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Moody National Reit I, Inc. 8-K [moody-8k_0607.htm]

 
EXHIBIT 10.8

COLLATERAL ASSIGNMENT OF NOTE AND LIENS

THE STATE OF TEXAS
§
 
§
COUNTY OF TARRANT
§

THIS COLLATERAL ASSIGNMENT OF NOTE AND LIENS (“Collateral Assignment”) is
entered into this the 3rd day of June, 2011, but effective as of the 5th day of
May, 2011, by and between MNHP NOTE HOLDER, LLC, a Delaware limited liability
company (“Debtor”), whose address for notice hereunder is 6363 Woodway, Suite
110, Houston, Texas 77057, and PATRIOT BANK, a Texas banking association
(“Secured Party”), whose address for notice hereunder is 7500 San Felipe, Suite
125, Harris County, Houston, Texas 77063, Attn: Jim Franer.

ARTICLE I
DEFINITIONS AND USE OF TERMS

Section 1.01                      Certain Definitions.  As used herein, the
following terms have the meanings indicated, unless the context otherwise
requires:

The term “Additional Interests” shall have the meaning set forth in Section 2.02
hereof.

The term “Adjust” shall have the meaning set forth in Section 5.01(l) hereof.

The term “Affiliate” means any Person (other than Secured Party): (a) directly
or indirectly controlling, controlled by, or under common control with, Debtor;
(b) directly or indirectly owning or holding 10% or more of any equity interest
in Debtor; or (c) 10% or more of whose voting stock or other equity interest is
directly or indirectly owned or held by Debtor. For purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by," and "under common control with") means the possession directly
or indirectly of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
by contract or otherwise.

THE term “Allonge” means an allonge in form and substance satisfactory to
Secured Party in its sole discretion, to be executed and delivered by Debtor to
Secured Party to assign and transfer the Collateral Note to Secured Party.

The term "Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as amended from time to time or any applicable bankruptcy,
insolvency, or other similar law now or hereafter in effect and all rules and
regulations promulgated thereunder.

The term “Code” means the Texas Business and Commerce Code as in effect in the
State of Texas on the date of this Collateral Assignment or as it may hereafter
be amended from time to time.

The term “Collateral” shall have the meaning set forth in Section 2.01 hereof.

The term “Collateral Deed of Trust” shall have the meaning set forth in Exhibit
“B” hereto.

 
 

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The term “Collateral Loan Documents” shall mean, collectively, the Collateral
Note and all instruments, agreements and documents evidencing, relating to
and/or securing all or any portion of the indebtedness evidenced by the
Collateral Note, as such instruments, agreements and documents may have been or
may hereafter be amended from time to time, including, without limitation, the
documents listed on Exhibit “B” attached hereto and incorporated herein by
reference.

The term “Collateral Loan Party” means Collateral Note Maker, Master Tenant and
each other Person who is or who may become liable for the payment and
performance of all or any portion of indebtedness evidenced by the Collateral
Note or any Collateral Loan Document or who owns any property that is subject to
(or purported to be subject to) a security interest or other lien which secures
all or any portion of the indebtedness evidenced by the Collateral Note or any
Collateral Loan Document.

The term “Collateral Note” means that certain Real Estate Lien Note
(Non-Recourse) dated August 5, 2008, in the stated original principal amount of
THIRTEEN MILLION AND NO/100 DOLLARS ($13,000,000.00), executed by Collateral
Note Maker, and payable to the order of Secured Party, as assigned by Secured
Party to Debtor, as the same may be renewed, extended, supplemented, increased,
amended or modified from time to time with the consent of Secured Party, and all
other promissory notes given in substitution therefor or in modification,
renewal, amendment, restatement, increase or extension thereof, in whole or in
part.

The term “Collateral Note Maker” means MOODY NATIONAL HP GRAPEVINE TRUST, a
Delaware statutory trust.

The term “Collateral Premises” means the real property, personal property and
other property encumbered by the Collateral Deed of Trust, which real property
is more particularly described on Exhibit “A” attached hereto and incorporated
herein by reference.

The term “Collateral Property” means all property, now or hereafter existing or
hereafter acquired, real or personal, tangible or intangible, and all rights
thereto, mortgaged or pledged (or purported to be mortgaged or pledged) pursuant
to any Collateral Loan Document, including without limitation, the Collateral
Premises.   The term “Collateral Property” is expressly defined as meaning all
or, where the context permits or requires, any portion of the Collateral
Property and all or, where the context permits or requires, any interest
therein.

The term “Collection Action” means any judicial proceeding or other action
taken, initiated or prosecuted by, on behalf of or at the request of Debtor
against the Collateral Note Maker, any other Collateral Loan Party or any
Collateral Property to collect all or any portion of the indebtedness evidenced
by the Collateral Note, to foreclose any lien or security interest under any
Collateral Loan Document or otherwise to enforce the rights or remedies of
Debtor under the Collateral Note, the Collateral Deed of Trust or any of the
other Loan Documents or applicable law.

The term “Event of Default” shall have the meaning set forth in Section 6.01
hereof.

The term “Indemnified Person” shall have the meaning set forth in Section 8.02
hereof.

The term “Loan” means the loan in the amount of ELEVEN MILLION FOUR HUNDRED
EIGHTY-THREE THOUSAND TWO HUNDRED SEVENTY-NINE AND 54/100 DOLLARS
($11,483,279.54) made by Secured Party to Debtor, evidenced by the Note and
secured by the liens created hereby.

 
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The term “Loan Agreement” means that certain Commercial Loan Agreement of even
date herewith executed by Debtor, Secured Party and other parties identified
therein, as the same may be amended, modified, supplemented, restated, extended
or renewed from time to time.

The term “Loan Documents” means the Note, this Collateral Assignment, the Loan
Agreement and any and all other agreements, documents and instruments now or
hereafter executed by Debtor or any other Person in connection with the Loan
evidenced by the Note or in connection with or as security for the Obligations,
together with any and all renewals, modifications, amendments, restatements,
consolidations, substitutions, replacements, extensions and supplements hereof
or thereof.

The term “Master Tenant” means MOODY NATIONAL HP GRAPEVINE MT, L.P., a Delaware
limited partnership.

The term “Note” means that certain Promissory Note dated of even date herewith,
in the original principal amount of ELEVEN MILLION FOUR HUNDRED EIGHTY-THREE
THOUSAND TWO HUNDRED SEVENTY-NINE AND 54/100 DOLLARS ($11,483,279.54), executed
contemporaneously herewith by Debtor and payable to the order of Secured Party,
as the same may be renewed, extended, supplemented, increased, amended or
modified in effect from time to time, and all other promissory notes given in
substitution therefor or in modification, renewal, amendment, restatement,
increase or extension thereof, in whole or in part.

The term “Note Receivables” shall have the meaning set forth in Section 2.01
hereof.

The term “Obligated Party” means each Person (other than Debtor) who is, or
whose property is, directly or indirectly liable for the Obligations or any part
thereof.

