliance
in favor of bona fide purchasers and encumbrancers for value and prima facie
evidence thereof in favor of all other persons. Each such deed or other
instrument from Trustee shall operate to convey to the grantee or transferee,
not subject to any right of redemption, Trustee's title and all right, title,
interest, and claim of Grantor, of its successors in interest, and of all
persons claiming by, through, or under them, in and to that part of the Trust
Property sold, including any and all right, title, interest, or claim in and to
such part which may have been acquired by Grantor or its successors in interest
subsequent to the execution of this Deed of Trust. Any such sale or sales made
under or by virtue or this paragraph, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or a judgment or
decree of foreclosure and sale, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of
Grantor in and to the property and rights so sold, and shall, to the fullest
extent permitted under law, be a perpetual bar both at law and in equity against
Grantor and against any and all persons claiming or who may claim the same, or
any part thereof, from, through or under Grantor.
(iv) In the event of any sale made under or by virtue of this Deed
of Trust (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or a judgment or decree of foreclosure and sale),
the entire Debt relative to the Trust Property, immediately thereupon shall,
anything in the Note, this Deed of Trust or any other of the Loan Documents to
the contrary notwithstanding, become due and payable.
(v) Upon any sale under or by virtue of this Deed of Trust
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or a judgment or decree of foreclosure and sale),
Beneficiary may bid for and acquire the Trust Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting the Debt to and against the net sales price after deducting therefrom
the expenses of the sale and the costs of the action.
(vi) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or any part thereof or upon
any other property of Grantor shall release the lien of this Deed of Trust upon
the Trust Property or any part thereof, or any liens, rights, powers or remedies
of Beneficiary hereunder, but such liens, rights, powers and remedies of
Beneficiary shall continue unimpaired until the entire Debt is paid in full.
(vii) All procedural matters relating to exercise of the Trustee's
Power of Sale available under this Deed of Trust (such as the manner of giving
notice of default and notice of
55
sale, the forms employed for such purpose, the persons to receive notice, the
time which must elapse between various stages of the proceeding, and the manner
in which the sale is conducted) shall be governed by the statutory law which is
in effect at the time said power is exercised. In the event some or all of such
procedural matters are not covered by then-effective legislation, the matters
not covered shall be governed by the law which is in effect at the time this
Deed of Trust is executed.
(viii) Grantor hereby authorizes Trustee, upon its being presented
with an affidavit signed by Beneficiary setting forth facts showing an Event of
Default under this Deed of Trust, to accept as true and conclusive all facts and
statements contained therein and to rely and act thereon.
(ix) Upon foreclosure of this Deed of Trust (whether pursuant to
the Power of Sale which is available under this Deed of Trust or pursuant to
foreclosure of this Deed of Trust as a mortgage), no lease, including, without
limitation, the Percentage Lease, then affecting the Trust Property shall be
terminated by application of the doctrine of merger, or as a matter of law, or
as a result of such foreclosure, unless Beneficiary or the purchaser at the
foreclosure sale shall so elect in writing. No act by or on behalf of
Beneficiary, Trustee, or any such purchaser shall constitute or result in
termination of any such lease unless Beneficiary or such purchaser shall give
written notice of such termination to the tenant or lessee thereunder.
(h) Other. Beneficiary may exercise any other right or remedy
available hereunder, under any of the other Loan Documents or at law or in
equity.
3.2 Application of Proceeds. To the fullest extent permitted by law,
the proceeds of any sale under this Deed of Trust following the occurrence and
continuance of an Event of Default shall be applied, to the extent funds are so
available, to the following items in such order as Beneficiary in its discretion
may determine:
(a) To payment of the reasonable costs, expenses and fees of
taking possession of the Trust Property, and of holding, operating, maintaining,
using, leasing, repairing, improving, marketing and selling the same and of
otherwise enforcing Beneficiary's rights and remedies hereunder and under the
other Loan Documents, including, but not limited to, receivers' fees, court
costs, attorneys', accountants', appraisers', managers' and other professional
fees, title charges and transfer taxes.
(b) To payment of all sums expended by Beneficiary under the terms
of any of the Loan Documents and not yet repaid, together with interest on such
sums at the Default Interest Rate.
(c) To payment of the Debt and all other obligations secured by
this Deed of Trust, including, without limitation, interest at the Default
Interest Rate and, to the extent permitted by applicable law, any prepayment
fee, charge or premium required to be paid under the Note in order to prepay
principal, subject to applicable law, in any order that Beneficiary chooses in
its sole discretion.
56
(d) The remainder, if any, of such funds shall be disbursed to
Grantor or to the person or persons legally entitled thereto or, in the case of
funds realized by reason of a sale by Trustee, the remainder may be deposited by
Trustee with the Clerk of the District Court for county in which the same took
place.
