Moody National Reit II, Inc. - 8-K [mnrtii-8k_092016.htm]

 

Exhibit 10.4

  

Return Address:

Katten Muchin Rosenman LLP
550 South Tryon Street, Suite 2900
Charlotte, North Carolina 28202
Attention: Daniel S. Huffenus, Esq.

 

 

 

 

 

Document Title(s) (or transactions contained therein):
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Reference Number(s) of Documents assigned or released:
(on page [___] of documents(s))
N/A Grantor(s) (Last name first, then first name and initials):
Moody National Yale-Seattle Holding, LLC Grantee(s) (Last name first, then first
name and initials):
1. KeyBank National Association
2. Old Republic Title, Ltd. Abbreviated Legal description (abbreviated: i.e.
lot, block, plat or section, township, range)
Lots 1, 2 and 3, Block 60, SECOND ADDITION TO THE TOWN OF SEATTLE AS LAID OFF BY
THE HEIRS OF SARAH A. BELL (DECEASED), (COMMONLY KNOWN AS HEIRS OF SARAH A.
BELL’S SECOND ADDITION TO THE CITY OF SEATTLE)

      S  Full legal is on pages 33-34 of document. Assessor’s Property Tax
Parcel/Account Number
066000-2685-09 and 066000-2680-04

 

 

 

  

MOODY NATIONAL YALE-SEATTLE HOLDING, LLC, as grantor
(Borrower)

 

to

 

OLD REPUBLIC TITLE, LTD., as trustee
(Trustee)

 

for the benefit of

 

KEYBANK NATIONAL ASSOCIATION, as beneficiary

 

(Lender)

 

 

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING

 

 

Dated:   As of September 20, 2016             Location:   1800 Yale Avenue
Seattle, WA 98101  

 

RECORD AND RETURN TO:

 

Katten Muchin Rosenman LLP
550 South Tryon Street, Suite 2900
Charlotte, North Carolina 28202
Attention: Daniel S. Huffenus, Esq.

 

Loan No. 10106606

 

 

 

  

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING

 

THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FIXTURE FILING (this “Security Instrument”) is made as of September 20, 2016, by
and between MOODY NATIONAL YALE-SEATTLE HOLDING, LLC, a Delaware limited
liability company, having an address at 6363 Woodway, Suite 110, Houston, Texas
77057, as Grantor (“Borrower”) to OLD REPUBLIC TITLE, LTD., having an address at
1111 3rd Avenue, Ste. 820, Seattle Washington 98101, as Trustee (“Trustee”), for
the benefit of KEYBANK NATIONAL ASSOCIATION, a national banking association,
having an address at 11501 Outlook, Suite 300, Overland Park, Kansas 66211, as
beneficiary (together with its successors and assigns, “Lender”).

 

RECITALS:

 

The following recitals are a material part of this Security Instrument.

 

A.      This Security Instrument is given to secure a loan (the “Loan”) in the
principal sum of $45,000,000.00 advanced pursuant to that certain Loan
Agreement, dated as of the date hereof, between Borrower and Lender (the “Loan
Agreement”) and evidenced by that certain Promissory Note, dated the date
hereof, made by Borrower in favor of Lender (the “Note”). Capitalized terms not
otherwise defined herein shall have the meaning set forth in the Loan Agreement.

 

B.      Borrower desires to secure the payment of the Debt and the performance
of all of its obligations under the Note, the Loan Agreement and the other Loan
Documents (as herein defined).

 

C.      This Security Instrument is given pursuant to the Loan Agreement, and
payment, fulfillment, and performance by Borrower of its obligations thereunder
and under the other Loan Documents are secured hereby, and each and every term
and provision of the Loan Agreement, and the Note, including the rights,
remedies, obligations, covenants, conditions, agreements, indemnities,
representations and warranties of the parties therein, are hereby incorporated
by reference herein as though set forth in full and shall be considered a part
of this Security Instrument. The Loan Agreement, the Note, this Security
Instrument and all other documents and instruments existing now or after the
date hereof that evidence or secure or otherwise relate to the Loan are
sometimes herein collectively referred to as the “Loan Documents” or
individually as a “Loan Document”.

 

For good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:

 

ARTICLE I
GRANTS OF SECURITY

 

Section 1.1     Property Mortgaged.  Borrower does hereby irrevocably mortgage,
grant, bargain, sell, pledge, assign, warrant, transfer and convey to Trustee
for the benefit of Lender and its successors and assigns, all of Borrower’s
right, title and interest in, to and under the following property, rights,
interests and estates now owned, or hereafter acquired by Borrower
(collectively, the “Property”):

 

(a)      Land.  The real property described in Exhibit A attached hereto and
made a part hereof (the “Land”);

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(b)      Additional Land. All additional lands, estates and development rights
hereafter acquired by Borrower for use in connection with the Land and the
development of the Land and all additional lands and estates therein which may,
from time to time, by supplemental mortgage or otherwise be expressly made
subject to the lien of this Security Instrument;

 

(c)      Improvements. The buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter erected or located on the Land (collectively, the
“Improvements”);

 

(d)      Easements. All easements, rights-of-way or use, rights, strips and
gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions and remainders, and all land lying
in the bed of any street, road or avenue, opened or proposed, in front of or
adjoining the Land, to the center line thereof and all the estates, rights,
titles, interests, dower and rights of dower, curtesy and rights of curtesy,
property, possession, claim and demand whatsoever, both at law and in equity, of
Borrower of, in and to the Land and the Improvements and every part and parcel
thereof, with the appurtenances thereto;

 

(e)      Equipment. All “goods” and “equipment,” as such terms are defined in
Article 9 of the Uniform Commercial Code (as hereinafter defined), now owned or
hereafter acquired by Borrower, which is used at or in connection with the
Improvements or the Land or is located thereon or therein (including all
machinery, equipment, furnishings, and electronic data-processing and other
office equipment now owned or hereafter acquired by Borrower and any and all
additions, substitutions and replacements of any of the foregoing), together
with all attachments, components, parts, equipment and accessories installed
thereon or affixed thereto (collectively, the “Equipment”). Notwithstanding the
foregoing, Equipment shall not include any property belonging to tenants under
leases except to the extent that Borrower shall have any right or interest
therein;

 

(f)      Fixtures. All Equipment now owned, or the ownership of which is
hereafter acquired, by Borrower which is so related to the Land and Improvements
forming part of the Property that it is deemed fixtures or real property under
the law of the particular state in which the Equipment is located, including all
building or construction materials intended for construction, reconstruction,
alteration or repair of or installation on the Property, construction equipment,
appliances, machinery, plant equipment, fittings, apparatuses, fixtures and
other items now or hereafter attached to, installed in or used in connection
with (temporarily or permanently) any of the Improvements or the Land, including
engines, devices for the operation of pumps, pipes, plumbing, cleaning, call and
sprinkler systems, fire extinguishing apparatuses and equipment, heating,
ventilating, laundry, incinerating, electrical, air conditioning and air cooling
equipment and systems, gas and electric machinery, appurtenances and equipment,
pollution control equipment, security systems, disposals, dishwashers,
refrigerators and ranges, recreational equipment and facilities of all kinds,
and water, gas, electrical, storm and sanitary sewer facilities, utility lines
and equipment (whether owned individually or jointly with others, and, if owned
jointly, to the extent of Borrower’s interest therein) and all other utilities
whether or not situated in easements, all water tanks, water supply, water power
sites, fuel stations, fuel tanks, fuel supply, and all other structures,
together with all accessions, appurtenances, additions, replacements,
betterments and substitutions for any of the foregoing and the proceeds thereof
(collectively, the “Fixtures”). Notwithstanding the foregoing, “Fixtures” shall
not include any property which tenants are entitled to remove pursuant to leases
except to the extent that Borrower shall have any right or interest therein;

 

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(g)      Personal Property. All furniture, furnishings, objects of art,
machinery, goods, tools, supplies, appliances, general intangibles, contract
rights, accounts, accounts receivable, franchises, licenses, certificates and
permits, and all other personal property of any kind or character whatsoever as
defined in and subject to the provisions of the Uniform Commercial Code, other
than Fixtures, which are now or hereafter owned by Borrower and which items of
personal property are located within or about the Land and the Improvements,
together with all accessories, replacements and substitutions thereto or
therefor and the proceeds thereof (collectively, the “Personal Property”), and
the right, title and interest of Borrower in and to any of the Personal Property
which may be subject to any security interests, as defined in the Uniform
Commercial Code, as adopted and enacted by the state or states where any of the
Property is located (the “Uniform Commercial Code”), superior in lien to the
lien of this Security Instrument and all proceeds and products of the above;

 

(h)      Master Lease. All rights, benefits, privileges, and interests of
Borrower in that certain Hotel Lease Agreement, dated as of May 24, 2016, as
amended by that certain First Amendment to Hotel Lease Agreement executed in
connection herewith, between Moody National Yale-Seattle MT, LLC, a Delaware
limited liability company (“Master Tenant”), as master tenant, and Borrower, as
landlord (the “Master Lease”) and that certain Assignment of Leases and Rents
and Security Agreement dated of even date herewith between Master Tenant, as
assignor, and Borrower, as landlord (as it may from time to time be assigned,
renewed, extended, amended or supplemented, the “Master Lease ALR”; together
with the Master Lease, the “Master Lease Documents”), and all modifications,
extensions, renewals, and replacements of the Master Lease Documents, and all
remedies, privileges and security interests granted to Borrower under the Master
Lease Documents, and all deposits, credits, options, privileges, and rights of
Borrower under the Master Lease Documents, 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 Borrower
therein or thereto, either at law or in equity, in possession or in expectancy,
now or hereafter acquired.