The term “Obligations” means (i) all indebtedness, obligations and liabilities
of Debtor to Secured Party of any kind or character, now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several or joint and several, and regardless of
whether such indebtedness, obligations and liabilities may, prior to their
acquisition by Secured Party, be or have been payable to or in favor of a third
party and subsequently acquired by Secured Party (it being contemplated that
Secured Party may make such acquisitions from third parties), including without
limitation all indebtedness, obligations and liabilities of Debtor to Secured
Party now existing or hereafter arising by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, purchase, overdraft, discount,
indemnity agreement or otherwise, including, without limitation, the Note,
(ii) all accrued but unpaid interest on any of the indebtedness described in
(i) above, (iii) all obligations of Debtor to Secured Party under any documents
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys' fees, and (v) all
renewals, extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above.

The term “Permitted Temporary Defaults” shall have the meaning ascribed to such
term in the Loan Agreement.

 
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The term "Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental person, the successor functional equivalent of such Person).

The term “Subordinate Mortgage” means any mortgage, deed of trust, pledge, lien
(statutory, constitutional, or contractual), security interest, encumbrance or
charge, or conditional sale or other title retention agreement, covering all or
any portion of the Collateral Property, the lien of which is subordinate and
inferior to the liens and security interests of the Collateral Loan Documents

Section 1.02                      Additional Definitions.  As used herein, the
following terms shall have the following meanings: (i) "hereof," "hereby,"
"hereto," "hereunder," "herewith," and similar terms mean of, by, to, under and
with respect to, this Collateral Assignment or to the other documents or matters
being referenced; (ii) "heretofore" means before, "hereafter" means after, and
"herewith" means concurrently with the date of this Collateral Assignment; (iii)
all pronouns, whether in masculine, feminine or neuter form, shall be deemed to
refer to the object of such pronoun whether same is masculine, feminine or
neuter in gender, as the context may suggest or require; (iv) "including" means
including, without limitation, and (v) all terms used herein, whether or not
defined in Section 1.01 hereof, and whether used in singular or plural form,
shall be deemed to refer to the object of such term whether such is singular or
plural in nature, as the context may suggest or require.

ARTICLE II
GRANT OF SECURITY INTEREST; DESCRIPTION OF COLLATERAL

Section 2.01                      Grant of Security Interest.  As security for
the Obligations and the performance of the covenants and agreements of Debtor
contained herein and in the other Loan Documents, Debtor hereby pledges,
collaterally assigns, transfers, and conveys to Secured Party, its successors
and assigns, for its benefit, with full recourse, and grants to Secured Party a
security interest in, all of Debtor’s right, title, and interest in, to and
under the following described property, whether now owned or hereafter acquired
(collectively, the “Collateral”):

(a)           the Collateral Note, and all of the indebtedness evidenced
thereby;

(b)           the Collateral Deed of Trust;

(c)           all of the other Collateral Loan Documents;

(d)           all right, title, interest and claims of Debtor now or hereafter
acquired as the owner of the Collateral Note, together with any and all rights,
privileges, demands or equities now or hereafter attaching to, existing or
arising in connection with the Collateral Note, any and all securities, cash,
certificates or other property, option or right in respect of, in addition to or
substitution or exchange for the Collateral Note, or any of the foregoing, or
other property at any time and from time to time receivable or otherwise
distributed in respect of or in exchange for the Collateral Note;

(e)           any and all payments, whether in the ordinary course or upon
dissolution or liquidation of the Debtor, of any kind or nature whatsoever, now
or hereafter payable by the Collateral Note Maker and/or any other Collateral
Loan Party to Debtor by reason of Debtor’s being the owner of the Collateral
Note, or now or hereafter distributable or payable to Debtor

 
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from any other source by reason of Debtor being the owner of the Note and any
and all proceeds from any transfer, assignment or pledge of any interest of
Debtor in, or claim or right against the Collateral Note (regardless of whether
such transfer, assignment or pledge is permitted under the terms hereof or the
other Loan Documents), and all claims, causes in action or things in action now
or hereafter arising out of the ownership of the Collateral Note (collectively,
“Note Receivables”);

(f)           all notes or other documents or instruments now or hereafter
evidencing or securing any of the Note Receivables; and

(g)           all accessions, additions and attachments to any of the foregoing,
all replacements and substitutions for any of the foregoing, and all renewals,
proceeds and products of any of the foregoing, including without limitation, all
cash, general intangibles, accounts, inventory, equipment, fixtures, farm
products, notes, drafts, acceptances, securities, instruments, chattel paper,
insurance proceeds payable because of loss or damage, or other property,
benefits or rights arising therefrom, and in and to all or other proceeds of any
sale or other disposition of such property.

Section 2.02                      Additional Interests.  This Collateral
Assignment includes, and the liens, security interests and assignments created
by this Collateral Assignment encumber and extend to, other, further and
additional estates, interests and rights that may now or anytime be acquired by
Debtor in or to the Collateral Property (collectively, the “Additional
Interests”), and if title to any of the Additional Interests ever becomes vested
in Debtor, such interest will be encumbered by this Collateral Assignment in the
same manner as if Debtor had title to the Additional Interests as of the date of
the execution of this Collateral Assignment.

Section 2.03                      [Intentionally Omitted].  

Section 2.04                      Maintenance of Collateral.  Other than the
exercise of reasonable care to assure the safe custody of any Collateral in
Secured Party's possession from time to time, Secured Party does not have any
obligation, duty or responsibility with respect to the Collateral.  Without
limiting the generality of the foregoing, Secured Party shall not have any
obligation, duty or responsibility to do any of the following:  (a) ascertain
any maturities, calls, conversions, exchanges, offers, tenders or similar
matters relating to the Collateral or informing Debtor with respect to any such
matters; (b) fix, preserve or exercise any right, privilege or option (whether
conversion, redemption or otherwise) with respect to the Collateral unless
(i) Debtor makes written demand to Secured Party to do so, (ii) such written
demand is received by Secured Party in sufficient time to permit Secured Party
to take the action demanded in the ordinary course of its business, and
(iii) Debtor provides additional Collateral, acceptable to Secured Party in its
sole discretion; (c) collect any amounts payable in respect of the Collateral
(Secured Party being liable to account to Debtor only for what Secured Party may
actually receive or collect thereon); (d) sell all or any portion of the
Collateral to avoid market loss; (e) sell all or any portion of the Collateral
unless and until (i) Debtor makes written demand upon Secured Party to sell the
Collateral, and (ii) Debtor provides additional collateral, acceptable to
Secured Party in its sole discretion; or (f) hold the Collateral for or on
behalf of any party other than Debtor.

Section 2.05                      Payments on Collateral Note. So long as there
shall exist no Event of Default, Debtor shall have the revocable right to
collect upon, but not prior to, accrual, all amounts under the Collateral Note,
which right shall automatically terminate upon the occurrence of an Event of
Default, without notice or further action of any kind or nature by Secured
Party, and all amounts due under the Collateral Loan Documents shall thereafter
be payable to Secured Party.