3.3 Right and Authority of Receiver or Beneficiary in the Event of
Default; Power of Attorney. Upon the occurrence and continuance of an Event of
Default, and entry upon the Trust Property pursuant to Section 3.1(b) hereof or
appointment of a receiver pursuant to Section 3.1(d) hereof, and under such
terms and conditions as may be prudent and reasonable under the circumstances in
Beneficiary's or the receiver's sole discretion, all at Grantor's expense,
Beneficiary or said receiver, or such other persons or entities as they shall
hire, direct or engage, as the case may be, may do or permit one or more of the
following, successively or concurrently: (a) enter upon and take possession and
control of any and all of the Trust Property; (b) take and maintain possession
of all documents, books, records, papers and accounts relating to the Trust
Property; (c) exclude Grantor and its agents, servants and employees wholly from
the Trust Property; (d) manage and operate the Trust Property; (e) preserve and
maintain the Trust Property; (f) make repairs and alterations to the Trust
Property; (g) complete any construction or repair of the Improvements, with such
changes, additions or modifications of the plans and specifications or intended
disposition and use of the Improvements as Beneficiary may in its sole
discretion deem appropriate or desirable to place the Trust Property in such
condition as will, in Beneficiary's sole discretion, make it or any part thereof
readily marketable or rentable; (h) conduct a marketing or leasing program with
respect to the Trust Property, or employ a marketing or leasing agent or agents
to do so, directed to the leasing or sale of the Trust Property under such terms
and conditions as Beneficiary may in its sole discretion deem appropriate or
desirable; (i) employ such contractors, subcontractors, materialmen, architects,
engineers, consultants, managers, brokers, marketing agents, or other employees,
agents, independent contractors or professionals, as Beneficiary may in its sole
discretion deem appropriate or desirable to implement and effectuate the rights
and powers herein granted; (j) execute and deliver, in the name of Beneficiary
as attorney-in-fact and agent of Grantor or in its own name as Beneficiary, such
documents and instruments as are necessary or appropriate to consummate
transactions authorized hereunder; (k) enter such leases, whether of real or
personal property, or tenancy agreements, under such terms and conditions as
Beneficiary may in its sole discretion deem appropriate or desirable; (1)
collect and receive the Rents from the Trust Property; (m) eject tenants or
repossess personal property, as provided by law, for breaches of the conditions
of their leases or other agreements; (n) sue for unpaid Rents, payments, income
or proceeds in the name of Grantor or Beneficiary; (o) maintain actions in
forcible entry and detainer, ejectment for possession and actions in distress
for rent; (p) compromise or give acquittance for Rents, payments, income or
proceeds that may become due; (q) delegate or assign any and all rights and
powers given to Beneficiary by this Deed of Trust; and (r) do any acts which
Beneficiary in its sole discretion deems appropriate or desirable to protect the
security hereof and use such measures, legal or equitable, as Beneficiary may in
its sole discretion deem appropriate or desirable to implement and effectuate
the provisions of this Deed of Trust. This Deed of Trust shall constitute a
direction to and full authority to any lessee, or other third party who has
heretofore dealt or contracted or may hereafter deal or contract with Grantor or
Beneficiary, at the request of Beneficiary following the occurrence and
continuance of an Event of Default or as otherwise provided in the Loan
Documents, to pay all amounts owing under any lease, contract, concession,
license or other agreement to Beneficiary without proof of the Event of Default
relied upon. Any such lessee or third party is hereby irrevocably authorized to
rely upon and comply with (and shall be fully protected by Grantor in so doing)
any request, notice or demand by Beneficiary for the payment to Beneficiary of
any Rents or other sums which may be or thereafter become due under its lease,
contract,
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concession, license or other agreement, or for the performance of any
undertakings under any such lease, contract, concession, license or other
agreement, and shall have no right or duty to inquire whether any Event of
Default under this Deed of Trust or under any of the other Loan Documents has
actually occurred or is then existing. Grantor hereby constitutes and appoints
Beneficiary, its assignees, successors, transferees and nominees, as Grantor's
true and lawful attorney-in-fact and agent, with full power of substitution in
the Trust Property, in Grantor's name, place and stead, to do or permit any one
or more of the foregoing described rights, remedies, powers and authorities,
successively or concurrently, and said power of attorney shall be deemed a power
coupled with an interest and irrevocable so long as any portion of the Debt is
outstanding. Any money advanced by Beneficiary in connection with any action
taken under this Section 3.3, together with interest thereon at the Default
Interest Rate from the date of making such advancement by Beneficiary until
actually paid by Grantor, shall be a demand obligation owing by Grantor to
Beneficiary and shall be secured by this Deed of Trust and by every other
instrument securing all or any portion of the Debt.
3.4 Occupancy After Foreclosure. In the event there is a foreclosure
sale hereunder resulting from the occurrence and continuance of an Event of
Default, and at the time of such sale, Grantor or Grantor's representatives,
successors or assigns, or any other persons claiming any interest in the Trust
Property by, through or under Grantor (except to the tenant under the Percentage
Lease if not terminated by Beneficiary), are occupying or using the Trust
Property, or any part thereof, then, to the extent not prohibited by applicable
law, each and all shall, at the option of Beneficiary or the purchaser at such
sale, as the case may be, immediately become the tenant of the purchaser at such
sale, which tenancy shall be a tenancy from day-to-day, terminable at the will
of either landlord or tenant, at a reasonable rental per day based upon the
value of the Trust Property occupied or used, such rental to be due daily to the
purchaser. Further, to the extent permitted by applicable law, in the event the
tenant fails to surrender possession of the Trust Property upon the termination
of such tenancy, the purchaser shall be entitled to institute and maintain an
action for unlawful detainer of the Trust Property in the appropriate court of
the county in which the Premises is located.