 

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(i)      Leases and Rents. All other leases, subleases or subsubleases,
lettings, licenses, concessions or other agreements (whether written or oral)
pursuant to which any Person is granted a possessory interest in, or right to
use or occupy all or any portion of the Land and the Improvements, and every
modification, amendment or other agreement relating to such leases, subleases,
subsubleases, or other agreements entered into in connection with such leases,
subleases, subsubleases, or other agreements and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto, heretofore or hereafter
entered into (collectively, the “Leases” provided that, except for purposes of
ensuring that Borrower’s right, title and interest in respect of Hotel
Transactions have been assigned to Lender and are subject to the lien hereof,
the term “Leases” shall not include Hotel Transactions), whether before or after
the filing by or against Borrower of any petition for relief under the
Bankruptcy Code and all right, title and interest of Borrower and Borrower’s
successors and assigns therein and thereunder, including cash or securities
deposited thereunder to secure the performance by the lessees of their
obligations thereunder and all rents, additional rents, revenues, issues and
profits (including all oil and gas or other mineral royalties and bonuses and
all hotel receipts, revenues and credit card receipts collected from guest
rooms, restaurants, bars, meeting rooms, banquet rooms and recreational
facilities) from the Land and the Improvements whether paid or accruing before
or after the filing by or against Borrower of any petition for relief under the
Bankruptcy Code (collectively, and including, the avoidance of doubt, all rent
and other amounts payable by Master Tenant to Borrower pursuant to the Master
Lease, the “Rents”) and all proceeds from the sale or other disposition of the
Leases and the right to receive and apply the Rents to the payment of the Debt;

 

(j)      Condemnation Awards. All awards or payments, including interest
thereon, which may heretofore and hereafter be made with respect to the
Property, whether from the exercise of the right of eminent domain (including
any transfer made in lieu of or in anticipation of the exercise of the right),
or for a change of grade, or for any other injury to or decrease in the value of
the Property;

 

(k)      Insurance Proceeds. All proceeds in respect of the Property under any
insurance policies covering the Property, including the right to receive and
apply the proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to the Property;

 

(l)      Tax Certiorari. All refunds, rebates or credits in connection with
reduction in real estate taxes and assessments charged against the Property as a
result of tax certiorari or any applications or proceedings for reduction;

 

(m)     Conversion. All proceeds of the conversion, voluntary or involuntary, of
any of the foregoing including proceeds of insurance and condemnation awards,
into cash or liquidation claims;

 

(n)      Rights. The right, in the name and on behalf of Borrower, to appear in
and defend any action or proceeding brought with respect to the Property and to
commence any action or proceeding to protect the interest of Lender in the
Property;

 

(o)      Agreements. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents, now or
hereafter entered into, and all rights therein and thereto, respecting or
pertaining to the use, occupation, construction, management or operation of the
Land and any part thereof and any Improvements or respecting or pertaining to
any business or activity conducted on the Land and any part thereof and all
right, title and interest of Borrower therein and thereunder, including the
right, upon the occurrence and during the continuance of any default hereunder,
to receive and collect any sums payable to Borrower thereunder;

 

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(p)      Trademarks. All tradenames, trademarks, servicemarks, logos,
copyrights, goodwill, books and records and all other general intangibles
relating to or used in connection with the operation of the Property;

 

(q)      Accounts. All reserves, escrows and deposit accounts maintained by
Borrower (or, to the extent of Borrower’s interest therein, Master Tenant) with
respect to the Property, including the Clearing Account and the Cash Management
Account, together with all deposits or wire transfers made to such accounts, all
cash, checks, drafts, certificates, securities, investment property, financial
assets, instruments and other property held therein from time to time and all
proceeds, products, distributions or dividends or substitutions thereon and
thereof;

 

(r)      Letter of Credit. All letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing) Borrower now has or hereafter
acquires relating to the properties, rights, titles and interests referred to in
this Section 1.1;

 

(s)      Tort Claims. All commercial tort claims Borrower now has or hereafter
acquires relating to the properties, rights, titles and interests referred to in
this Section 1.1; and

 

(t)      Other Rights. Any and all other rights of Borrower in and to the items
set forth in Subsections (a) through (s) above.

 

AND without limiting any of the other provisions of this Security Instrument, to
the extent permitted by applicable law, Borrower expressly grants to Lender as
secured party, a security interest in the portion of the Property which is or
may be subject to the provisions of the Uniform Commercial Code which are
applicable to secured transactions; it being understood and agreed that the
Improvements and Fixtures are part and parcel of the Land (the Land, the
Improvements and the Fixtures collectively referred to as the “Real Property”)
appropriated to the use thereof and, whether affixed or annexed to the Real
Property or not, shall for the purposes of this Security Instrument be deemed
conclusively to be real estate and subject to this Security Instrument.

 

PROVIDED, HOWEVER FOR THE AVOIDANCE OF DOUBT, THAT, for so long as the Master
Lease (or any replacement Master Lease entered into in accordance with the Loan
Agreement) is in effect, Borrower’s interests in the Rents shall be limited to
payments of rent due under the Master Lease (together with the assignment by
Borrower to Lender pursuant to Section 1.1(h) hereof of Borrower’s interest in
the assignment and conveyance of the Rents (as such term is defined in the
Master Lease ALR) by Master Tenant to Borrower pursuant to the Master Lease
ALR).

 

Section 1.2      Assignment of Rents.  Borrower hereby absolutely and
unconditionally assigns to Lender all of Borrower’s right, title and interest in
and to all current and future Leases and Rents; it being intended by Borrower
that this assignment constitutes a present, absolute assignment and not an
assignment for additional security only. Nevertheless, subject to the terms of
the Cash Management Agreement and Section 7.1(h) of this Security Instrument,
Lender grants to Borrower a license revocable upon the occurrence and during the
continuation of an Event of Default to collect, receive, use and enjoy the Rents
and Borrower shall hold the Rents, or a portion thereof sufficient to discharge
all current sums due on the Debt, for use in the payment of such sums.

 

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Section 1.3      Security Agreement.  This Security Instrument is both a real
property deed of trust and a “security agreement” within the meaning of the
Uniform Commercial Code. The Property includes both real and personal property
and all other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations (hereinafter
defined), a security interest in the Fixtures, the Equipment and the Personal
Property and other property constituting the Property, whether now owned or
hereafter acquired, to the full extent that the Fixtures, the Equipment and the
Personal Property and such other property may be subject to the Uniform
Commercial Code (said portion of the Property so subject to the Uniform
Commercial Code being called the “Collateral”). If an Event of Default shall
occur and be continuing, Lender, in addition to any other rights and remedies
which it may have, shall have and may exercise immediately and without demand,
any and all rights and remedies granted to a secured party upon default under
the Uniform Commercial Code, including the right to take possession of the
Collateral or any part thereof, and to take such other measures as Lender may
deem necessary for the care, protection and preservation of the Collateral. Upon
request or demand of Lender after the occurrence and during the continuance of
an Event of Default, Borrower shall, at its expense, assemble the Collateral and
make it available to Lender at a convenient place (at the Land if tangible
property) reasonably acceptable to Lender. Borrower shall pay to Lender on
demand any and all expenses, including legal expenses and attorneys’ fees,
incurred or paid by Lender in protecting its interest in the Collateral and in
enforcing its rights hereunder with respect to the Collateral after the
occurrence and during the continuance of an Event of Default. Any notice of
sale, disposition or other intended action by Lender with respect to the
Collateral sent to Borrower in accordance with the provisions hereof at least
ten (10) Business Days prior to such action, shall, except as otherwise provided
by applicable law, constitute reasonable notice to Borrower. The proceeds of any
disposition of the Collateral, or any part thereof, may, except as otherwise
required by applicable law, be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.
Borrower’s (debtor’s) principal place of business is as set forth on page one
hereof and the address of Lender (secured party) is as set forth on page one
hereof.

 

Borrower shall promptly notify Lender of the existence of any commercial tort
claim now or hereafter existing for the benefit of Borrower or the Property, and
shall execute, acknowledge and deliver a security agreement or other
documentation as Lender shall from time to time require to acquire and perfect a
valid and binding security interest in such commercial tort claim.

 

Section 1.4     Fixture Filing.  Certain of the Property is or will become
“fixtures” (as that term is defined in the Uniform Commercial Code) on the Land,
and this Security Instrument, upon being filed for record in the real estate
records of the city or county wherein such fixtures are situated, shall operate
also as a financing statement filed as a fixture filing in accordance with the
applicable provisions of said Uniform Commercial Code upon such of the Property
that is or may become fixtures.

 

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Section 1.5      Pledges of Monies Held.  Borrower hereby pledges to Lender, to
the extent of Borrower’s interest therein, any and all monies now or hereafter
held by Lender or on behalf of Lender, including any sums deposited in the
Clearing Account, the Cash Management Account, the Reserve Funds and Net
Proceeds, as additional security for the Obligations until expended or applied
as provided in this Security Instrument or the Loan Agreement.

 

Section 1.6      Common Law Pledge/Assignment.  To the extent that the Uniform
Commercial Code does not apply to any item of the Personal Property, it is the
intention of this Security Instrument that Lender have a common law pledge or
collateral assignment of such item of Personal Property.

 

CONDITIONS TO GRANT

 

TO HAVE AND TO HOLD the above granted and described Property unto Trustee for
the use and benefit of Lender, and its successors and assigns, forever;

 

IN TRUST, WITH POWER OF SALE, to secure payment to Lender of the Debt at the
time and in the manner provided for its payment in the Loan Agreement, the Note
and in this Security Instrument.

 

PROVIDED, HOWEVER, these presents are upon the express condition that, if
Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note, the Loan Agreement and this Security Instrument,
shall well and truly perform the Other Obligations as set forth in this Security
Instrument and shall well and truly abide by and comply with each and every
covenant and condition set forth herein and in the Note, the Loan Agreement and
the other Loan Documents, these presents and the estate hereby granted shall
cease, terminate and be void; provided, however, that Borrower’s obligation to
indemnify and hold harmless Lender pursuant to the provisions hereof shall
survive any such payment or release.

 

ARTICLE II
DEBT AND OBLIGATIONS SECURED

 

Section 2.1      Debt.  This Security Instrument and the grants, assignments and
transfers made in Article I are given for the purpose of securing the Debt.

 

Section 2.2      Other Obligations.  This Security Instrument and the grants,
assignments and transfers made in Article I are also given for the purpose of
securing the following (the “Other Obligations”):

 

(a)      the performance of all other obligations of Borrower contained herein;

 

(b)      the performance of each obligation of Borrower contained in the Loan
Agreement and any other Loan Document; and

 

(c)      the performance of each obligation of Borrower contained in any
renewal, extension, amendment, modification, consolidation, change of, or
substitution or replacement for, all or any part of the Note, the Loan Agreement
or any other Loan Document.

 

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Section 2.3      Debt and Other Obligations.  Borrower’s obligations for the
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively herein as the “Obligations.”

 

ARTICLE III
BORROWER COVENANTS

 

Borrower covenants and agrees that:

 

Section 3.1      Payment of Debt.  Borrower shall pay the Debt at the time and
in the manner provided in the Loan Agreement, the Note and this Security
Instrument.