 
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ARTICLE III
CONSIDERATION

Section 3.01                      Consideration.  This Collateral Assignment is
made in consideration of the Loan and for other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged and confessed.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DEBTOR

Section 4.01                      Warranties and Representations.  Debtor hereby
unconditionally warrants and represents to Secured Party as of the date hereof
and at all times during the term of this Collateral Assignment as follows:

(a)           [Intentionally Omitted.]

(b)           Ownership.  Except for the security interest granted by this
Collateral Assignment, Debtor is the owner of the Collateral free of any adverse
claim, security interest or encumbrance.  No dispute, right of setoff,
counterclaim or defense exists with respect to all or any part of the
Collateral.  Debtor has not executed any other security agreement currently
affecting the Collateral and no financing statement or other instrument similar
in effect covering all or any part of the Collateral is on file in any recording
office except as may have been executed or filed in favor of Secured Party.

(c)           [Intentionally Omitted.]

(d)           Authority.   The execution, delivery and performance of this
Collateral Assignment by Debtor have been duly authorized by all necessary
corporate action of Debtor, to the extent Debtor is a corporation, or by all
necessary partnership action, to the extent Debtor is a partnership.

(e)           Valid and Enforceable Security Interest.  The pledge and
assignment of the Collateral pursuant to this Collateral Assignment creates a
valid, enforceable and first-priority security interest in the Collateral,
securing the payment of the Obligations, and all filings and other actions
necessary or desirable to perfect and protect such security interest (including
the priority thereof) have been, or, upon (i) the filing of a Uniform Commercial
Code financing statement in the office of the Secretary of State of Texas, and
(ii) the obtaining of possession of all Collateral the possession of which is
lawfully required to perfect a security interest therein, will have been duly
taken to create a valid, enforceable, and perfected first priority security
interest in the Collateral.

(f)           [Intentionally Omitted.]

(g)           Location/Identity.  Debtor's principal residence or place of
business and chief executive office (as those terms are used in the Code), as
the case may be is located at the address set forth on the first page
hereof.  Except as specified elsewhere herein, all Collateral and records
concerning the Collateral shall be kept at such address.  Debtor’s
organizational structure, state of organization, and organizational number (the
“Organizational Information”) are as set forth on the first page hereof.  Except
as specified herein, the Organizational Information shall not change.
 
 
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(h)           [Intentionally Omitted.]

(i)           All Information Correct.  All information contained in this
Collateral Assignment and the statements furnished, or to be furnished, to
Secured Party by or on behalf of Debtor in connection with the Obligations
secured by this Collateral Assignment are complete and accurate.

(j)           [Intentionally Omitted.]  

(k)           No Default.  Other than the Permitted Temporary Defaults, there is
no default or any action, event, or condition that would, with the giving of
notice, the passage of time, or both, constitute a default or event of default
under the Collateral Note or any of the other Collateral Loan Documents.

(l)           Fire and Casualty Insurance.  At all times Debtor has a security
interest against the Collateral Premises, all fire and casualty policies
covering the Collateral Premises (1) name Debtor as the insured under a standard
mortgagee clause, (2) are in full force and effect, and (3) afford insurance
against fire and such other risks as are usually insured against under builder’s
risk policies or policies covering vacant dwellings.

(m)           Flood Insurance.  At all times Debtor has a security interest
against the Collateral Premises, the Collateral Premises located in a special
flood hazard area designated as such by the Federal Emergency Management Agency
(FEMA) are covered by special flood insurance under the National Flood Insurance
Program.

(o)           Continuous Nature of Representations and Warranties.  Each
representation and warranty contained in this Collateral Assignment shall be
continuous in nature and shall remain accurate, complete and not misleading at
all times during the term of this Collateral Assignment, except for such
representations and warranties that expressly relate solely to a specific date.
 
ARTICLE V
COVENANTS AND AGREEMENTS OF DEBTOR

Section 5.01                      Covenants.  Debtor hereby unconditionally
covenants and agrees with Secured Party as follows:

(a)           Delivery of Collateral.  Debtor shall tender immediate physical
possession of the original of each of the Collateral Note and other Collateral
Loan Documents to Secured Party, together with, in the case of the Collateral
Note, an Allonge assigning the Collateral Note to Secured Party.

(b)           Filing.  Debtor authorizes Secured Party to file, in jurisdictions
where this authorization will be given effect, a Financing Statement signed only
by Secured Party covering the Collateral; and at the request if Secured Party,
Debtor will execute one or more Financing Statements pursuant to the Code, in a
form satisfactory to Secured Party, and will pay the cost of filing the same of
in filing or recording this Collateral Assignment in all public offices wherever
filing or recording is deemed by Secured Party to be necessary or desirable, it
being further stipulated in this regard that Secured Party may also, at any time
or times, file any counterpart of

 
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this Collateral Assignment signed by Debtor as a Financing Statement if Secured
Party elects to do so.

(c)           Transfer of Encumbrance.  Debtor will not (i) sell, assign (by
operation of law or otherwise) or transfer Debtor's rights in any of the
Collateral, (ii) grant a lien or security interest in or execute, authorize,
file or record any financing statement or other security instrument with respect
to the Collateral to any party other than Secured Party, or (iii) deliver actual
or constructive possession of any certificate, instrument or document evidencing
and/or representing any of the Collateral to any party other than Secured Party.

(d)           Other Liens.  Debtor will keep the Collateral free from any and
all adverse liens, security interests and encumbrances, and Debtor agrees to
defend the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein.

(e)           Payment of Taxes and Fees.  Debtor will promptly pay when due
(unless they are being contested in good faith) all taxes, assessments, costs,
expenses and fees necessary to preserve, protect, maintain, and collect the
Collateral; defend the Collateral against all claims and demands of all Persons
at any time claiming an interest therein adverse to Secured Party; and in the
event of a failure to do so, Debtor agrees that Secured Party may make
expenditure for any and all such purposed, and the amount so expended together
with interest thereon at the highest rate allowed by law constitutes one of
Debtor’s Obligations to Secured Party by this Collateral Assignment.

(f)           Financial Information.  Debtor will promptly furnish reports, data
and financial statements in respect of Collateral Note Maker, the other
Collateral Loan Parties, the Collateral Note, the other Collateral Loan
Documents and the Collateral Property, as Secured Party may reasonably request
from time to time.  Without limiting the generality of the foregoing, Debtor
shall cause all financial statements and other information and reports required
to be delivered by Collateral Note Maker, any other Collateral Loan Party or any
other Person under the Collateral Loan Documents to be contemporaneously
delivered to Secured Party.

(g)           Collection.  Debtor will use its best efforts to collect the
Collateral Note, including instituting and diligently prosecuting legal
proceedings for the collection of the Collateral Note and/or enforcement of the
other Collateral Loan Documents, provided Secured Party has first consented in
writing to such action.