3.5 Notice to Account Debtors. Beneficiary may, at any time after the
occurrence and continuance of an Event of Default, notify the account debtors
and obligors of any accounts, chattel paper, negotiable instruments or other
evidences of indebtedness to Grantor included in the Trust Property to pay
Beneficiary directly. Grantor shall at any time or from time to time upon the
request of Beneficiary following the occurrence and continuance of an Event of
Default, provide to Beneficiary a current list of all such account debtors and
obligors and their addresses.
3.6 Cumulative Remedies. All remedies contained in this Deed of Trust
are cumulative and Beneficiary shall also have all other remedies provided at
law and in equity or in any other Loan Documents. Such remedies may be pursued
separately, successively or
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concurrently at the sole subjective direction of Beneficiary and may be
exercised in any order and as often as occasion therefor shall arise. No act of
Beneficiary shall be construed as an election to proceed under any particular
provisions of this Deed of Trust to the exclusion of any other provision of this
Deed of Trust or as an election of remedies to the exclusion of any other remedy
which may then or thereafter be available to Beneficiary. No delay or failure by
Beneficiary to exercise any right or remedy under this Deed of Trust shall be
construed to be a waiver of that right or remedy or of any Event of Default.
Beneficiary may exercise any one or more of its rights and remedies at its
option without regard to the adequacy of its security.
3.7 Payment of Expenses. Grantor shall pay on demand all of
Beneficiary's or Trustee's expenses incurred in any efforts to enforce any terms
of this Deed of Trust, whether or not any lawsuit is filed and whether or not
foreclosure is commenced but not completed, including, but not limited to,
reasonable legal fees and disbursements, foreclosure costs and title charges,
together with interest thereon from and after the date incurred by Beneficiary
until actually paid by Grantor at the Default Interest Rate, and the same shall
be secured by this Deed of Trust and by all of the other Loan Documents securing
all or any part of the Debt.
ARTICLE IV.
MISCELLANEOUS TERMS AND CONDITIONS
4.1 Time of Essence. Time is of the essence with respect to all
provisions of this Deed of Trust.
4.2 Release of Deed of Trust. If all of the Debt be paid, then and in
that event only, all rights under this Deed of Trust, except for those
provisions hereof which by their terms survive, shall terminate and the Trust
Property shall become wholly clear of the liens, security interests, conveyances
and assignments evidenced hereby, which shall be promptly reconveyed and
released of record by Trustee, at the written request of Beneficiary at
Grantor's cost.
4.3 Certain Rights of Beneficiary. Without affecting Grantor's
liability for the payment of any of the Debt, Beneficiary may from time to time
and without notice to Grantor: (a) release any person liable for the payment of
the Debt; (b) extend or modify the terms of payment of the Debt; (c) accept
additional real or personal property of any kind as security or alter,
substitute or release any property securing the Debt; (d) recover any part of
the Trust Property; (e) consent in writing to the making of any subdivision map
or plat thereof; (f) join in granting any easement therein; or (g) join in any
extension agreement of this Deed of Trust or any agreement subordinating the
lien hereof.
4.4 Waiver of Certain Defenses. No action for the enforcement of the
lien hereof or of any provision hereof shall be subject to any defense which
would not be good and available to the party interposing the same in an action
at law upon the Note or any of the other Loan Documents.
4.5 Notices. Except for Notices of Default, Notice of Sale, and any
other notices or materials sent or given pursuant to the Utah Trust Deed Act
(which shall be given as required by said Act and which are referred to herein
as the "Statutory Notices"), all notices, demands,
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requests or other communications to be sent by one party to the other hereunder
or required by law (other than the Utah Trust Deed Act) shall be in writing and
shall be deemed to have been validly given or served by delivery of the same in
person to the intended addressee, or by depositing the same with Federal Express
or another reputable private courier service for next business day delivery, or
by depositing the same in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, in any event addressed to the intended
addressee at its address set forth on the first page of this Deed of Trust or at
such other address as may be designated by such party as herein provided. All
such notices, demands and requests shall be effective upon such personal
delivery, or one (1) business day after being deposited with the private courier
service, or two (2) business days after being deposited in the United States
mail as required above. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given as herein
required shall be deemed to be receipt of the notice, demand or request sent. By
giving to the other party hereto at least fifteen (15) days' prior written
notice thereof in accordance with the provisions hereof, the parties hereto
shall have the right from time to time to change their respective addresses and
each shall have the right to specify as its address any other address within the
United States of America.
4.6 Statutory Notices. Notwithstanding the provisions of the foregoing
Section 4.5 or any other provision of this Deed of Trust, any notice of default
required by law or notice of sale required by law, in either case given in
anticipation of or preparation for Trustee's exercise of the Power of Sale under
this Deed of Trust, shall be given in the manner, at the time, and to the
persons required by the Utah Trust Deed Act. Grantor hereby requests that a copy
of any such notice of default and a copy of any such notice of sale be mailed to
Grantor at the address for Grantor set forth on the first page of this Deed of
Trust.
4.7 Successors and Assigns; Joint and Several Liability. The terms,
provisions, indemnities, covenants and conditions hereof shall be binding upon
Grantor and the successors and assigns of Grantor, including all successors in
interest of Grantor in and to all or any part of the Trust Property, and shall
inure to the benefit of Beneficiary, its directors, officers, shareholders,
employees and agents and their respective successors and assigns and shall
constitute covenants running with the land. All references in this Deed of Trust
to Grantor or Beneficiary shall be deemed to include all such parties'
successors and assigns, and the term "Beneficiary" as used herein shall also
mean and refer to any lawful holder or owner, including pledgees and
participants, of any of the Debt.