 

Section 3.2     Incorporation by Reference.  Borrower covenants and agrees that
all the covenants, conditions and agreements contained in (a) the Loan
Agreement, (b) the Note and (c) all and any of the other Loan Documents, are
hereby made a part of this Security Instrument to the same extent and with the
same force as if fully set forth herein.

 

Section 3.3      Insurance.  Borrower shall obtain and maintain, or cause to be
maintained, in full force and effect at all times insurance with respect to
Borrower and the Property as required pursuant to the Loan Agreement.

 

Section 3.4     Maintenance of Property.  Borrower shall cause the Property to
be maintained in a good and safe condition and repair. The Improvements, the
Fixtures, the Equipment and the Personal Property, if material in any way to the
operation or value of the Property, shall not be removed, demolished or
materially altered (except for normal replacement of equal or better quality of
the Fixtures, the Equipment or the Personal Property, tenant finish and
refurbishment of the Improvements or as otherwise expressly permitted under the
Loan Agreement) without the consent of Lender. Borrower shall promptly repair,
replace or rebuild any part of the Property which may be destroyed by any
Casualty or become damaged, worn or dilapidated or which may be affected by any
Condemnation, and shall, or shall cause Master Tenant to, complete and pay for
any structure at any time in the process of construction or repair on the Land.

 

Section 3.5     Waste.  Borrower shall not commit or suffer any physical waste
of the Property (“physical waste” meaning the diminution in the Property’s value
resulting from Borrower’s grossly negligent or willful failure to manage,
maintain, repair and otherwise operate the Property in a commercially reasonable
manner) or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that might invalidate or allow the
cancellation of any Policy, or do or permit to be done thereon anything that may
in any way materially impair the value of the Property or the security of this
Security Instrument. Borrower shall not, without the prior written consent of
Lender, permit any drilling or exploration for or extraction, removal, or
production of any minerals from the surface or the subsurface of the Land,
regardless of the depth thereof or the method of mining or extraction thereof.

 

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Section 3.6      Payment for Labor and Materials.  (a) Subject to Section
3.6(b), Borrower shall promptly pay when due all bills and costs for labor,
materials, and specifically fabricated materials (“Labor and Material Costs”)
incurred in connection with the Property and never permit to exist beyond the
due date thereof in respect of the Property or any part thereof any lien or
security interest, even though inferior to the liens and the security interests
hereof, and in any event never permit to be created or exist in respect of the
Property or any part thereof any other or additional lien or security interest
other than the liens or security interests hereof except for the Permitted
Encumbrances.

 

(b)      After prior written notice to Lender, Borrower, at its own expense, may
contest by appropriate legal or other proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Labor and Material Costs, provided
that (i) no Event of Default has occurred and is continuing under the Loan
Agreement, the Note, this Security Instrument or any of the other Loan
Documents, (ii) Borrower is permitted to do so under the provisions of any other
mortgage, Security Instrument or deed to secure debt affecting the Property,
(iii) such proceeding shall suspend the collection of the Labor and Material
Costs from Borrower and from the Property or Borrower shall have paid all of the
Labor and Material Costs under protest, (iv) neither the Property nor any part
thereof or interest therein will be in imminent danger of being sold, forfeited,
terminated, cancelled or lost; (v) Borrower or Master Tenant shall promptly upon
final determination thereof pay (or cause to be paid) any such contested Labor
and Material Costs determined to be valid, applicable or unpaid; (vi) such
proceeding shall suspend the collection of such contested Labor and Material
Costs from the Property or Borrower or Master Tenant, as the case may be, shall
have paid the same (or shall have caused the same to be paid) under protest; and
(vii) Borrower shall furnish (or cause to be furnished) such security as may be
required in the proceeding, or as may be reasonably requested by Lender, to
insure payment of such Labor and Material Costs, together with all interest and
penalties payable in connection therewith. Lender may (x) apply any such
security or part thereof, as necessary to pay for such Labor and Material Costs
at any time when, in the judgment of Lender, the validity, applicability or
non-payment of such Labor and Material Costs is finally established or the
Property (or any part thereof or interest therein) shall be in present danger of
being sold, forfeited, terminated, cancelled or lost, (y) provided that no Event
of Default has occurred and is continuing, shall make such security available to
Borrower or Master Tenant, as the case may be, to satisfy any obligation that
may be payable by it in connection with the matter so contested, and (z)
provided that no Event of Default has occurred and is continuing, shall release
any balance of such security to Borrower or Master Tenant, as the case may be.

 

Section 3.7     Performance of Other Agreements.  Borrower shall observe and
perform (subject to any applicable grace or care periods) each and every term,
covenant and provision to be observed or performed by Borrower pursuant to the
Loan Agreement, any other Loan Document and any other agreement or recorded
instrument affecting or pertaining to the Property and any amendments,
modifications or changes thereto.

 

Section 3.8      Change of Name, Identity or Structure.  Borrower shall not
change Borrower’s name, identity (including its trade name or names) or, if not
an individual, Borrower’s corporate, partnership or other structure, without
notifying Lender of such change in writing at least thirty (30) days prior to
the effective date of such change and without first obtaining the prior written
consent of Lender. Borrower hereby authorizes Lender to file, prior to or
contemporaneously with the effective date of any such change, any financing
statement or financing statement change required by Lender to establish or
maintain the validity, perfection and priority of the security interest granted
herein. At the request of Lender, Borrower shall execute a certificate in form
satisfactory to Lender listing the trade names under which Borrower intends to
operate the Property, and representing and warranting that Borrower does
business under no other trade name with respect to the Property.

 

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Section 3.9     Title.  Borrower has good, marketable and insurable fee simple
title to the real property comprising part of the Property and owns the balance
of such Property, free and clear all Liens (as defined in the Loan Agreement)
whatsoever except the Permitted Encumbrances (as defined in the Loan Agreement),
such other Liens as may be expressly permitted pursuant to the Loan Documents
and the Liens created by the Loan Documents. The Permitted Encumbrances in the
aggregate do not materially and adversely affect the value, operation or use of
the Property or Borrower’s ability to repay the Loan. This Security Instrument,
when properly recorded in the appropriate records, together with any Uniform
Commercial Code financing statements required to be filed in connection
therewith, will create (a) a valid, perfected first priority lien on that
portion of the Property constituting an interest in real property, subject only
to Permitted Encumbrances and the Liens created by the Loan Documents and (b)
perfected security interests in and to, and perfected collateral assignments of,
all personalty (including the Leases), to the extent that the creation of a
security interest in the Leases is subject to the Uniform Commercial Code, as in
effect under applicable law), to the extent that a security interest therein can
be created under the Uniform Commercial Code as in effect in the State of New
York or Washington, as applicable, and can be perfected by the filing of
financing statements under the Uniform Commercial Code, all in accordance with
the terms thereof, in each case subject only to any applicable Permitted
Encumbrances, such other Liens as are permitted pursuant to the Loan Documents
and the Liens created by the Loan Documents. There are no claims for payment for
work, labor or materials affecting the Property which are past due and are or
may become a lien prior to, or of equal priority with, the Liens created by the
Loan Documents unless such claims for payments are being contested in accordance
with the terms and conditions of this Security Instrument.

 

Section 3.10   Letter of Credit Rights.  If Borrower is at any time a
beneficiary under a letter of credit relating to the properties, rights, titles
and interests referenced in Section 1.1 of this Security Instrument now or
hereafter issued in favor of Borrower, Borrower shall promptly notify Lender
thereof and, at the request and option of Lender, Borrower shall, pursuant to an
agreement in form and substance satisfactory to Lender, either (i) arrange for
the issuer and any confirmer of such letter of credit to consent to an
assignment to Lender of the proceeds of any drawing under the letter of credit
or (ii) arrange for Lender to become the transferee beneficiary of the letter of
credit, with Lender agreeing, in each case that the proceeds of any drawing
under the letter of credit are to be applied as provided in Section 7.2 of this
Security Instrument.

 

ARTICLE IV
OBLIGATIONS AND RELIANCES

 

Section 4.1      Relationship of Borrower and Lender.  The relationship between
Borrower and Lender is solely that of debtor and creditor, and Lender has no
fiduciary or other special relationship with Borrower, and no term or condition
of any of the Loan Agreement, the Note, this Security Instrument and the other
Loan Documents shall be construed so as to deem the relationship between
Borrower and Lender to be other than that of debtor and creditor.

 

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Section 4.2      No Reliance on Lender.  The general partners, members,
principals and (if Borrower is a trust) beneficial owners of Borrower, as
applicable, are experienced in the ownership and operation of properties similar
to the Property, and Borrower and Lender are relying solely upon such expertise
and business plan in connection with the ownership and operation of the
Property. Borrower is not relying on Lender’s expertise, business acumen or
advice in connection with the Property.

 

Section 4.3      No Lender Obligations.  (a) Notwithstanding the provisions of
Subsections 1.1(h) and (n) or Section 1.2, Lender is not undertaking the
performance of (i) any obligations under the Leases; or (ii) any obligations
with respect to such agreements, contracts, certificates, instruments,
franchises, permits, trademarks, licenses and other documents.

 

(b)      By accepting or approving anything required to be observed, performed
or fulfilled or to be given to Lender pursuant to this Security Instrument, the
Loan Agreement, the Note or the other Loan Documents, including any officer’s
certificate, balance sheet, statement of profit and loss or other financial
statement, survey, appraisal, or insurance policy, Lender shall not be deemed to
have warranted, consented to, or affirmed the sufficiency, the legality or
effectiveness of same, and such acceptance or approval thereof shall not
constitute any warranty or affirmation with respect thereto by Lender.

 

Section 4.4     Reliance.  Borrower recognizes and acknowledges that in
accepting the Loan Agreement, the Note, this Security Instrument and the other
Loan Documents, Lender is expressly and primarily relying on the truth and
accuracy of the warranties and representations set forth in Section 4.1 of the
Loan Agreement without any obligation to investigate the Property and
notwithstanding any investigation of the Property by Lender; that such reliance
existed on the part of Lender prior to the date hereof, that the warranties and
representations are a material inducement to Lender in making the Loan; and that
Lender would not be willing to make the Loan and accept this Security Instrument
in the absence of the warranties and representations as set forth in Section 4.1
of the Loan Agreement.