(h)           Further Assurances.  The Debtor agrees that, at any time and from
time to time, at the expense of Debtor, the Debtor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be reasonably necessary or desirable, or that the Secured Party may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or under the Collateral or to enable
the Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.  Without limiting the generality of the foregoing, at
any time and from time to time, Debtor shall, at the request of Secured Party,
make, execute, acknowledge, and deliver or authorize the execution and delivery
of and where appropriate, cause to be recorded and/or filed and from time to
time thereafter to be re-recorded and/or refiled at such time in such offices
and places as shall be deemed desirable by Secured Party all such other and
further assignments, security agreements, financing statements, continuation
statements, endorsements, assurances, certificates and other documents as
Secured Party from time to time may require for the better assuring, conveying,
assigning and confirming to Secured Party the Collateral and the rights hereby
conveyed or assigned or intended now or hereafter to be conveyed or assigned,
and for carrying out the intention or facilitating the performance of the terms
of this Collateral Assignment.  Upon any

 
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failure of Debtor to do so, Secured Party may make, execute, record, file,
re-record and/or refile, acknowledge and deliver any and all such further
assignments, security agreements, financing statements, continuation statements,
endorsements, assurances, instruments, certificates and documents for and in the
name of Debtor, and Debtor hereby irrevocably appoints Secured Party the agent
and attorney-in-fact with full power of substitutions of Debtor so to do.  This
power is coupled with an interest and is irrevocable.  Without limiting the
generality of the foregoing, Debtor will obtain such waivers of lien, estoppel
certificates or subordination agreements as Secured Party may reasonably require
to insure the priority of its security interest in the Collateral.  Debtor also
shall furnish to Secured Party such evidence as Secured Party reasonably may
require from time to time to establish a valid security interest in and to
further protect and perfect its security interest in the Collateral.
 

(i)           Covenant of Debtor Upon Foreclosure of Collateral Property.  Upon
acquisition of all or any portion of the Collateral Property by Debtor (or an
Affiliate of Debtor), whether by way of foreclosure, acceptance of a
deed-in-lieu of foreclosure or in any other manner whatsoever, prior to the
payment in full of the Obligations, Debtor covenants and agrees to promptly, at
Debtor’s sole cost and expense: (i) execute, acknowledge and deliver (or cause
to be executed, acknowledged and delivered) to Secured Party one or more deeds
of trust and/or security agreements covering all of the Collateral Property
acquired by Debtor (or Debtor’s Affiliate, as applicable), and such other
documents, agreements, instruments, assignments, pledges, comfort letters,
estoppel certificates, subordination agreements, consents, environmental
indemnities, authorizations and resolutions as Secured Party may require in its
sole discretion, all in form and substance satisfactory to Secured Party, (ii)
do and perform such other acts as Secured Party may reasonably request, and
(iii) provide (or cause to be provided) loan policies of title insurance
covering all Collateral Property with only such exceptions as Secured Party
approves.

(j)           Delivery of Payments and Proceeds.  If Debtor shall at any time be
entitled to receive or shall receive any cash, certificate or other property,
option or right upon, in respect of, as an addition to, or in substitution or
exchange for any of the Collateral, whether for value paid by Debtor or
otherwise, Debtor agrees that the same shall be deemed to be Collateral and
shall be delivered directly to Secured Party in each case, accompanied by proper
instruments of assignment and powers duly executed by Debtor in such a form as
may be required by Secured Party, to be held by Secured Party subject to the
terms hereof, as further security for the Obligations (except as otherwise
provided herein with respect to the application of the foregoing to the
Obligations).  If Debtor receives any of the foregoing directly, Debtor agrees
to hold such cash or other property in trust for the benefit of Secured Party,
and to surrender such cash or other property to Secured Party immediately. 

(k)           Notification of Defaults. Debtor will, until the Obligations are
paid in full, notify Secured Party in writing promptly after the Debtor obtains
knowledge or receives notice of any default or any action, event, or condition
that would, with the giving of notice, the passage of time, or both, constitute
a default or event of default under the Collateral Note or any of the other
Collateral Loan Documents.

(l)           Modification of Terms of Collateral Loan Documents.  Except as
expressly permitted under Section 5.34 of the Loan Agreement, without the prior
written consent of Secured Party, the Debtor shall not (i) extend the final
maturity date of the Collateral Note or any other date fixed for payment of
principal of the Collateral Note, (ii) reduce the amount of principal of, or
interest rate under, the Collateral Note, (iii) cancel, terminate or release, or
permit or consent to the cancellation, termination or release of, any part of
the Collateral, (iv) take,

 
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permit or consent to any other action that could substantially interfere with
the exercise of remedies by the Secured Party under the Collateral, or (v) amend
or waive any of the terms or conditions of, modify, settle, compromise, abate,
discharge, release, terminate, arbitrate, set off, adjust, grant consents with
respect to, waive any default or event of default under, or otherwise adversely
affect (collectively, “Adjust”) the Collateral or the obligations of Collateral
Note Maker, any other Collateral Loan Party or any other Person thereunder in
any way.

(m)           Impairment of Security Interest.  Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.

(n)           Delivery of Documents Evidencing Note Receivables.  Debtor shall
promptly deliver to Secured Party as additional Collateral any note or other
document or instrument entered into after the date hereof which evidences,
constitutes, guarantees or secures any of the Note Receivables or any right to
receive a Note Receivable, which notes or other documents and instruments shall
be accompanied by such endorsements or assignments as Secured Party may require
to create a perfected security interest therein in favor of Secured Party.

(o)           No Subordinate Mortgage.  Debtor will not create, place, or permit
to be created or placed, or through any act or failure to act, acquiesce in the
placing of, or allow to remain any Subordinate Mortgage regardless of whether
such Subordinate Mortgage is expressly subordinate to the liens or security
interests of the Collateral Deed of Trust or other Collateral Loan Documents
with respect to the Collateral Property (or any portion thereof).

(p)           Default Notices and other Notices.  Upon the sending or receipt of
any demand letter, notice of default or similar correspondence relating to the
Collateral Note, any other Collateral Loan Document or any Collateral Property,
Debtor shall promptly forward a copy of such letter, notice or other
correspondence to Secured Party.

Nothing contained in this Article V authorizes Debtor to take any Collection
Action without Secured Party’s prior written consent.

ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES

Section 6.01                      Events of Default.  The term "Event of
Default," as used herein, shall include the occurrence and continuance of any
one or more of the following events:

(a)           [Intentionally Omitted.]

(b)           [Intentionally Omitted.]

(c)           [Intentionally Omitted.]