4.8 Severability. A determination that any provision of this Deed of
Trust is unenforceable or invalid shall not affect the enforceability or
validity of any other provision, and any determination that the application of
any provision of this Deed of Trust to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.
4.9 Gender. Within this Deed of Trust, words of any gender shall be
held and construed to include any other gender, and words in the singular shall
be held and construed to include the plural, and vice versa, unless the context
otherwise requires.
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4.10 Waiver; Discontinuance of Proceedings. Beneficiary may waive any
single Event of Default by Grantor hereunder without waiving any other prior or
subsequent Event of Default. Beneficiary may remedy any Event of Default by
Grantor hereunder without waiving the Event of Default remedied. Neither the
failure by Beneficiary to exercise, nor the delay by Beneficiary in exercising,
any right, power or remedy upon any Event of Default by Grantor hereunder shall
be construed as a waiver of such Event of Default or as a waiver of the right to
exercise any such right, power or remedy at a later date. No single or partial
exercise by Beneficiary of any right, power or remedy hereunder shall exhaust
the same or shall preclude any other or further exercise thereof, and every such
right, power or remedy hereunder may be exercised at any time and from time to
time. No modification or waiver of any provision hereof nor consent to any
departure by Grantor therefrom shall in any event be effective unless the same
shall be in writing and signed by Beneficiary, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
given. No notice to nor demand on Grantor in any case shall of itself entitle
Grantor to any other or further notice or demand in similar or other
circumstances. Acceptance by Beneficiary of any payment in an amount less than
the amount then due on any of the Debt shall be deemed an acceptance on account
only and shall not in any way affect the existence of an Event of Default. In
case Beneficiary shall have proceeded to invoke any right, remedy or recourse
permitted hereunder or under the other Loan Documents and shall thereafter elect
to discontinue or abandon the same for any reason, Beneficiary shall have the
unqualified right to do so and, in such an event, Grantor and Beneficiary shall
be restored to their former positions with respect to the Debt, the Loan
Documents, the Trust Property and otherwise, and the rights, remedies, recourses
and powers of Beneficiary shall continue as if the same had never been invoked.
4.11 Section Headings. The headings of the sections and paragraphs of
this Deed of Trust are for convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.
4.12 GOVERNING LAW. THIS DEED OF TRUST WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS
LOCATED, PROVIDED THAT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER
BE PREEMPTED BY FEDERAL LAW, SUCH FEDERAL LAW SHALL SO GOVERN AND BE
CONTROLLING, AND PROVIDED FURTHER THAT THE LAWS OF THE STATE IN WHICH THE
PREMISES IS LOCATED SHALL GOVERN AS TO THE CREATION, PRIORITY AND ENFORCEMENT OF
LIENS, ENCUMBRANCES AND SECURITY INTERESTS IN THE TRUST PROPERTY LOCATED IN SUCH
STATE.
4.13 Counting of Days. The term "days" when used herein shall mean
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the Premises is located, the
period shall be deemed to end on the next succeeding business day. The term
"business day" when used herein shall mean a weekday, Monday through Friday,
except a legal holiday or a day on which banking institutions in New York, New
York are authorized by law to be closed.
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4.14 Relationship of the Parties. The relationship between Grantor and
Beneficiary is that of a borrower and a lender only and neither of those parties
is, nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.
4.15 Application of the Proceeds of the Note. To the extent that
proceeds of the Note are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against the Trust Property,
such proceeds have been advanced by Beneficiary at Grantor's request and
Beneficiary shall be subrogated to any and all rights, security interests and
liens owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens, security
interests, charges or encumbrances are released.
4.16 Unsecured Portion of Indebtedness. If any part of the Debt cannot
be lawfully secured by this Deed of Trust or if any part of the Trust Property
cannot be lawfully subject to the lien and security interest hereof to the full
extent of such indebtedness, then all payments made shall be applied on said
indebtedness first in discharge of that portion thereof which is unsecured by
this Deed of Trust.
4.17 Cross-Default; Cross-Collateralization. Grantor acknowledges that
Beneficiary has made the loan evidenced by the Note to Grantor upon the security
of its collective interest in the Trust Property and Other Mortgaged Properties
and in reliance upon the aggregate of the Trust Property and Other Mortgaged
Properties taken together being of greater value as collateral security than the
sum of the Trust Property and Other Mortgaged Properties taken separately.
Grantor agrees that this Deed of Trust and the other Contemporaneous Mortgages
are and will be cross-collateralized and cross-defaulted with each other so that
(i) an Event of Default under either this Deed of Trust or any of the
Contemporaneous Mortgages shall constitute an Event of Default under both this
Deed of Trust and the Contemporaneous Mortgages which secure the Note and the
Contemporaneous Notes; (ii) an Event of Default under the Note shall constitute
an Event of Default under each of this Deed of Trust, the Contemporaneous Notes,
the Contemporaneous Mortgages and the Contemporaneous Assignments; and (iii)
each of this Deed of Trust, the Contemporaneous Notes and the Contemporaneous
Mortgages and the Contemporaneous Assignments shall constitute security for the
Note and the Contemporaneous Notes as if a single blanket lien were placed on
the Trust Property and Other Mortgaged Properties as security for the Note and
the Contemporaneous Notes.