 

ARTICLE V
FURTHER ASSURANCES

 

Section 5.1     Recording of Security Instrument, etc.  Borrower forthwith upon
the execution and delivery of this Security Instrument and thereafter, from time
to time, at Lender’s request, shall cause this Security Instrument and any of
the other Loan Documents creating a lien or security interest or evidencing the
lien hereof upon the Property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect and perfect the lien or security interest hereof upon, and the interest
of Lender in, the Property. Borrower shall pay all taxes, filing, registration
or recording fees, and all expenses incident to the preparation, execution,
acknowledgment or recording of the Note, this Security Instrument, the other
Loan Documents, any note, deed of trust or mortgage supplemental hereto, any
security instrument with respect to the Property and any instrument of further
assurance, and any modification or amendment of the foregoing documents, and all
federal, state, county and municipal taxes, duties, imposts, assessments and
charges arising out of or in connection with the execution and delivery of this
Security Instrument, any deed of trust or mortgage supplemental hereto, any
other security instrument with respect to the Property or any instrument of
further assurance, and any modification or amendment of the foregoing documents,
except where prohibited by law so to do.

 

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Section 5.2      Further Acts, Etc.  Borrower shall, at the cost of Borrower,
and without expense to Lender, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, deeds of trust, mortgages,
assignments, notices of assignments, transfers and assurances as Lender shall,
from time to time, reasonably require, for the better assuring, conveying,
assigning, transferring, and confirming unto Lender the property and rights
hereby mortgaged, deeded, granted, bargained, sold, conveyed, confirmed,
pledged, assigned, warranted and transferred or intended now or hereafter so to
be, or which Borrower may be or may hereafter become bound to convey or assign
to Lender, or for carrying out the intention or facilitating the performance of
the terms of this Security Instrument or for filing, registering or recording
this Security Instrument, or for complying with all Legal Requirements.
Borrower, on demand, shall execute and deliver, and in the event it shall fail
to so execute and deliver, hereby authorizes Lender to execute in the name of
Borrower or without the signature of Borrower to the extent Lender may lawfully
do so, one or more financing statements to evidence more effectively the
security interest of Lender in the Property (including the filing of a financing
statement with a generic description such as “all assets”). Borrower grants to
Lender an irrevocable power of attorney coupled with an interest for the purpose
of exercising and perfecting any and all rights and remedies available to Lender
at law and in equity, including such rights and remedies available to Lender
pursuant to this Section 5.2.

 

Section 5.3     Changes in Tax, Debt, Credit and Documentary Stamp Laws.  (a) If
any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender’s interest in the Property, Borrower shall pay the tax, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall
have the option by written notice of not less than one hundred twenty (120) days
to declare the Debt immediately due and payable. No Yield Maintenance Premium
shall be due in connection with any prepayment made pursuant to this Section
5.3(a).

 

(b)      Borrower shall not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by written notice of not less than one hundred twenty
(120) days, to declare the Debt immediately due and payable. No Yield
Maintenance Premium shall be due in connection with any prepayment made pursuant
to this Section 5.3(b).

 

(c)      If at any time the United States of America, any state thereof or any
subdivision of any such state shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the other Loan
Documents or impose any other tax or charge on the same, Borrower shall pay for
the same, with interest and penalties thereon, if any.

 

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Section 5.4      Severing of Security Instrument.  The provisions of Section
8.2(c) of the Loan Agreement are hereby incorporated by reference herein.

 

Section 5.5     Replacement Documents.  Upon receipt of Lender’s (or Lender’s
custodian’s) then standard form of lost note affidavit and indemnity signed on
its behalf by an authorized officer of such Person as to the loss, theft,
destruction or mutilation of the Note or any other Loan Document which is not of
public record, and, in the case of any such mutilation, upon surrender and
cancellation of such Note or other Loan Document, Borrower shall issue, in lieu
thereof, a replacement Note or other Loan Document, dated the date of such lost,
stolen, destroyed or mutilated Note or other Loan Document in the same principal
amount thereof and otherwise of like tenor.

 

ARTICLE VI
DUE ON SALE/ENCUMBRANCE

 

Section 6.1      Lender Reliance.  Borrower acknowledges that Lender has
examined and relied on the experience of Borrower and its general partners,
members, principals and (if Borrower is a trust) beneficial owners, as
applicable, in owning and operating properties such as the Property in agreeing
to make the Loan, and will continue to rely on Borrower’s ownership of the
Property as a means of maintaining the value of the Property as security for
repayment of the Debt and the performance of the Other Obligations. Borrower
acknowledges that Lender has a valid interest in maintaining the value of the
Property so as to ensure that, should Borrower default in the repayment of the
Debt or the performance of the Other Obligations, Lender can recover the Debt by
a sale of the Property.

 

Section 6.2      No Sale/Encumbrance.  Neither Borrower nor any Restricted Party
shall Transfer the Property or any part thereof or any interest therein or
permit or suffer the Property or any part thereof or any interest therein to be
Transferred other than as expressly permitted pursuant to the terms of the Loan
Agreement or otherwise with Lender’s express prior written consent (which
consent may be granted or denied in Lender’s sole discretion).

 

ARTICLE VII
RIGHTS AND REMEDIES UPON DEFAULT

 

Section 7.1     Remedies.  Upon the occurrence and during the continuance of any
Event of Default, Borrower agrees that Lender may take such action, without
notice or demand, as it deems advisable to protect and enforce its rights
against Borrower and in and to the Property, including the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
order as Lender may determine, in its discretion, without impairing or otherwise
affecting the other rights and remedies of Lender:

 

(a)      declare the entire unpaid Debt to be immediately due and payable;

 

(b)      institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of law,
in which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;

 

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(c)      with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this Security
Instrument for the balance of the Debt not then due, unimpaired and without loss
of priority;

 

(d)      sell for cash or upon credit the Property or any part thereof and all
estate, claim, demand, right, title and interest of Borrower therein and rights
of redemption thereof, pursuant to power of sale or otherwise, at one or more
sales, as an entirety or in parcels, at such time and place, upon such terms and
after such notice thereof as may be required or permitted by law;

 

(e)      institute an action, suit or proceeding in equity for the specific
performance of any covenant, condition or agreement contained herein, in the
Note, the Loan Agreement or in the other Loan Documents;

 

(f)      recover judgment on the Note either before, during or after any
proceedings for the enforcement of this Security Instrument or the other Loan
Documents;

 

(g)      apply for and obtain the appointment, on an ex parte basis (any
required notice of such appointment or any proceeding to appoint the same being
hereby expressly waived) and without regard for the adequacy of the security for
the Debt and without regard for the solvency of Borrower, any guarantor,
indemnitor or of any Person liable for the payment of the Debt, of a receiver,
trustee, liquidator or conservator of the Property to do all of the actions set
forth in subparagraph (h) below and to, with the consent of Lender, dispose (by
lease, sale or otherwise) of some or all of the Property in the course of the
proceeding in which such receiver, trustee, liquidator or conservator is
appointed;

 

(h)      the license granted to Borrower under Section 1.2 hereof shall
automatically be revoked and Lender may enter into or upon the Property, either
personally or by its agents, nominees or attorneys and dispossess Borrower and
its agents and servants therefrom, without liability for trespass, damages or
otherwise and exclude Borrower and its agents or servants wholly therefrom, and
take possession of all books, records and accounts relating to the Property and
Borrower agrees to surrender possession of the Property and of such books,
records and accounts to Lender upon demand, and thereupon Lender may (i) use,
operate, manage, control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Property and conduct the business thereat; (ii)
complete any construction on the Property in such manner and form as Lender
deems advisable; (iii) make alterations, additions, renewals, replacements and
improvements to or on the Property; (iv) exercise all rights and powers of
Borrower with respect to the Property, whether in the name of Borrower or
otherwise, including the right to make, cancel, enforce or modify Leases, obtain
and evict tenants, and demand, sue for, collect and receive all Rents of the
Property and every part thereof; (v) require Borrower to pay monthly in advance
to Lender, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the Property
as may be occupied by Borrower; (vi) require Borrower to vacate and surrender
possession of the Property to Lender or to such receiver and, in default
thereof, Borrower may be evicted by summary proceedings or otherwise; and (vii)
subject to the provisions of the Loan Agreement relating to application of
collateral for the Debt, apply the receipts from the Property to the payment of
the Debt, in such order, priority and proportions as Lender shall deem
appropriate in its discretion after deducting therefrom all expenses (including
attorneys’ fees) incurred in connection with the aforesaid operations and all
amounts necessary to pay the Taxes, Other Charges, insurance and other expenses
in connection with the Property, as well as compensation for the services of
Lender, its counsel, agents and employees;

 

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(i)      exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including: (i) the right to take
possession of the Fixtures, the Equipment, the Personal Property or any part
thereof, and to take such other measures as Lender may deem necessary for the
care, protection and preservation of the Fixtures, the Equipment, the Personal
Property, and (ii) request Borrower at its expense to assemble the Fixtures, the
Equipment, the Personal Property and make it available to Lender at a convenient
place acceptable to Lender. Any notice of sale, disposition or other intended
action by Lender with respect to the Fixtures, the Equipment, the Personal
Property sent to Borrower in accordance with the provisions hereof at least five
(5) days prior to such action, shall constitute commercially reasonable notice
to Borrower;

 

(j)      subject to the provisions of the Loan Agreement, apply any sums then
deposited or held in escrow or otherwise by or on behalf of Lender in accordance
with the terms of the Loan Agreement, this Security Instrument or any other Loan
Document to the payment of the following items in any order in its discretion:
(i) Taxes and Other Charges; (ii) Insurance Premiums; (iii) interest on the
unpaid principal balance of the Note; (iv) amortization of the unpaid principal
balance of the Note; and (v) all other sums payable pursuant to the Note, the
Loan Agreement, this Security Instrument and the other Loan Documents, including
advances made by Lender pursuant to the terms of this Security Instrument;

 

(k)      upon foreclosure of this Security Instrument, surrender the Policies
maintained pursuant to the Loan Agreement, collect the unearned Insurance
Premiums and apply such sums as a credit on the Debt in such priority and
proportion as Lender shall deem proper, and in connection therewith, Borrower
hereby appoints Lender as agent and attorney-in-fact (which is coupled with an
interest and is therefore irrevocable) for Borrower to collect such Insurance
Premiums;

 

(l)      prohibit Borrower and anyone claiming for or through Borrower from
making use of or withdrawing any sums from any lockbox, escrow or similar
account related to the Property;

 

(m)     exercise any and all rights, remedies or other privileges of Borrower
under the Master Lease Documents;

 

(n)      pursue such other remedies as Lender may have under applicable law; or

 

(o)      apply the undisbursed balance of any Net Proceeds Deficiency deposit,
together with interest thereon, to the payment of the Debt in such order,
priority and proportions as Lender shall deem to be appropriate in its
discretion.