 
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(d)           An involuntary case or other proceeding shall be commenced against
Debtor or any Obligated Party which seeks liquidation, reorganization or other
relief with respect to it or its debts or other liabilities under any
bankruptcy, insolvency or other similar law now or hereafter in effect, or seeks
the appointment of a trustee, receiver, liquidator, custodian or other similar
official for Debtor or any Obligated Party or all or any substantial part of
their property, and such involuntary case or other proceeding shall remain
undismissed or unstayed for a period of 60 days; or an order for relief against
any Debtor or any Obligated Party shall be entered in any such case under the
Bankruptcy Code;

(e)           Debtor or any Obligated Party shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts or other liabilities under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for Debtor or any Obligated Party or all or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take any corporate or limited partnership
action to authorize or effect any of the foregoing;

(f)           Debtor or any Obligated Party discontinues its usual business;

(g)           Failure of Debtor to deliver additional Collateral as required by
this Collateral Assignment;

(h)           Any deterioration or impairment of the Collateral or any part
thereof, any decline or depreciation in the market price thereof (whether actual
or reasonably anticipated) which, in the judgment of Secured Party, causes the
Collateral to become unsatisfactory as to value or character;

(i)           If Debtor is a natural person, the death of any Debtor;

(j)           If Debtor, or any Obligated Party, is a corporation, limited
liability company, partnership, or other entity, as applicable, the dissolution,
or adoption of a plan of liquidation by Debtor, or any Obligated Party, or
voluntary or involuntary forfeiture of the corporate; or

(k)           The occurrence of any event of default under the Loan Agreement or
any of the other Loan Documents after the expiration of any applicable grace,
notice or cure period.

Section 6.02                      Remedies and Rights.  If any Event of Default
shall occur and be continuing, Secured Party may do any one or more of the
following:

(a)           declare the Obligations or any part thereof to be immediately due
and payable, and the same shall thereupon become immediately due and payable,
without notice, demand, presentment, notice of dishonor, notice of acceleration,
notice of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by Debtor;
provided, however, that upon the occurrence of an Event of Default under Section
5.01(d) or Section 5.01(e), the Obligations shall become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by Debtor;

 
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(b)           reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest granted hereunder by any available
judicial procedure;

(c)           foreclose upon or otherwise enforce its security interest in and
lien on the Collateral to secure all payments and performance of Obligations of
the Debtor in any manner permitted by law or provided for hereunder;

(d)           notify all obligors in respect of the Collateral that the
Collateral has been assigned to Secured Party and that all payments thereon are
to be made directly to Secured Party or such other party as may be designated by
the Secured Party; settle, compromise, or release, in whole or in part, any
amounts owing on the Collateral, any such obligor or any portion of the
Collateral, on terms acceptable to the Secured Party; enforce payment and
prosecute any action or proceeding with respect to any and all of the
Collateral; and where any such Collateral is in default, foreclose on and
enforce security interests in, such Collateral by any available judicial
procedure or without judicial process and sell property acquired as a result of
any such foreclosure sale;

(e)           require the Debtor to assemble the Collateral and/or books and
records relating thereto and make such available to the Secured Party at a place
to be designated by Secured Party;

(f)           enter onto property where any Collateral or books and records
relating thereto are located and take possession thereof with or without
judicial process;

(g)           prior to the disposition of the Collateral, prepare it for
disposition in any manner and to the extent Secured Party deems appropriate;

(h)           exercise all rights and remedies of a secured creditor under the
Code or other applicable law, including but not limited to, selling or otherwise
disposing of the Collateral, or any part thereof, at one or more public or
private sales, whether or not such Collateral is present at the place of sale,
for cash or credit or future delivery, on such terms and in such manner as
Secured Party may determine;

(i)           perform or attempt to perform any covenant, duty, or agreement of
the Debtor contained in any of the Loan Documents on behalf of the Debtor. In
such event, Debtor shall, at the request of Secured Party, promptly pay any
amount reasonably expended by Secured Party in such performance or attempted
performance to Secured Party, together with interest thereon at the rate of
interest in effect upon the occurrence of an Event of Default as specified in
the Note from the date of such expenditure until paid. Notwithstanding the
foregoing, it is expressly agreed that Secured Party shall not have any
liability (other than for bad faith, gross negligence, or willful misconduct) or
responsibility for the performance of any obligation of any of Debtor under this
Collateral Assignment or any other Loan Document;

(j)           apply for the appointment of a receiver for the Collateral, and
Debtor hereby consents to such right and such appointment and hereby, to the
extent permitted by law, waive any objection Debtor may have thereto or the
right to have a bond or other security posted by the Secured Party, in
connection therewith;

(k)           at its option, retain the Collateral in satisfaction of the
Obligations whenever the circumstances are such that Secured Party is entitled
to do so under the Code or otherwise, to the

 
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full extent permitted by the Code, Secured Party shall be permitted to elect
whether such retention shall be in full or partial satisfaction of the
Obligations;

(l)           exercise all rights and remedies available to Secured Party in law
or in equity, under the Loan Documents, or otherwise (all of which rights and
remedies are cumulative);

(m)           as regards to that portion of the Collateral consisting of cash or
cash equivalent items (i.e., check or other items convertible at face),
immediately apply them against the Obligations, and for this purpose, Debtor
agrees that such items are considered identical in character to cash proceeds;
or

(n)           immediately and without further action by Secured Party set-off
against the Obligations all money owed by Secured Party in any capacity to
Debtor, including any such sums owed under property that is included in the
Collateral, such as certificates of deposit, or demand, savings or passbook
accounts, whether or not due, and Secured Party will be deemed to have exercised
such right of set off and to have made a charge against any such money at the
time of any acceleration upon default even though such charge is made or entered
on Secured Party’s book subsequent thereto.

6.03           Sale of Collateral.  In the event Secured Party shall elect to
sell the Collateral, Secured Party may sell the Collateral without giving any
warranties as and shall be permitted to specifically disclaim any warranties of
title or the like.  Further, if Secured Party sells any of the Collateral on
credit, Debtor will be credited only with payments actually made by the
purchaser, received by Secured Party and applied to the Indebtedness.  In the
event the purchaser fails to pay for the Collateral, Secured Party may resell
the Collateral and Debtor shall be credited with the proceeds of the
sale.  Debtor agrees that in the event Debtor is entitled to receive any notice
under the Code, as it exists in the state governing any such notice, of the sale
or other disposition of any Collateral, reasonable notice shall be deemed given
when such notice is deposited in a depository receptacle under the care and
custody of the United States Postal Service, postage prepaid, at Debtor’s
address set forth on the first page hereof, ten (10) days prior to the date of
any public sale, or after which a private sale, of any of such Collateral is to
be held.  Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given.  Secured Party may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.  Debtor further acknowledges and agrees
that the redemption by Secured Party of any certificate of deposit pledged as
Collateral shall be deemed to be a commercially reasonable disposition under
Section 9.610 of the Code.

6.04             No Liability for Sale of Collateral.  Secured Party shall incur
no liability as a result of the sale or other disposition of the Collateral, or
any part thereof, at any public or private sale or disposition. Debtor hereby
waives (to the extent permitted by law) any claims it may have against Secured
Party arising by reason of the fact that the price at which the Collateral may
have been sold at such private sale was less than the price which might have
been obtained at a public sale or was less than the aggregate amount of the
outstanding Obligations, even if the Secured Party accepts the first offer
received and does not offer the Collateral to more than one offeree and none of
the actions described herein shall render Secured Party 's disposition of the
Collateral in such a manner as commercially unreasonable.