4.18 Interest After Sale. In the event the Trust Property or any part
thereof shall be sold upon foreclosure as provided hereunder, to the extent
permitted by law, the sum for which the same shall have been sold shall, for
purposes of redemption (pursuant to the laws of the state in which the Premises
is located), bear interest at the Default Interest Rate.
4.19 Inconsistency with Other Loan Documents. In the event of any
inconsistency between the provisions hereof and the provisions in any of the
other Loan Documents, it is intended that the provisions of the Note shall
control over the provisions of the other Loan Documents.
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4.20 Construction of this Document. This document may be construed as
a mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, in order to fully effectuate the
liens and security interests created hereby and the purposes and agreements
herein set forth.
4.21 No Merger. It is the desire and intention of the parties hereto
that this Deed of Trust and the lien hereof do not merge in fee simple title to
the Trust Property. It is hereby understood and agreed that should Beneficiary
acquire any additional or other interests in or to the Trust Property or the
ownership thereof, then, unless a contrary intent is manifested by Beneficiary
as evidenced by an appropriate document duly recorded, this Deed of Trust and
the lien hereof shall not merge in such other or additional interests in or to
the Trust Property, toward the end that this Deed of Trust may be foreclosed as
if owned by a stranger to said other or additional interests.
4.22 Rights With Respect to Junior Encumbrances. Any person or entity
purporting to have or to take a junior mortgage or other lien upon the Trust
Property or any interest therein shall be subject to the rights of Beneficiary
to amend, modify, increase, vary, alter or supplement this Deed of Trust, the
Note or any of the other Loan Documents, and to extend the maturity date of the
Debt, and to increase the amount of the Debt, and to waive or forebear the
exercise of any of its rights and remedies hereunder or under any of the other
Loan Documents and to release any collateral or security for the Debt, in each
and every case without obtaining the consent of the holder of such junior lien
and without the lien or security interest of this Deed of Trust losing its
priority over the rights of any such junior lien.
4.23 Beneficiary May File Proofs of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Grantor or the principals, general
partners or managing members in Grantor, or their respective creditors or
property, Beneficiary, to the extent permitted by law, shall be entitled to file
such proofs of claim and other documents as may be necessary or advisable in
order to have the claims of Beneficiary allowed in such proceedings for the
entire Debt at the date of the institution of such proceedings and for any
additional amount which may become due and payable by Grantor hereunder after
such date.
4.24 Fixture Filing. This Deed of Trust shall be effective from the
date of its recording as a financing statement filed as a fixture filing with
respect to all goods constituting part of the Trust Property which are or are to
become fixtures. This Deed of Trust shall also be effective as a financing
statement covering minerals or the like (including oil and gas) and is to be
filed for record in the real estate records of the county where the Premises is
situated. The mailing address of Grantor and the address of Beneficiary from
which information concerning the security interests may be obtained are set
forth in Section 1.22 above. The record owner of the Premises (which is the land
to which the fixtures are or will be attached) is Grantor. The Tax
Identification number for Grantor is: [PENDING].
4.25 After-Acquired Trust Property. All property acquired by Grantor
after the date of this Deed of Trust which by the terms of this Deed of Trust
shall be subject to the lien and the
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security interest created hereby, shall immediately upon the acquisition thereof
by Grantor and without further mortgage, conveyance or assignment become subject
to the lien and security interest created by this Deed of Trust. Nevertheless,
Grantor shall execute, acknowledge, deliver and record or file, as appropriate,
all and every such further mortgages, security agreements, financing statements,
assignments and assurances as Beneficiary shall require for accomplishing the
purposes of this Deed of Trust.
4.26 No Representation. By accepting delivery of any item required to
be observed, performed or fulfilled or to be given to Beneficiary pursuant to
the Loan Documents, including, but not limited to, any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Beneficiary shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness or
legal effect of the same, or of any term, provision or condition thereof, and
such acceptance of delivery thereof shall not be or constitute any warranty,
consent or affirmation with respect thereto by Beneficiary.
4.27 Counterparts. This Deed of Trust may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, for the same effect as if all parties hereto had signed the
same signature page. Any signature page of this Deed of Trust may be detached
from any counterpart of this Deed of Trust without impairing the legal effect of
any signatures thereon and may be attached to another counterpart of this Deed
of Trust identical in form hereto but having attached to it one or more
additional signature pages.
4.28 Personal Liability. Notwithstanding anything to the contrary
contained in this Deed of Trust, the liability of Grantor and its officers,
directors, general partners, managers, members and principals for the Debt and
for the performance of the other agreements, covenants and obligations contained
herein and in the Loan Documents shall be limited as set forth in Section 2.6 of
the Note.
4.29 Recording and Filing. Grantor will cause the Loan Documents and
all amendments and supplements thereto and substitutions therefor to be
recorded, filed, re-recorded and re-filed in such manner and in such places as
Beneficiary shall reasonably request, and will pay on demand all such recording,
filing, re-recording and re-filing taxes, fees and other charges. Grantor shall
reimburse Beneficiary, or its servicing agent, for the costs incurred in
obtaining a tax service company to verify the status of payment of taxes and
assessments on the Trust Property.
4.30 Entire Agreement and Modifications. This Deed of Trust and the
other Loan Documents contain the entire agreements between the parties relating
to the subject matter hereof and thereof and all prior agreements relative
hereto and thereto which are not contained herein or therein are terminated.