 

In the event of a sale, by foreclosure, power of sale or otherwise, of less than
all of the Property, this Security Instrument shall continue as a lien and
security interest on the remaining portion of the Property unimpaired and
without loss of priority.

 

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Section 7.2      Application of Proceeds.  Subject to the provisions of the Loan
Agreement, the purchase money, proceeds and avails of any disposition of the
Property, and or any part thereof, or any other sums collected by Lender
pursuant to the Note, this Security Instrument or the other Loan Documents, may
be applied by Lender to the payment of the Debt in such priority and proportions
as Lender in its discretion shall deem proper.

 

Section 7.3      Right to Cure Defaults.  Upon the occurrence and during the
continuance of any Event of Default, or if Borrower fails to make any payment or
to do any act as herein provided, Lender may, but without any obligation to do
so and without notice to or demand on Borrower and without releasing Borrower
from any obligation hereunder, make any payment or do any act required of
Borrower hereunder in such manner and to such extent as Lender may deem
necessary to protect the security hereof. Lender is authorized to enter upon the
Property for such purposes, or appear in, defend, or bring any action or
proceeding to protect its interest in the Property or to foreclose this Security
Instrument or collect the Debt, and the cost and expense thereof (including
attorneys’ fees to the extent permitted by law), with interest as provided in
this Section 7.3, shall constitute a portion of the Debt and shall be due and
payable to Lender upon demand. All such costs and expenses incurred by Lender in
remedying such Event of Default or such failed payment or act or in appearing
in, defending, or bringing any such action or proceeding shall bear interest at
the Default Rate, for the period after notice from Lender that such cost or
expense was incurred to the date of payment to Lender. All such costs and
expenses incurred by Lender together with interest thereon calculated at the
Default Rate shall be deemed to constitute a portion of the Debt and be secured
by this Security Instrument and the other Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.

 

Section 7.4      Actions and Proceedings.  Lender has the right to appear in and
defend any action or proceeding brought with respect to the Property and to
bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in
the Property.

 

Section 7.5      Recovery of Sums Required To Be Paid.  Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
an Event of Default or Events of Default by Borrower existing at the time such
earlier action was commenced.

 

Section 7.6      Examination of Books and Records.  At reasonable times and upon
reasonable notice, Lender, its agents, accountants and attorneys shall have the
right to examine the records, books, management and other papers of Borrower
which reflect upon their financial condition, at the Property or at any office
regularly maintained by Borrower where the books and records are located. Lender
and its agents shall have the right to make copies and extracts from the
foregoing records and other papers. In addition, at reasonable times and upon
reasonable notice, Lender, its agents, accountants and attorneys shall have the
right to examine and audit the books and records of Borrower pertaining to the
income, expenses and operation of the Property during reasonable business hours
at any office of Borrower where the books and records are located. This Section
7.6 shall apply throughout the term of the Note and without regard to whether an
Event of Default has occurred or is continuing.

 

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Section 7.7      Other Rights, etc.  (a) The failure of Lender to insist upon
strict performance of any term hereof shall not be deemed to be a waiver of any
term of this Security Instrument. Borrower shall not be relieved of Borrower’s
obligations hereunder by reason of (i) the failure of Lender to comply with any
request of Borrower or any guarantor or any indemnitor with respect to the Loan
to take any action to foreclose this Security Instrument or otherwise enforce
any of the provisions hereof or of the Note or the other Loan Documents,
(ii) the release, regardless of consideration, of the whole or any part of the
Property, or of any person liable for the Debt or any portion thereof, or (iii)
any agreement or stipulation by Lender extending the time of payment or
otherwise modifying or supplementing the terms of the Note, this Security
Instrument or the other Loan Documents.

 

(b)      It is agreed that the risk of loss or damage to the Property is on
Borrower, and Lender shall have no liability whatsoever for decline in value of
the Property, for failure to maintain the Policies, or for failure to determine
whether insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial relief if any
such possession is requested or obtained with respect to any Property or
collateral not in Lender’s possession.

 

(c)      Lender may resort for the payment of the Debt to any other security
held by Lender in such order and manner as Lender, in its discretion, may elect.
Lender may take action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Lender thereafter
to foreclose this Security Instrument. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.

 

Section 7.8     Right to Release Any Portion of the Property.  Lender may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.

 

Section 7.9     Violation of Laws.  If the Property is not in material
compliance with Legal Requirements, Lender may impose additional requirements
upon Borrower in connection herewith including monetary reserves or financial
equivalents.

 

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Section 7.10   Recourse and Choice of Remedies.  Notwithstanding any other
provision of this Security Instrument or the Loan Agreement, to the fullest
extent permitted by applicable law and the provisions of Section 9.3 of the Loan
Agreement, Lender and other Indemnified Parties are entitled to enforce the
obligations of Borrower contained in Sections 9.1, 9.2 and 9.3 herein and
Section 9.3 of the Loan Agreement without first resorting to or exhausting any
security or collateral and without first having recourse to the Note or any of
the Property, through foreclosure or acceptance of a deed in lieu of foreclosure
or otherwise, and in the event Lender commences a foreclosure action against the
Property, Lender is entitled to pursue a deficiency judgment with respect to
such obligations against Borrower if and to the extent permitted under the terms
of Section 9.3 of the Loan Agreement. The provisions of Sections 9.1, 9.2 and
9.3 herein and Section 9.3 of the Loan Agreement are exceptions to any
non-recourse or exculpation provisions in the Loan Agreement, the Note, this
Security Instrument or the other Loan Documents, and Borrower is fully and
personally liable for the obligations pursuant to Sections 9.1, 9.2 and 9.3
herein and Section 9.3 of the Loan Agreement. The liability of Borrower pursuant
to Sections 9.1, 9.2 and 9.3 herein and Section 9.3 of the Loan Agreement is not
limited to the original principal amount of the Note. Notwithstanding the
foregoing, nothing herein shall inhibit or prevent Lender from foreclosing or
exercising any other rights and remedies pursuant to the Loan Agreement, the
Note, this Security Instrument and the other Loan Documents, whether
simultaneously with foreclosure proceedings or in any other sequence. A separate
action or actions may be brought and prosecuted against Borrower pursuant to
Sections 9.1, 9.2 and 9.3 herein and Section 9.3 of the Loan Agreement whether
or not action is brought against any other Person or whether or not any other
Person is joined in the action or actions. In addition, Lender shall have the
right but not the obligation to join and participate in, as a party if it so
elects, any administrative or judicial proceedings or actions initiated in
connection with any matter addressed in Article IX herein.

 

Section 7.11   Right of Entry.  Upon reasonable notice to Borrower, Lender and
its agents shall have the right to enter and inspect the Property at all
reasonable times, subject to the rights of Tenants.

 

Section 7.12   Rights Pertaining To Sales.  The following provisions shall, to
the extent permitted by law, apply to any sale or sales of all or any portion of
the Property under or by virtue of this Security Instrument, whether under any
power of sale herein granted or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale:

 

(a)      Trustee (for purposes of this Section 7.12 only, the term “Trustee”
shall be interpreted to include any public officer or other person having the
responsibility to conduct any sale of all or part of the Property pursuant to
this Security Instrument) may conduct any number of sales from time to time. The
power of sale shall not be exhausted by any one or more of such sales as to any
part of the Property that has not been sold or by any sale that is not completed
or is defective until the Debt has been paid in full.

 

(b)      Any sale may be postponed or adjourned by public announcement at the
time and place appointed for such sale or for such postponed or adjourned sale,
and such sale may be completed at the time and place so announced without
further notice.

 

(c)      Lender is hereby appointed the true and lawful attorney-in-fact of
Borrower, which appointment is irrevocable and shall be deemed to be coupled
with an interest, in Borrower’s name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the Property and rights so
sold, and for that purpose Lender may execute all necessary instruments to
accomplish the same, and may substitute one or more persons with like power, and
Borrower hereby ratifies and confirms all that said attorney or such substitute
or substitutes shall lawfully do by virtue thereof. Nevertheless, Borrower, if
requested by Lender, shall ratify and confirm any such sale or sales by
executing and delivering to Lender or such purchaser or purchasers, as
applicable, all such instruments as may be advisable, in Lender’s judgment, for
the purposes designated in such request.

 

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(d)      Any and all statements of fact or other recitals made in any of the
instruments referred to in Section 7.12(c) given by Lender concerning nonpayment
of the Debt, occurrence of any Event of Default, any declaration by Lender that
all or any of the Debt is due and payable, any request to sell, any
representation that notice of time, place and terms of sale and property or
rights to be sold was duly given, or that any other act or thing was duly done
by Lender, shall be taken as prima facie evidence of the truth of the facts so
stated and recited.

 

(e)      The receipt by Trustee of the purchase money paid at any such sale, or
the receipt of any other person authorized to give the same, shall be sufficient
discharge therefor to any purchaser of any property or rights sold as aforesaid,
and no purchaser, or its representatives, grantees or assigns, after paying such
purchase price and receiving such receipt, shall be bound to see to the
application of such purchase price or any part thereof upon or for any trust or
purpose of this Security Instrument or, in any manner whatsoever, be answerable
for any loss, misapplication or non-application of any such purchase money, or
part thereof, or be bound to inquire as to the authorization, necessity,
expediency or regularity of any such sale.

 

(f)      Any such sale or sales shall operate to divest all of the estate,
right, title, interest, claim and demand whatsoever, whether at law or in
equity, of Borrower in and to the properties and rights so sold, and shall be a
perpetual bar both at law and in equity against Borrower and any and all persons
claiming or who may claim the same, or any part thereof, by, through or under
Borrower to the fullest extent permitted by applicable law.

 

(g)      Upon any such sale or sales, Lender may bid for and acquire the
Property and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting against the Debt the amount of the bid made
therefor, after deducting therefrom the expenses of the sale, the cost of any
enforcement proceeding hereunder and any other sums that Lender is authorized to
charge to Borrower under the terms of the Note, this Security Instrument, or any
other Loan Document to the extent necessary to satisfy such bid.