6.05           Other Recourse.  Debtor specifically waives (to the extent
permitted by law) any equity or right of redemption, all rights of redemption,
stay or appraisal which Debtor has or may have under any rule of law or statute
now existing or hereafter adopted, and any right to require Secured Party to (1)
proceed against any Person, (2) proceed against or exhaust any of the Collateral
or pursue its rights and remedies as against the Collateral in any particular
order, or (3) pursue any other remedy in its power. The

 
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Secured Party shall not be required to take any steps necessary to preserve any
rights of the Debtor against holders of mortgages prior in lien to the lien of
any Collateral Loan Document included in the Collateral or to preserve rights
against prior parties.

6.06           Non-Judicial Remedies. In granting to Secured Party the power to
enforce its rights hereunder without prior judicial process or judicial hearing,
Debtor expressly waives, renounces and knowingly relinquishes any legal right
which might otherwise require Secured Party to enforce its rights by judicial
process.  Debtor recognizes and concedes that non-judicial remedies are
consistent with the usage of trade, are responsive to commercial necessity and
are the result of a bargain at arm's length.

6.07           Remedies Not Exclusive. The rights and remedies of Secured Party
under this Collateral Assignment, Note or any of the other Loan Documents shall
be cumulative and not exclusive, and the exercise, or partial exercise, of any
such right or remedy shall not preclude the exercise of any other right or
remedy.

6.08           Application of Proceeds.  If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held by
Secured Party as Collateral, and any cash proceeds received by Secured Party in
respect of any sale or other disposition of, collection from, or other
realization upon, all or any part of the Collateral as follows in such order and
manner as Secured Party may elect:

(i)           to the repayment or reimbursement of the reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred by Secured Party in connection with (A) the administration of
the Loan Documents, (B) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, the Collateral, and (C) the
exercise or enforcement of any of the rights and remedies of Secured Party under
this Collateral Assignment or any other Loan Document;

(ii)           to the payment or other satisfaction of any liens and other
encumbrances upon the Collateral;

(iii)           to the satisfaction of the Obligations;

(iv)           by holding such cash and proceeds as Collateral;

(v)           to the payment of any other amounts required by applicable law
(including without limitation, Section 9.615(a)(3) of the Code or any other
applicable statutory provision); and

(vi)           by delivery to Debtor or any other party lawfully entitled to
receive such cash or proceeds whether by direction of a court of competent
jurisdiction or otherwise.

6.09           Deficiency.  In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the Collateral by
Secured Party are insufficient to pay all amounts to which Secured Party is
legally entitled, Debtor and any other party who guaranteed or is otherwise
obligated to pay all or any portion of the Obligations shall be liable for the
deficiency, together with interest thereon as provided in the Loan Documents, to
the full extent permitted by the Code.

ARTICLE VII
RIGHTS OF COLLECTION

Section                      7.01           Dealing with the
Collateral.  Subject to the provisions of Section 2.05 hereof, and upon the
occurrence and during the continuance of an Event of Default, Secured Party may,
at its option

 
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(whether or not the Obligations are due), demand, sue for, collect or many any
compromise or settlement Secured Party deems desirable with reference to the
Collateral. Secured Party is not obligated to take any steps necessary to
preserve any rights in the Collateral against prior parties, which is the
responsibility of Debtor. Debtor shall not accelerate the maturity of the
Collateral Note or take any Collection Action, including, but not limited to,
causing the trustee under the Collateral Deed of Trust to post the Collateral
Property for foreclosure, without the prior written consent of Secured Party,
which consent may be withheld in Secured Party’s sole discretion. If Secured
Party consents to the posting of the Collateral Property for foreclosure, then
such sale must be for cash, and Debtor may not bid a credit against the
Collateral Note without the prior or contemporaneous written consent of Secured
Party, which consent may, but need not, set a maximum amount that may be so
credited. Following an Event of Default, and until the full and complete payment
of all the Obligations, Secured Party is hereby fully authorized and empowered
(without the necessity of any further consent or authorization from Debtor) and
the right is expressly granted to the Secured Party, and the Debtor hereby
constitutes, appoints and makes the Secured Party as the Debtor’s true and law
attorney-in-fact and agent for the Debtor (which appointment is coupled with an
interest) and in the Debtor’s name, place and stead with full power of
substitution, in the Secured Party’s name or the Debtor’s name or otherwise, for
the Secured Party’s sole use and benefit, but at the Debtor’s cost and expense,
to exercise, without notice, all or any of the following powers at any time:

(a)           Receive, collect and demand payment directly from Collateral Note
Maker and/or any other Collateral Loan Party of all sums and amounts payable on
or with respect to the Collateral Note or the other Collateral Loan Documents,
with such sums and amounts to be held by Secured Party without liability for
interest thereon and applied toward payment of the Obligations as and when the
same becomes payable;

(b)           Exercise and enforce all of the rights, powers and remedies of the
holder of the Collateral Note, including, but not limited to, the right to
demand payment of the Collateral Note in the event of any default thereunder and
the rights to appoint a substitute trustee under the Collateral Deed of Trust
and to request the substitute trustee to conduct a non-judicial foreclosure sale
of the Collateral Property under the Collateral Deed of Trust or to make and
accept with and from Collateral Note Maker and/or any other Collateral Loan
Party a deed or transfer in lieu of foreclosure of the Collateral Property under
and in respect to the Collateral Deed of Trust and/or any other Collateral Loan
Documents;

(c)           Consent or otherwise agree with the Collateral Note Maker and/or
any other Collateral Loan Party to any and all renewals, rearrangements,
extensions or other modifications to the terms and provisions of the Collateral
Note or the other Collateral Loan Documents, including, but not limited to,
extensions of the time for payment of the Collateral Note, adjustment of the
interest rate to be paid thereon, or any substation, subordination, impairment,
waiver, exchange or release of the security for the Collateral Note, including
the release of the Collateral Property or any party primarily or secondarily
liable for the payment of the Collateral Note; and

(d)           Release the lien or liens securing the Collateral Note upon the
full and final payment thereof.

Section 7.02                      Subordination.  Debtor agrees that its
interest in the proceeds from any foreclosure sale, deed-in-lieu transaction or
similar transaction, or settlement with the Collateral Note Maker and/or any
other Collateral Loan Party will be subordinate and inferior to Secured Party's
right to prior and complete payment of the Obligations, and Debtor’s interest in
the Collateral Property acquired in any foreclosure sale or deed-in-lieu
transaction will be encumbered by the lien and security interest

 
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granted Secured Party by this Collateral Assignment.  Nothing contained in this
Section 7.02 authorizes Debtor to take any Collection Action without Secured
Party’s prior written consent.