This Deed of Trust and the other Loan Documents may not be amended, revised,
waived, discharged, released or terminated orally but only by a written
instrument or instruments executed by the party against which enforcement of the
amendment, revision,
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waiver, discharge, release or termination is asserted. Any alleged amendment,
revision, waiver, discharge, release or termination which is not so documented
shall not be effective as to any party.
4.31 Maximum Interest. The provisions of this Deed of Trust and of all
agreements between Grantor and Beneficiary, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest") to Beneficiary for the use, forbearance or retention of the
money loaned under the Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or fulfillment
of any provision hereof or of any agreement between Grantor and Beneficiary
shall, at the time performance or fulfillment of such provision shall be due,
exceed the limit for Interest prescribed by law or otherwise transcend the limit
of validity prescribed by applicable law, then, ipso facto, the obligation to be
performed or fulfilled shall be reduced to such limit, and if, from any
circumstance whatsoever, Beneficiary shall ever receive anything of value deemed
Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under the Note in the inverse order of its maturity
(whether or not then due) or, at the option of Beneficiary, be paid over to
Grantor, and not to the payment of Interest. All Interest (including any amounts
or payments deemed to be Interest) paid or agreed to be paid to Beneficiary
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment in full of the
principal balance of the Note so that the Interest thereon for such full period
will not exceed the maximum amount permitted by applicable law. This Section
will control all agreements between Grantor and Beneficiary.
4.32 Interest Payable by Beneficiary. Beneficiary shall cause funds in
the Replacement Reserve to be deposited into interest bearing accounts of the
type customarily maintained by Beneficiary or its servicing agent for the
investment of similar reserves, which accounts may not yield the highest
interest rate then available. Interest payable on such amounts shall be computed
based on the daily outstanding balance in the Replacement Reserve. Such interest
shall be calculated on a simple, non-compounded interest basis based solely on
contributions made to the Replacement Reserve by Grantor. All interest earned on
amounts contributed to the Replacement Reserve shall be retained by Beneficiary
and accumulated for the benefit of Grantor and added to the balance in the
Replacement Reserve and shall be disbursed for payment of the items for which
other funds in the Replacement Reserve are to be disbursed.
4.33 Secondary Market. Beneficiary may sell, assign, participate,
transfer or deliver the Note and the Loan Documents to one or more investors
(directly or through a trust of other entity which may sell certificates or
other instruments to investor) in the secondary mortgage market (a "Secondary
Market Transaction"). In connection with such sale, assignment, participation,
transfer or delivery, Beneficiary may retain or assign responsibility for
servicing the loan evidenced by the Note or may delegate some or all of such
responsibility and/or obligations to a servicer, including, but not limited to,
any subservicer or master servicer, on behalf of the investors.
4.34 Dissemination of Information. If Beneficiary determines at any
time to sell, transfer or assign the Note, this Deed of Trust and other Loan
Documents, and any or all
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servicing rights with respect thereto, or to grant participations therein (the
"Participations") or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (the "Securities"), Beneficiary may forward to
each purchaser, transferee, Beneficiary, servicer, participant, investor, or
their respective successors in such Participations and/or Securities
(collectively, the "Investors") or any Rating Agency rating such Securities,
each prospective Investor and each of the foregoing's respective counsel, all
documents and information which Beneficiary now has or may hereafter acquire
relating to the Debt, to Beneficiary, any guarantor, any indemnitor, and the
Trust Property, which shall have been furnished by Beneficiary and any
Indemnitor, as Beneficiary determines necessary or desirable. If at any time
during which the Loan is an asset of a securitization or is otherwise an asset
of any rated transaction, "Rating Agency" or "Rating Agencies" shall mean the
rating agency or rating agencies that from time to time rate the securities,
certificates or other instruments issued in connection with such securitization
or other transaction.
4.35 Contemporaneous Notes, Contemporaneous Mortgages and
Contemporaneous Assignments of Leases and Rents. This Deed of Trust is made
contemporaneously with two (2) other promissory notes of Grantor and three (3)
promissory notes of Apple Suites REIT Limited Partnership, each of even date
herewith (the "Contemporaneous Notes"), two (2) other deeds of trust or deeds to
secure debt of Grantor and three (3) other deeds of trust of Apple Suites REIT
Limited Partnership, each of even date herewith (the "Contemporaneous
Mortgages") and two (2) other Assignment of Leases, Rents and Profits of Grantor
and three (3) other Assignment of Leases, Rents and Profits of Apple Suites REIT
Limited Partnership, each of even date herewith (the "Contemporaneous
Assignments"), given by Grantor or Apple Suites REIT Limited Partnership to or
for the benefit of Beneficiary covering properties listed together with the
Trust Property, on Exhibit B attached hereto and incorporated herein by this
reference (the "Other Mortgaged Properties").
ARTICLE V.