 

(h)      If Borrower, or any person claiming by, through or under Borrower,
shall transfer or refuse or fail to surrender possession of the Property after
any sale thereof, then Borrower or such person shall be deemed a tenant at
sufferance of the purchaser at such sale, subject to eviction by means of
unlawful detainer proceedings or other appropriate proceedings, and to any other
right or remedy available hereunder or under applicable law.

 

(i)      Upon any such sale, it shall not be necessary for Trustee, Lender or
any public officer acting under execution or order of court to have present or
constructively in its possession any or all of the Property.

 

(j)      In the event of any sale referred to in this Section 7.12, the entire
Debt, if not previously due and payable, immediately thereupon shall,
notwithstanding anything to the contrary in the Note, this Security Instrument
or any other Loan Document, become due and payable.

 

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(k)      This instrument shall be effective as a mortgage. If a sale hereunder
shall be commenced by Trustee, Lender may, at any time before the sale of the
Property, direct the Trustee to abandon the sale, and may institute suit for the
collection of the Debt or part thereof and for the foreclosure of this Security
Instrument. If Lender shall institute suit for the collection of the Debt or
part thereof, and for the foreclosure of this Security Instrument, Lender may at
any time before the entry of final judgment in said suit dismiss the same (or
part thereof) and direct the Trustee to sell the Property in accordance with the
provisions of this Security Instrument. Lender may pursue its rights and
remedies against any guarantor or other party liable for any of the obligations
in such a suit for foreclosure or by separate suit, whether or not the Trustee
is also pursuing a sale under the terms hereof.

 

ARTICLE VIII
PREPAYMENT

 

Section 8.1     Prepayment.  The Debt may not be prepaid in whole or in part
except in accordance with the express terms and conditions of the Loan Agreement
and the Note.

 

ARTICLE IX
INDEMNIFICATION

 

Section 9.1      General Indemnification.  Excluding any of the following to the
extent arising out of the gross negligence or willful misconduct of Lender,
Borrower shall, at its sole cost and expense, protect (with legal counsel
reasonably acceptable to Lender), defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all claims, suits, liabilities
(including strict liabilities), actions, proceedings, obligations, debts,
damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, punitive
damages, foreseeable and unforeseeable consequential damages, of whatever kind
or nature (including attorneys’ fees and other costs of defense) (collectively,
the “Losses”) imposed upon or incurred by or asserted against any Indemnified
Parties and directly or indirectly arising out of or in any way relating to any
one or more of the following: (a) ownership of this Security Instrument, the
Property or any interest therein or receipt of any Rents; (b) any amendment to,
or restructuring of, the Debt, the Note, the Loan Agreement, this Security
Instrument, or any other Loan Documents; (c) any and all lawful action that may
be taken by Lender in connection with the enforcement of the provisions of this
Security Instrument, the Loan Agreement, the Note or any of the other Loan
Documents, whether or not suit is filed in connection with same, or in
connection with Borrower, any guarantor or any indemnitor Person or any partner,
joint venturer or shareholder thereof becoming a party to a voluntary or
involuntary federal or state bankruptcy, insolvency or similar proceeding; (d)
any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(e) any use, nonuse or condition in, on or about the Property or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (f) intentionally deleted; (g) performance of
any labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with this Security Instrument,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which this Security Instrument is made;
(i) any failure of the Property to be in compliance with any Legal Requirements;
(j) the enforcement by any Indemnified Party of the provisions of this Article
IX; (k) any and all claims and demands whatsoever which may be asserted against
Lender by reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants, or agreements contained in any
Lease; (l) any and all claims (including lender liability claims) or demands by
Borrower or any third parties, including any guarantor or indemnitor; (m) the
payment of any commission, charge or brokerage fee to anyone claiming through
Borrower which may be payable in connection with the funding of the Loan; or (n)
any misrepresentation made by Borrower in this Security Instrument or any other
Loan Document. Any amounts payable to Lender by reason of the application of
this Section 9.1 shall become immediately due and payable and shall bear
interest at the Default Rate from the date loss or damage is sustained by Lender
until paid.

 

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Section 9.2      Mortgage or Intangible Tax.  Borrower shall, at its sole cost
and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making or recording of
this Security Instrument, the Note or any of the other Loan Documents, but
excluding any income, franchise or other similar taxes or taxes on Lender’s
capital. Borrower hereby agrees that, in the event that it is determined that
any documentary stamp taxes or intangible personal property taxes are due hereon
or on any mortgage or promissory note executed in connection herewith (including
the Note), Borrower shall indemnify and hold harmless the Indemnified Parties
for all such documentary stamp or intangible taxes, including all penalties and
interest assessed or charged in connection therewith.

 

Section 9.3      ERISA Indemnification.  Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including attorneys’ fees and costs
incurred in the investigation, defense, and settlement of Losses incurred in
correcting any prohibited transaction or in the sale of a prohibited loan, and
in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender’s discretion) that Lender may incur, directly or
indirectly, as a result of a breach of any of the representations made under
Section 4.1.9 of the Loan Agreement or a breach of any negative covenants
contained in Section 5.2.9 of the Loan Agreement.

 

Section 9.4      Duty to Defend; Attorneys’ Fees and Other Fees and
Expenses.  Upon written request by any Indemnified Party, Borrower shall defend
such Indemnified Party (if requested by any Indemnified Party, in the name of
the Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, if the defendants in any
such claim or proceeding include both Borrower and any Indemnified Party and
Borrower and such Indemnified Party shall have reasonably concluded that there
are any legal defenses available to it or other Indemnified Parties that are
different from or additional to those available to Borrower, such Indemnified
Party shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such Indemnified Party, provided that no compromise or settlement shall be
entered without Borrower’s consent, which consent shall not be unreasonably
withheld. Upon demand, Borrower shall pay or, in the sole and absolute
discretion of the Indemnified Parties, reimburse, the Indemnified Parties for
the payment of fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.

 

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Section 9.5     Environmental Indemnity.  Simultaneously with this Security
Instrument, Borrower and Guarantor have executed that certain Environmental
Indemnity. The obligations of Borrower and Guarantor under the Environmental
Indemnity are not part of the Debt and are not secured by this Security
Instrument.

 

ARTICLE X
WAIVERS

 

Section 10.1    Waiver of Counterclaim.  To the extent permitted by applicable
law, Borrower hereby waives the right to assert a counterclaim, other than a
mandatory or compulsory counterclaim, in any action or proceeding brought
against it by Lender arising out of or in any way connected with this Security
Instrument, the Loan Agreement, the Note, any of the other Loan Documents, or
the Obligations.

 

Section 10.2    Marshalling and Other Matters.  To the extent permitted by
applicable law, Borrower hereby waives the benefit of all homestead,
appraisement, valuation, stay, extension, reinstatement and redemption laws now
or hereafter in force and all rights of marshalling in the event of any sale
hereunder of the Property or any part thereof or any interest therein. Further,
Borrower hereby expressly waives any and all rights of redemption from sale
under any order or decree of foreclosure of this Security Instrument on behalf
of Borrower, and on behalf of each and every person acquiring any interest in or
title to the Property subsequent to the date of this Security Instrument and on
behalf of all persons to the extent permitted by applicable law, and hereby
waives any defense Borrower might assert or have by reason of Lender’s failure
to make any tenant or lessee of the Property a party defendant in any
foreclosure proceeding or action instituted by Lender.

 

Section 10.3   Waiver of Notice.  To the extent permitted by applicable law,
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Security Instrument or
another Loan Document specifically and expressly provides for the giving of
notice by Lender to Borrower and except with respect to matters for which Lender
is required by applicable law to give notice, and Borrower hereby expressly
waives the right to receive any notice from Lender with respect to any matter
for which this Security Instrument or another Loan Document does not
specifically and expressly provide for the giving of notice by Lender to
Borrower or that, under applicable law, cannot be waived.

 

Section 10.4   Waiver of Statute of Limitations.  To the extent permitted by
applicable law, Borrower hereby expressly waives and releases to the fullest
extent permitted by law, the pleading of any statute of limitations as a defense
to payment of the Debt or performance of its Other Obligations.

 

22 

 

 

Section 10.5   Survival.  The indemnifications made pursuant to Sections 9.1,
9.2 and 9.3 herein shall continue indefinitely in full force and effect and
shall survive and shall in no way be impaired by any of the following: any
satisfaction or other termination of this Security Instrument, any assignment or
other transfer of all or any portion of this Security Instrument or Lender’s
lien on, and security interests in, the Property (but, in such case, shall
benefit both Indemnified Parties and any assignee or transferee), any exercise
of Lender’s rights and remedies pursuant hereto including foreclosure or
acceptance of a deed in lieu of foreclosure, any exercise of any rights and
remedies pursuant to the Loan Agreement, the Note or any of the other Loan
Documents, any transfer of all or any portion of the Property (whether by
Borrower or by Lender following foreclosure or acceptance of a deed in lieu of
foreclosure or at any other time), any amendment to this Security Instrument,
the Loan Agreement, the Note or the other Loan Documents, and any act or
omission that might otherwise be construed as a release or discharge of Borrower
from the obligations pursuant hereto.

 

Section 10.6   Trial by Jury.  TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED
BY APPLICABLE LAW, BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE
LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.

 

ARTICLE XI
EXCULPATION

 

The provisions of Section 9.3 of the Loan Agreement are hereby incorporated by
reference into this Security Instrument to the same extent and with the same
force as if fully set forth herein.

 

ARTICLE XII
NOTICES

 

All notices or other written communications hereunder shall be delivered in
accordance with terms and provisions of Section 10.6 of the Loan Agreement.

 

ARTICLE XIII
APPLICABLE LAW

 

Section 13.1    Governing Law.  This Security Instrument shall be governed in
accordance with the governing law and related terms and provisions of Section
10.3 of the Loan Agreement.

 

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Section 13.2   Usury Laws.  Notwithstanding anything to the contrary, (a) all
agreements and communications between Borrower and Lender are hereby and shall
automatically be limited so that, after taking into account all amounts deemed
interest, the interest contracted for, charged or received by Lender shall never
exceed the maximum lawful rate or amount, (b) in calculating whether any
interest exceeds the lawful maximum, all such interest shall be amortized,
prorated, allocated and spread over the full amount and term of all principal
indebtedness of Borrower to Lender, and (c) if through any contingency or event,
Lender receives or is deemed to receive interest in excess of the lawful
maximum, any such excess shall be deemed to have been applied toward payment of
the principal of any and all then outstanding indebtedness of Borrower to
Lender, or if there is no such indebtedness, shall immediately be returned to
Borrower.