Section 7.03                      Secured Party Appointed Attorney-in-Fact.  The
Debtor hereby appoints the Secured Party as the Debtor’s attorney-in-fact, with
full authority in the place and stead of the Debtor and in the name of the
Debtor or otherwise, from time to time in Secured Party’s discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to preserve or protect its interest in the Collateral and otherwise to
accomplish the purposes of this Collateral Assignment, including, without
limitation, to: (i) settle, extend, renew, compromise, compound, exchange, or
otherwise Adjust claims or security with respect to the Collateral or in
connection with any legal proceedings brought with regard thereof; (ii) take
control in any manner of any cash or non-cash items of payment; and (iii)
endorse the name of the Debtor upon any items of payment as to the Collateral.
This appointment as attorney-in-fact is irrevocable and coupled with an
interest, and shall survive the disability of the Debtor. The appointment of the
Secured Party as attorney-in-fact under this Section 7.03, and the Secured
Party’s right to take any actions under this Section 7.03, shall be effective at
any time whether or not a default has occurred or exists under the Loan
Documents. The Debtor will indemnify and save harmless the Secured Party from
and against any liability or damage that the Secured Party or the Debtor may
incur in good faith in the exercise and performance of any of the powers and
duties set forth herein (other than losses, claims, costs or expenses that
result from or arise out of the gross negligence or willful misconduct of the
Secured Party or its officers, directors, employees, assigns or
representatives).

ARTICLE VIII
MISCELLANEOUS

Section 8.01                      Debtor to Remain Liable.  Notwithstanding
anything to the contrary contained herein, (a) Debtor shall remain liable under
all the contracts, agreements, and documents included in the Collateral to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Collateral Assignment had not been executed; (b)
the exercise by Secured Party of any of its rights hereunder shall not release
Debtor from any of its duties or obligations under the contracts, agreements,
and documents included in the Collateral; and (c) Secured Party shall have no
obligation or liability under the contracts, agreements, and documents included
in the Collateral, nor shall the Secured Party be obligated to perform any of
the duties or obligations of Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.

 
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Section 8.02                      INDEMNIFICATION.  DEBTOR SHALL INDEMNIFY,
DEFEND, PROTECT AND HOLD HARMLESS SECURED PARTY AND ITS PARENTS, SUBSIDIARIES,
DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, ATTORNEYS, AGENTS, SUCCESSORS,
AND ASSIGNS (EACH, AN “INDEMNIFIED PERSON”) FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES OF
ANY KIND OR OF ANY NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS, CONSULTANTS AND EXPERTS FEES AND DISBURSEMENTS ACTUALLY INCURRED IN
INVESTIGATING, DEFENDING, SETTLING OR PROSECUTING ANY DEMAND, CLAIM, LITIGATION
OR PROCEEDING), WHICH MAY AT ANY TIME BE IMPOSED UPON, INCURRED BY, SUFFERED BY,
OR ASSERTED OR AWARDED AGAINST ANY INDEMNIFIED PERSON, THE COLLATERAL OR THE
COLLATERAL PROPERTY (OR ANY PORTION THEREOF), WHETHER BASED ON STRICT LIABILITY
OR OTHERWISE, WHETHER OR NOT AS THE RESULT OF THE NEGLIGENCE OF ANY PERSON SO
INDEMNIFIED, WHETHER VOLUNTARILY OR INVOLUNTARILY INCURRED OR SUFFERED, ARISING
DIRECTLY OR INDIRECTLY FROM OR OUT OF OR RELATED TO ANY OF THE COLLATERAL, ANY
OF THE COLLATERAL LOAN DOCUMENTS, ANY OF THE COLLATERAL PROPERTY OR THE
TRANSACTIONS CONTEMPLATED HEREUNDER, INCLUDING WITHOUT LIMITATION, ANY
NONJUDICIAL FORECLOSURE PROCEEDING OR OTHER COLLECTION PROCEEDING OR ACTION
ASSERTED, INITIATED OR PROSECUTED BY OR ON BEHALF OF DEBTOR WITH RESPECT TO THE
COLLATERAL NOTE, THE OTHER COLLATERAL LOAN DOCUMENTS OR THE COLLATERAL PROPERTY
(OR ANY PORTION THEREOF), EXCEPT TO THE EXTENT SUCH CLAIMS, DEMANDS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARE SOLELY AND DIRECTLY
CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SECURED PARTY OR ANY
INDEMNIFIED PERSON.

Section 8.03                      Amendment.  No modification, consent or
amendment of any provision of this Collateral Assignment or any of the other
Loan Documents shall be valid or effective unless the same is in writing and
authenticated by the party against whom it is sought to be enforced, except to
the extent of amendments specifically permitted by the Code without
authentication by the Debtor.

Section 8.04                      Actions by Secured Party.  The lien, security
interest and other security rights of Secured Party hereunder shall not be
impaired by (i) any renewal, extension, increase or modification with respect to
the Obligations, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Secured Party may grant with respect to the
Collateral, or (iii) any release or indulgence granted to any endorser,
guarantor or surety of the Obligations.  The taking of additional security by
Secured Party shall not release or impair the lien, security interest or other
security rights of Secured Party hereunder or affect the obligations of Debtor
hereunder.

Section 8.05                      Waiver.  No delay or omission on the part of
Secured Party in exercising any rights under this Collateral Assignment operates
as a waiver of any such right or any other right. A waiver on any one or more
occasions will not be construed as a bar to or waiver of any right or remedy on
any future occasion. Secured Party is under no obligation to make or enforce the
collection of the Collateral Note and Secured Party’s failure to make or enforce
the collection thereof will not in any way prejudice the right of Secured Party
to thereafter make or enforce collection thereof or in any way affect the
Obligations. Debtor acknowledges and agrees that Secured Party has no duty of
good faith to Debtor and that no fiduciary, trust of other special relationship
exists between Debtor and Secured Party.

 
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Section 8.06                      Costs and Expenses.  Debtor will upon demand
pay to Secured Party the amount of any and all costs and expenses (including
without limitation, attorneys' fees and expenses), which Secured Party may incur
in connection with (i) the transactions which give rise to the Loan Documents,
(ii) the preparation of this Collateral Assignment and the perfection and
preservation of the security interests granted under the Loan Documents,
(iii) the administration of the Loan Documents, (iv) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
the Collateral, (v) the exercise or enforcement of any of the rights of Secured
Party under the Loan Documents, or (vi) the failure by Debtor to perform or
observe any of the provisions hereof.  Debtor agrees to pay interest on such
amounts at the maximum non-usurious rate of interest permitted by applicable
law.

Section 8.07                      GOVERNING LAW.  THIS COLLATERAL ASSIGNMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF TEXAS.

Section 8.08                      Severability.  If any provision of this
Collateral Assignment is held by a court of competent jurisdiction to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable, shall not impair or invalidate the remainder of this
Collateral Assignment and the effect thereof shall be confined to the provision
held to be illegal, invalid or unenforceable.