CONCERNING THE TRUSTEE
5.1 Certain Rights. With the approval of Beneficiary, Trustee shall
have the right to take any and all of the following actions: (i) to select,
employ and consult with counsel (who may be, but need not be, counsel for
Beneficiary) upon any matters arising hereunder, including the preparation,
execution and interpretation of the Loan Documents, and shall be fully protected
in relying as to legal matters on the advice of counsel, (ii) to execute any of
the trusts and powers hereof and to perform any duty hereunder either directly
or through his or her agents or attorneys, (iii) to select and employ, in and
about the execution of his or her duties hereunder, suitable accountants,
engineers and other experts, agents and attorneys-in-fact, either corporate or
individual, not regularly in the employ of Trustee (and Trustee shall not be
answerable for any act, default, negligence, or misconduct of any such
accountant, engineer or other expert, agent or attorney-in-fact, if selected
with reasonable care, or for any error of judgment or act done by Trustee in
good faith, or be otherwise responsible or accountable under any circumstances
whatsoever, except for Trustee's gross negligence or bad faith), and (iv) any
and all other lawful action that Beneficiary may instruct Trustee to take to
protect or enforce Beneficiary's rights hereunder. Trustee shall not be
personally liable in case of entry by Trustee, or anyone entering
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by virtue of the powers herein granted to Trustee, upon the Trust Property for
debts contracted for or liability or damages incurred in the management or
operation of the Trust Property. Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting any action taken or
proposed to be taken by Trustee hereunder, believed by Trustee in good faith to
be genuine. Trustee shall be entitled to reimbursement for expenses incurred by
Trustee in the performance of Trustee's duties hereunder and to reasonable
compensation for such of Trustee's services hereunder as shall be rendered.
Grantor will, from time to time, pay reasonable compensation due to Trustee
hereunder and reimburse Trustee for, and save and hold Trustee harmless against,
any and all liability and reasonable expenses which may be incurred by Trustee
in the performance of Trustee's duties.
5.2 Retention of Money. All moneys received by Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received, and shall be segregated from any other moneys of Trustee.
5.3 Successor Trustees. Beneficiary may at any time appoint a successor
Trustee to act hereunder. All matters relating to the method of effecting a
substitution of Trustee shall be governed by the statutory law which is in
effect at the time substitution takes place. In the event then-effective
legislation does not cover some or all of the matters relating to the method of
accomplishing a substitution of Trustee, the matters not covered shall be
governed by the law which is in effect at the time this Deed of Trust is
executed. From the time a substitution of Trustee is accomplished, the new
Trustee shall succeed to all the power, duties, authority and title of Trustee
named herein and of any successor Trustee.
5.4 Perfection of Appointment. Should any deed, conveyance, or
instrument of any nature be required from Grantor by any Trustee or substitute
Trustee to more fully and certainly vest in and confirm to Trustee or substitute
Trustee such estates, rights, powers, and duties, then, upon request by Trustee
or substitute trustee, any and all such deeds, conveyances and instruments shall
be made, executed, acknowledged, and delivered and shall be caused to be
recorded and/or filed by Grantor.
5.5 No Representation by Trustee or Beneficiary. By accepting or
approving anything required to be observed, performed, or fulfilled or to be
given to Trustee or Beneficiary pursuant to the Loan Documents, including,
without limitation, any officer's certificate, balance sheet, statement of
profit and loss or other financial statement, survey, appraisal or insurance
policy, neither Trustee nor Beneficiary shall be deemed to have warranted,
consented to, or affirmed the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision, or condition thereof, and such
acceptance or approval thereof shall not be or constitute any warranty or
affirmation with respect thereto by Trustee or Beneficiary.
5.6 Acceptance of Trust. Trustee accepts this trust when this Deed of
Trust, duly executed and acknowledged, is made a public record as provided by
law. Trustee is not obligated to notify any party to this Deed of Trust of
pending sale under any other deed of trust or of any action or proceeding in
which Grantor, Beneficiary, or Trustee is a party, unless brought by Trustee.
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IN WITNESS WHEREOF, Grantor has executed this Deed of Trust on the day
and year first written above.
GRANTOR:
APPLE SUITES SPE I, INC.,
a Virginia corporation
By:/s/ Glade M. Knight
---------------------------
Name: Glade M. Knight
Title: President
STATE/COMMONWEALTH OF VIRGINIA )
) SS.
CITY/COUNTY OF RICHMOND )
On the 6th day of September 2000, personally appeared before me Glade
M. Knight, who being by me duly sworn did say that he is the President of Apple
Suites SPE I, Inc., a Virginia corporation and that the foregoing instrument was
signed on behalf of said corporation by authority of a resolution of its Board
of Directors, and said Glade M. Knight acknowledged to me that said corporation
executed the same.
/s/ Robin S. Broughton
- -----------------------
Notary Public
My Commission Expires: 7/31/02
Residing at Richmond, VA
EXHIBIT A
Legal Description
Tax Serial No(s): __________
[OMITTED]
EXHIBIT B
Mortgaged Property
1. Homewood Suites, Salt Lake City, Utah - 844 East North Union Avenue,
Midvale, Utah 84047.
Other Mortgaged Properties
2. Homewood Suites, Addison, Texas - 4451 Beltline Road, Addison Texas
75001.
3. Homewood Suites, Atlanta, Georgia - 3200 Cobb Parkway, Southwest,
Atlanta, Georgia 30339.
4. Homewood Suites, Irving, Texas - 4300 Wingren Drive, Irving, Texas
75001.
5. Homewood Suites, Ridgeland, Mississippi - 853 Centre Street, Ridgeland,
Mississippi 39157.
6. Homewood Suites, Plano, Texas - 4705 Old Shepard Place, Plano, Texas
75093.