 

Section 13.3    Provisions Subject to Applicable Law.  All rights, powers and
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any applicable law. If any
term of this Security Instrument or any application thereof shall be invalid or
unenforceable, the remainder of this Security Instrument and any other
application of the term shall not be affected thereby.

 

ARTICLE XIV
DEFINITIONS

 

Unless the context clearly indicates a contrary intent or unless otherwise
specifically provided herein, words used in this Security Instrument may be used
interchangeably in singular or plural form and the word “Borrower” shall mean
“individually and collectively, jointly and severally, each Borrower (if more
than one) and any subsequent owner or owners of the fee interest in the Property
or any part thereof or any interest therein,” the word “Lender” shall mean
“Lender and any subsequent holder of the Note,” the word “Note” shall mean “the
Note and any other evidence of indebtedness secured by this Security
Instrument,” the word “Property” shall include any portion of the Property and
any interest therein, and the phrases “attorneys’ fees,” “legal fees” and
“counsel fees” shall include any and all attorneys’, paralegal and law clerk
fees and disbursements, including fees and disbursements at the pre-trial, trial
and appellate levels incurred or paid by Lender in protecting its interest in
the Property, the Leases and the Rents and enforcing its rights hereunder.

 

ARTICLE XV
MISCELLANEOUS PROVISIONS

 

Section 15.1    No Oral Change.  This Security Instrument, and any provisions
hereof, including the provisions of this Section, may not be modified, amended,
waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of Borrower or Lender, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought, and
the parties hereby: (a) expressly agree that it shall not be reasonable for any
of them to rely on any alleged, non-written amendment to this Security
Instrument; (b) irrevocably waive any and all right to enforce any alleged,
non-written amendment to this Security Instrument; and (c) expressly agree that
it shall be beyond the scope of authority (apparent or otherwise) for any of
their respective agents to agree to any non-written modification of this
Security Instrument.

 

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Section 15.2   Successors and Assigns.  This Security Instrument shall be
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns forever.

 

Section 15.3   Inapplicable Provisions.  If any term, covenant or condition of
the Loan Agreement, the Note or this Security Instrument is held to be invalid,
illegal or unenforceable in any respect, the Loan Agreement, the Note and this
Security Instrument shall be construed without such provision.

 

Section 15.4   Headings, Etc.  The headings and captions of various Sections of
this Security Instrument are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

 

Section 15.5   Number and Gender.  Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.

 

Section 15.6    Subrogation.  If any or all of the proceeds of the Note have
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Property, then, to the extent of the funds so used, Lender shall be
subrogated to all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the holder of such
indebtedness and such former rights, claims, liens, titles, and interests, if
any, are not waived but rather are continued in full force and effect in favor
of Lender and are merged with the lien and security interest created herein as
cumulative security for the repayment of the Debt, the performance and discharge
of Borrower’s obligations hereunder, under the Loan Agreement, the Note and the
other Loan Documents and the performance and discharge of the Other Obligations.

 

Section 15.7    Entire Agreement.  The Note, the Loan Agreement, this Security
Instrument and the other Loan Documents constitute the entire understanding and
agreement between Borrower and Lender with respect to the transactions arising
in connection with the Debt and supersede all prior written or oral
understandings and agreements between Borrower and Lender with respect thereto.
Borrower hereby acknowledges that, except as incorporated in writing in the
Note, the Loan Agreement, this Security Instrument and the other Loan Documents,
there are not, and were not, and no persons are or were authorized by Lender to
make, any representations, understandings, stipulations, agreements or promises,
oral or written, with respect to the transaction which is the subject of the
Note, the Loan Agreement, this Security Instrument and the other Loan Documents.

 

Section 15.8   Limitation on Lender’s Responsibility.  No provision of this
Security Instrument shall operate to place any obligation or liability for the
control, care, management or repair of the Property upon Lender, nor shall it
operate to make Lender responsible or liable for any waste committed on the
Property by the tenants or any other Person, or for any dangerous or defective
condition of the Property, or for any negligence in the management, upkeep,
repair or control of the Property resulting in loss or injury or death to any
tenant, licensee, employee or stranger. Nothing herein contained shall be
construed as constituting Lender a “mortgagee in possession.”

 

25 

 

 

Section 15.9   Rules of Construction.  The following rules of construction shall
be applicable for all purposes of this Security Instrument and all documents or
instruments supplemental hereto, unless the context otherwise clearly requires:

 

(a)      The terms “include,” “including” and similar terms shall be construed
as if followed by the phrase “without being limited to”;

 

(b)      The term “or” has, except where otherwise indicated, the inclusive
meaning represented by the phrase “and/or”;

 

(c)      The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms
in this Security Instrument refer to this Security Instrument as a whole and not
to any particular provision or section of this Security Instrument;

 

(d)      an Event of Default shall “continue” or be “continuing” until such
Event of Default has been waived in writing by Lender;

 

(e)      No inference in favor of or against any party shall be drawn from the
fact that such party has drafted any portion hereof or any other Loan Document;

 

(f)      The cover page (if any) of, all recitals set forth in, and all Exhibits
to, this Security Instrument are hereby incorporated herein; and

 

(g)      Wherever Lender’s judgment, consent, approval or discretion is required
under this Security Instrument or any other Loan Document for any matter or
thing or Lender shall have an option, election, or right of determination or any
other power to decide any matter relating to the terms and conditions of this
Security Instrument, including any right to determine that something is
satisfactory or not (“Decision Power”), such Decision Power shall be exercised
in the sole and absolute discretion of Lender unless otherwise expressly stated
to be reasonably exercised. Such Decision Power and each other power granted to
Lender upon this Security Instrument or any other Loan Document may be exercised
by Lender or by any authorized agent of Lender (including any servicer or
attorney-in-fact), and Borrower hereby expressly agrees to recognize the
exercise of such Decision Power by such authorized agent. Without limiting the
generality of the foregoing, any authorized agent of Lender (including any
servicer or attorney-in-fact) is hereby specifically authorized to remove a
trustee and select and appoint a successor trustee.

 

Section 15.10  Counterparts.  This Security Instrument may be executed in
several counterparts, each of which counterpart shall be deemed an original
instrument and all of which together shall constitute a single Security
Instrument.

 

Section 15.11  Lender’s Right to Subordinate.  Lender may, at its election,
subordinate the lien of this Security Instrument and any or all of Lender’s
rights, titles or interests hereunder to any lien, leasehold interest, easement,
plat, covenant, restriction, dedication, encumbrance or other matter affecting
the Property or any part thereof by recording a written declaration of such
subordination in the office of the register or recorder of deeds or similar
filing officer for the county in which the Land is located. If foreclosure sale
occurs hereunder after the recording of any such declaration, the title received
by the purchaser at such sale shall be subject to the matters specified in such
declaration, but such declaration shall not otherwise affect the validity or
terms of this Security Instrument or any other Loan Document or the priority of
any lien or security interest created hereunder or under any other Loan
Document. Without limitation of the foregoing, Lender shall have the right to
unilaterally modify any Loan Document to release any lien on any portion of the
Property.

 

26 

 

 

ARTICLE XVI
DEED OF TRUST PROVISIONS

 

Section 16.1   Concerning the Trustee.  Trustee shall be under no duty to take
any action hereunder except as expressly required hereunder or by law, or to
perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee’s reasonable satisfaction. Trustee, by acceptance of this Security
Instrument, covenants to perform and fulfill the trusts herein created, being
liable, however, only for gross negligence or willful misconduct, and hereby
waives any statutory fee and agrees to accept reasonable compensation, in lieu
thereof, for any services rendered by Trustee in accordance with the terms
hereof. Trustee may resign at any time upon giving thirty (30) days’ notice to
Borrower and to Lender. Lender may remove Trustee at any time or from time to
time and select a successor trustee. In the event of the death, removal,
resignation, refusal to act, or inability to act of Trustee, or in its
discretion for any reason whatsoever Lender may, without notice and without
specifying any reason therefor and without applying to any court, select and
appoint a successor trustee, by an instrument recorded wherever this Security
Instrument is recorded and all powers, rights, duties and authority of Trustee,
as aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall not be required to give bond for the faithful performance of the
duties of Trustee hereunder unless required by Lender. The procedure provided
for in this paragraph for substitution of Trustee shall be in addition to and
not in exclusion of any other provisions for substitution, by law or otherwise.

 

Section 16.2   Trustee’s Fees.  Borrower shall pay all reasonable costs, fees
and expenses incurred by Trustee and Trustee’s agents and counsel in connection
with the performance by Trustee of Trustee’s duties hereunder and all such
costs, fees and expenses shall be secured by this Security Instrument.

 

Section 16.3    Certain Rights.  With the approval of Lender, Trustee shall have
the right to take any and all of the following actions: (a) to select, employ,
and advise with counsel (who may be, but need not be, counsel for Lender) upon
any matters arising hereunder, including the preparation, execution, and
interpretation of the Note, this Security Instrument or the Other Loan
Documents, and shall be fully protected in relying as to legal matters on the
advice of counsel, (b) to execute any of the trusts and powers hereof and to
perform any duty hereunder either directly or through his/her agents or
attorneys, (c) to select and employ, in and about the execution of his/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 (d) any and all other lawful action as Lender may
instruct Trustee to take to protect or enforce Lender’s rights hereunder.
Trustee shall not be personally liable in case of entry by Trustee, or anyone
entering by virtue of the powers herein granted to Trustee, upon the Property
for debts contracted for or liability or damages incurred in the management or
operation of the Property. Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting an 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 actual 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.

 

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Section 16.4   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, but need not be segregated in any manner from any other
moneys (except to the extent required by applicable law) and Trustee shall be
under no liability for interest on any moneys received by Trustee hereunder.

 

Section 16.5   Perfection of Appointment.  Should any deed, conveyance, or
instrument of any nature be required from Borrower by any Trustee or substitute
trustee to more fully and certainly vest in and confirm to the Trustee or
substitute trustee such estates rights, powers, and duties, then, upon request
by the 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 or filed by Borrower.