Contemporaneous Notes
1. Promissory Note from Apple Suites SPE I, Inc., a Virginia corporation,
to First Union National Bank, a national banking association, secured by
Homewood Suites, Atlanta, Georgia (Loan No.: 26-5330841).
2. Promissory Note from Apple Suites REIT Limited Partnership, a Virginia
limited partnership, to First Union National Bank, a national banking
association, secured by Homewood Suites, Irving, Texas (Loan No.:
26-5330846).
3. Promissory Note from Apple Suites SPE I, Inc., a Virginia corporation,
to First Union National Bank, a national banking association, secured by
Homewood Suites, Ridgeland, Mississippi (Loan No.: 26-5330844).
4. Promissory Note from Apple Suites REIT Limited Partnership, a Virginia
limited partnership, to First Union National Bank, a national banking
association, secured by Homewood Suites, Plano, Texas (Loan No.:
26-5330847).
5. Promissory Note from Apple Suites SPE I, Inc., a Virginia corporation,
to First Union National Bank, a national banking association, secured by
Homewood Suites, Addison, Texas (Loan No.: 26-5330845).
Contemporaneous Mortgages
1. Deed to Secure Debt and Security Agreement from Apple Suites SPE I,
Inc., a Virginia corporation, to First Union National Bank, a national
banking association, secured by Homewood Suites, Atlanta, Georgia (Loan
No.: 26-5330841).
2. Deed of Trust and Security Agreement from Apple Suites REIT Limited
Partnership, a Virginia limited partnership, to TRSTE, Inc., a Virginia
corporation, as Trustee for the benefit of First Union National Bank, a
national banking association, secured by Homewood Suites, Irving, Texas
(Loan No.: 26-5330846).
3. Deed of Trust and Security Agreement from Apple Suites SPE I, Inc., a
Virginia corporation, to TRSTE, Inc., a Virginia corporation, as Trustee
for the benefit of First Union National Bank, a national banking
association, secured by Homewood Suites, Ridgeland, Mississippi (Loan
No.: 26-5330844).
4. Deed of Trust and Security Agreement from Apple Suites REIT Limited
Partnership, a Virginia limited partnership, to TRSTE, Inc., a Virginia
corporation, as Trustee for the benefit of First Union National Bank, a
national banking association, secured by Homewood Suites, Plano, Texas
(Loan No.: 26-5330847).
5. Deed of Trust and Security Agreement from Apple Suites REIT Limited
Partnership, a Virginia limited partnership, to TRSTE, Inc., a Virginia
corporation, as Trustee for the benefit of First Union National Bank, a
national banking association, secured by Homewood Suites, Addison, Texas
(Loan No.: 26-5330845).
Contemporaneous Assignments
1. Assignment of Leases, Rents and Profits from Apple Suites SPE I, Inc., a
Virginia corporation, in favor of First Union National Bank, a national
banking association, secured by Homewood Suites, Atlanta, Georgia (Loan
No.: 26-5330841).
2. Assignment of Leases, Rents and Profits from Apple Suites REIT Limited
Partnership, a Virginia limited partnership, in favor of First Union
National Bank, a national banking association, secured by Homewood
Suites, Irving, Texas (Loan No.: 26-5330846).
3. Assignment of Leases, Rents and Profits from Apple Suites SPE I, Inc., a
Virginia corporation, in favor of First Union National Bank, a national
banking association, secured by Homewood Suites, Ridgeland, Mississippi
(Loan No.: 26-5330844).
4. Assignment of Leases, Rents and Profits from Apple Suites REIT Limited
Partnership, a Virginia limited partnership, in favor of First Union
National Bank, a national banking association, secured by Homewood
Suites, Plano, Texas (Loan No.: 26-5330847).
5. Assignment of Leases, Rents and Profits from Apple Suites REIT Limited
Partnership, a Virginia limited partnership, in favor of First Union
National Bank, a national banking association, secured by Homewood
Suites, Addison, Texas (Loan No.: 26-5330845).
EXHIBIT C
Loan Documents
1. Promissory Note from Apple Suites SPE I, Inc. to First Union National
Bank
2. Deed of Trust, Security Agreement and UCC Fixture Filing from Apple
Suites SPE I, Inc. to First Union National Bank
3. Security Agreement from Apple Suites SPE I, Inc. to First Union National
Bank
4. Indemnity and Guaranty Agreement from Apple Suites, Inc. to First Union
National Bank
5. Environmental Indemnity Agreement from Apple Suites SPE I, Inc. and
Apple Suites, Inc. to First Union National Bank
6. Assignment of Leases, Rents and Profits from Apple Suites SPE I, Inc. to
First Union National Bank
7. Assignment of Contracts and Permits from Apple Suites SPE I, Inc. to
First Union National Bank
8. Consent and Agreement of Manager by Promus Hotels, Inc.
9. Disbursement Authorization by Apple Suites SPE I, Inc.
10. Receipt and Closing Certificate by Apple Suites SPE I, Inc. and Apple
Suites, Inc.
11. Form W-9 by Apple Suites SPE I, Inc.
12. Certificate Regarding Organizational Documents by Apple Suites SPE I,
Inc.
13. UCC-1 Fixture filings by Apple Suites SPE I, Inc. (Utah Secretary of
State and Salt Lake County)
14. UCC-1 Financing Statement by Apple Suites SPE I, Inc. (Virginia State
Corporation Commission)