 

Section 16.6   Succession Instruments.  Any substitute trustee appointed
pursuant to any of the provisions hereof shall, without any further act, deed,
or conveyance, become vested with all the estates, properties, rights, powers,
and trusts of its or his/her predecessor in the rights hereunder with like
effect as if originally named as Trustee herein; but nevertheless, upon the
written request of Lender or of the substitute trustee, the Trustee ceasing to
act shall execute and deliver any instrument transferring to such substitute
trustee, upon the trusts herein expressed, all the estates, properties, rights,
powers, and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver any of the property and moneys held by such Trustee to the
substitute trustee so appointed in the Trustee’s place.

 

ARTICLE XVII
STATE-SPECIFIC PROVISIONS

 

Section 17.1    Principles of Construction.  In the event of any inconsistencies
between the terms and conditions of this Article XVII and any other terms and
conditions of this Security Instrument, the terms and conditions of this Article
XVII shall control and be binding.

 

Section 17.2   Substitution of Trustee. Pursuant to RCW 61.24.010(2), the powers
of Trustee may be exercised by any successor Trustee with the same effect as if
exercised by Trustee. Borrower hereby grants to Lender, in its sole discretion,
the right and power to appoint a substitute trustee or trustees for any reason
whatsoever. Such substitution shall be made by an instrument duly executed and
acknowledged and recorded where this Security Instrument is recorded.

 

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Section 17.3    Performance of Duties; Liability.  Trustee shall perform and
fulfill faithfully its obligations hereunder, but it shall be under no duty to
act until it receives notice of the occurrence of an Event of Default from
Lender and arrangements have been made which are satisfactory to it for the
indemnification to which it is entitled, the payment of its compensation and the
reimbursement of any expenses it may incur in the performance of its duties. It
shall have no liability for its acts unless it is guilty of willful misconduct
or gross negligence.

 

Section 17.4    Trustee’s Fees.  Borrower shall pay Trustee reasonable
compensation for any and all services performed and all its reasonable expenses,
charges, attorneys’ fees and other obligations incurred in the administration
and execution of the trusts hereby created and the performance of its duties and
powers hereunder, which compensation, expenses, fees and disbursements shall
constitute a part of the Debt secured hereby.

 

Section 17.5    Reconveyance.  Trustee shall reconvey all or any part of the
Property covered by this Security Instrument to the person entitled thereto,
upon written request of Lender and Borrower, or upon full satisfaction of the
Debt secured hereby and written request of Lender or the person entitled
thereto.

 

Section 17.6   Procedure of Trustee’s Power of Sale.  Except as otherwise
prescribed by applicable law, the procedure for exercise of the Trustee’s power
of sale under this Security Instrument shall be as follows:

 

Upon written request therefor by Lender specifying the nature of the Event of
Default, or the nature of the several Events of Default, and the amount or
amounts due and owing, Trustee shall execute a written notice of breach and of
its election to cause the Property to be sold to satisfy the obligation secured
hereby, and shall cause such notice to be recorded and otherwise given according
to law.

 

Notice of sale having been given as then required by law and not less than the
time then required by law having elapsed after recordation of such notice of
breach, Trustee, without demand on Borrower, shall sell the Property at the time
and place of sale specified in the notice, as provided by statute, either as a
whole or in separate parcels and in such order as it may determine, at public
auction to the highest and best bidder for cash in lawful money of the United
States, payable at time of sale. Borrower agrees that such sale (or a sheriff’s
sale pursuant to judicial foreclosure) of all the Property as real estate
constitutes a commercially reasonable disposition thereof, but that with respect
to all or any part of the Property which may be personal property, Trustee shall
have and exercise, at Lender’s sole election, all the rights and remedies of a
secured party under the Uniform Commercial Code (the “UCC”). Whatever notice is
permitted or required hereunder or under the UCC, ten (10) days shall be deemed
reasonable. Trustee may postpone sale of all or any portion of the Property, and
from time to time thereafter may postpone such sale, as provided by statute.
Trustee shall deliver to the purchaser its deed and bill of sale conveying the
Property so sold, but without any covenant or warranty, express or implied. The
recital in such deed and bill of sale of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any Person other than Trustee,
including Borrower or any one or more Lender, may purchase at such sale.

 

After deducting all costs, fees and expenses of Trustee, and of this Security
Instrument, including the cost of evidence of title search and reasonable
counsel fees in connection with sale, Trustee shall apply the proceeds of sale
to payment of: all sums expended under the terms hereof not then repaid, with
accrued interest at the Default Rate of interest specified in the Loan
Documents; all other sums then secured hereby; and the remainder, if any, to the
clerk of the superior court of the county in which the sale took place, as
provided in RCW 61.24.080.

 

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Section 17.7    Commercial Loan.  Borrower warrants that the proceeds of the
Loan are for commercial purposes only and not for personal, family or household
purposes pursuant to RCW 19.52.080.

 

Section 17.8    Non-Agricultural Use.  The Property is not presently, and will
not during the term of this Security Instrument be, used principally or at all
for agricultural or farming purposes.

 

Section 17.9    Washington Statute of Frauds Notice.  ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR FOREBEAR FROM ENFORCING REPAYMENT
OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

Section 17.10  Waiver of Immunity Under RCW Title 51.  With respect to any
contractual matters that Borrower establishes in any action within the scope of
RCW Section 4.24.115, Borrower expressly (1) waives Borrower’s immunity under
RCW tit. 51 and acknowledges that such waiver was mutually negotiated by the
parties; and (2) agrees to indemnify Lender. The scope of this indemnity shall
be limited with regard to damages for bodily injury to persons or damage to
property resulting from the concurrent negligence of Borrower or Borrower’s
agents or employees and of Lender or Lender’s agents or employees, as to which
Borrower agrees to indemnify Lender to the extent of the negligence of Borrower
or Borrower’s agents or employees. Nothing herein shall be deemed to require
Borrower to indemnify Lender against the sole or concurrent negligence of Lender
or Lender’s agents or employees if such indemnity would be prohibited under RCW
Section 4.24.115. The parties intend that under indemnity provisions herein,
unless otherwise expressly limited herein, Borrower shall indemnify Lender to
the fullest extent not prohibited by law, including, without limitation, in the
event of the sole or concurrent negligence of Lender or of any other person or
entity.

 

Section 17.11 Excluded Obligations.  Any provision of Sections 2.1 through 2.3
hereof or any other provision of this Security Instrument or any other Loan
Document to the contrary notwithstanding, this Security Instrument does not
secure (collectively, the “Excluded Obligations”): (i) any guaranty of the
obligations of Borrower under the Note or the Loan Agreement; (ii) any
environmental indemnification agreement executed by Borrower or any other party
in connection with the Loan secured hereby; or (iii) any provision of this
Security Instrument, the Loan Agreement or any other Loan Document that would,
under RCW Ch. 61.24, be considered the “substantial equivalent” of an
environmental indemnification agreement described in (ii) above.

 

Section 17.12  Assignment of Rents.  The assignment of Rents under this Security
Instrument is intended to be specific, perfected and choate upon recording of
this Security Instrument as provided in RCW 7.28.230.

 

[NO FURTHER TEXT ON THIS PAGE]

 

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IN WITNESS WHEREOF, this Security Instrument has been executed by Borrower as of
the day and year first above written.

 

  BORROWER:   MOODY NATIONAL YALE-SEATTLE HOLDING, LLC,
a Delaware limited liability company         By: /s/ Brett C. Moody     Brett C.
Moody     President

 

STATE OF TEXAS )       )   SS:     COUNTY OF HARRIS )

 

On _______________, 2016, before me, _______________________________________, a
Notary Public, personally appeared BRETT C. MOODY, President, and as Authorized
Party of Moody National Yale-Seattle Holding, LLC, a Delaware limited liability
company, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.

 

WITNESS my hand and official seal.

 

(Seal)         Notary Public in and for _________ County   Print Name:

 

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EXHIBIT A

 

LEGAL DESCRIPTION

 

PARCEL A:

 

Lots 1, 2 and 3, Block 60, SECOND ADDITION TO THE TOWN OF SEATTLE AS LAID OFF BY
THE HEIRS OF SARAH A. BELL (DECEASED), (COMMONLY KNOWN AS HEIRS OF SARAH A.
BELL’S SECOND ADDITION TO THE CITY OF SEATTLE), according to the plat thereof
recorded in Volume 1 of Plats, page 121, records of King County, Washington,
more particularly described as follows:

 

Beginning at the most Southerly corner of Lot 1, Block 60, SECOND ADDITION TO
THE TOWN OF SEATTLE AS LAID OFF BY THE HEIRS OF SARAH A. BELL (DECEASED),
(COMMONLY KNOWN AS HEIRS OF SARAH A. BELL’S SECOND ADDITION TO THE CITY OF
SEATTLE), according to the plat thereof recorded in Volume 1 of Plats, page 121,
records of King County, Washington;

 

THENCE North 42°22’49” East along the Southeasterly line of said Lot 1, a
distance of 120.07 feet to the most Easterly corner of said Lot 1;

 

THENCE North 47°42’19” West along the Northeasterly line of Lots 1, 2 and 3 of
said Block 60, a distance of 180.06 feet to the most Northerly corner of said
Lot 3;

 

THENCE South 42°22’49” West along the Northwesterly line of said Lot 3, a
distance of 120.06 feet to the most Westerly corner of said Lot 3;

 

THENCE South 47°42’11” East along the Southwesterly line of said Lots 1, 2 and
3, a distance of 180.06 feet to the most Southerly corner of said Lot 1 and the
point of beginning.

 

PARCEL B:

 

An easement for the purpose of inserting tie-back rods and anchors, pins, and
concrete and installation of settlement plates for construction on the premises
described in Parcel “A” above, as more particularly set out in that Easement
Agreement recorded May 16, 2000, under Recording No. 20000516000769.

 

PARCEL C:

 

License for use of parking stalls located within the “Parking Facilities” as
described in, and upon the terms and provisions of, Parking License Agreement,
dated November 4, 1999, recorded November 4, 1999 under Recording No.
19991104001409.

 

ALL SITUATE in the County of King, State of Washington

 

NOTE: Parcel C is a Parking License Agreement and any interest or rights are
subject to the terms and conditions set forth therein.

 

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ABBREVIATED LEGAL

 

Lots 1, 2 and 3, Block 60, SECOND ADDITION TO THE TOWN OF SEATTLE AS LAID OFF BY
THE HEIRS OF SARAH A. BELL (DECEASED), (COMMONLY KNOWN AS HEIRS OF SARAH A.
BELL’S SECOND ADDITION TO THE CITY OF SEATTLE)

 

Tax Account Nos. 066000-2685-09 and 066000-2680-04

 

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