Section 8.09                      Notices.  All notices, requests, demands or
other communications required or permitted to be given pursuant to this
Collateral Assignment shall be in writing and given by (i) personal delivery,
(ii) expedited delivery service with proof of delivery, or (iii) United States
mail, postage prepaid, registered or certified mail, return receipt requested,
sent to the intended addressee at the address set forth on the first page hereof
or to such different address as the addressee shall have designated by written
notice sent pursuant to the terms hereof and shall be deemed to have been
received either, in the case of personal delivery, at the time of personal
delivery, in the case of expedited delivery service, as of the date of first
attempted delivery at the address and in the manner provided herein, or in the
case of mail, upon deposit in a depository receptacle under the care and custody
of the United States Postal Service.  Either party shall have the right to
change its address for notice hereunder to any other location within the
continental United States by notice to the other party of such new address at
least thirty (30) days prior to the effective date of such new address.

Section 8.10                      Binding Effect and Assignment.  This
Collateral Assignment (i) creates a continuing security interest in the
Collateral, (ii) shall be binding on Debtor and the heirs, executors,
administrators, personal representatives, successors and assigns of Debtor, and
(iii) shall inure to the benefit of Secured Party and its successors and
assigns.  Without limiting the generality of the foregoing, Secured Party may
pledge, assign or otherwise transfer the Obligations and its rights under this
Collateral Assignment and any of the other Loan Documents to any other
party.  Debtor's rights and obligations hereunder may not be assigned or
otherwise transferred without the prior written consent of Secured Party.

Section 8.11                      Termination.  It is contemplated by the
parties hereto that from time to time there may be no outstanding Obligations,
but notwithstanding such occurrences, this Collateral Assignment shall remain
valid and shall be in full force and effect as to subsequent outstanding
Obligations.  Upon (i) the satisfaction in full of the Obligations, (ii) the
termination or expiration of any commitment of Secured Party to extend credit to
Debtor, (iii) written request for the termination hereof delivered by Debtor to
Secured Party, and (iv) written release delivered by Secured Party to Debtor,
this Collateral Assignment and the security interests created hereby shall
terminate.  Upon termination of this Collateral Assignment and Debtor's written
request, Secured Party will, at Debtor's sole cost and expense, return to Debtor
such of the

 
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Collateral as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof and execute and deliver to Debtor such documents as
Debtor shall reasonably request to evidence such termination.

Section 8.12                      Cumulative Rights.  All rights and remedies of
Secured Party hereunder are cumulative of each other and of every other right or
remedy which Secured Party may otherwise have at law or in equity or under any
of the other Loan Documents, and the exercise of one or more of such rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
any other rights or remedies.  Further, except as specifically noted as a waiver
herein, no provision of this Collateral Assignment is intended by the parties to
this Collateral Assignment to waive any rights, benefits or protection afforded
to Secured Party under the Code.

Section 8.13                      Gender and Number.  Within this Collateral
Assignment, words of any gender shall be held and construed to include the other
gender, and words in the singular number shall be held and construed to include
the plural and words in the plural number shall be held and construed to include
the singular, unless in each instance the context requires otherwise.

Section 8.14                      Descriptive Headings.  The headings in this
Collateral Assignment are for convenience only and shall in no way enlarge,
limit or define the scope or meaning of the various and several provisions
hereof.

Section 8.15                      Counterparts.  This Collateral Assignment may
be executed in two or more counterparts, and it shall not be necessary that the
signatures of all parties hereto be contained on any one counterpart hereof;
each counterpart shall be deemed an original, but all of which together shall
constitute one and the same instrument.

Section 8.16                      ARBITRATION.  DEBTOR AGREES TO BE BOUND BY THE
TERMS AND PROVISIONS OF THE BINDING ARBITRATION AGREEMENT AND WAIVER OF JURY
TRIAL OF EVEN DATE HEREWITH, WHICH IS INCORPORATED BY REFERENCE HEREIN AND IS
ACKNOWLEDGED AS RECEIVED BY THE DEBTOR.

Section 8.17                      ENTIRE AGREEMENT.  THIS COLLATERAL ASSIGNMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
HERETO.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK –
SIGNATURE PAGE FOLLOWS]

 
19

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IN WITNESS WHEREOF, the undersigned has duly executed this Collateral Assignment
as of the date of the acknowledgement set forth below, to be effective for all
purposes, however, as of the date first above written.

DEBTOR:
 
SECURED PARTY:
     
MNHP NOTE HOLDER, LLC,
 
PATRIOT BANK,
a Delaware limited liability company
 
a Texas banking association
     
By:
MOODY NATIONAL OPERATING
 
By:
/s/ Jim Franer
 
PARTNERSHIP I, L.P.,
   
Jim Franer, Executive Vice President
 
a Delaware limited partnership, its Manager
               
By:
MOODY NATIONAL REIT I, INC.,
       
a Maryland corporation, its General Partner
               
By:
/s/ Brett C. Moody
       
Brett C. Moody, CEO
     

STATE OF TEXAS
§
 
§
COUNTY OF ______________
§

This instrument was acknowledged before me on this ______ day of June, 2011, by
Brett C. Moody, CEO of Moody National REIT I, Inc., a Maryland corporation,
General Partner of Moody National Operating Partnership I, L.P., a Delaware
limited partnership, Manager of MNHP Note Holder, LLC, a Delaware limited
liability company, on behalf of the limited liability company,  the limited
partnership and the corporation.
 

     
Notary Public, State of Texas
         
Printed or Typed Name of Notary
 
My Commission Expires: ________________

Signature Page to Collateral Assignment of Note and Liens
 
 

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STATE OF TEXAS
§
 
§
COUNTY OF HARRIS
§

This instrument was acknowledged before me on this the ____ day of June, 2011,
by Jim Franer, Executive Vice President of Patriot Bank, a Texas banking
association, on behalf of the banking association.

     
Notary Public, State of Texas
         
Printed or Typed Name of Notary
 
My Commission Expires: ________________

WHEN RECORDED, RETURN TO:
PREPARED IN THE LAW OFFICES OF:
   
Jim Franer
HUGHES WATTERS ASKANASE, LLP
Patriot Bank
Three Allen Center, 333 Clay, 29th Floor
7500 San Felipe, Suite 125
Houston, Texas 77002
Houston, Texas  77063
(713) 328-2806
(713) 400-8823
File No. PBNK-1155

Notary Page to Collateral Assignment of Note and Liens
 
 

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EXHIBIT “A”

Legal Description

Tract I:
Being Lot One (1), Block Six (6) of Grapevine Mills Addition, an addition to the
City of Grapevine, Tarrant County, Texas, according to the plat thereof recorded
in Cabinet A, Slide 4713, Plat Records, Tarrant County, Texas, said lot being
more particularly described by metes and bounds in attached Exhibit "A-1";

Tract II:
Non-Exclusive Easement Rights contained in Declaration of Restrictions and
Reciprocal Easement Agreement dated July 9, 1996, filed July 10, 1996, recorded
in Volume 12429, Page 2207, Deed Records, Tarrant County, Texas;

Tract III:
Non-Exclusive Easement Rights created in Master Declaration of Easements,
Covenants, Conditions and Restrictions, dated April 18, 1997, filed April 28,
1997, recorded in Volume 12747, Page 494, Deed Records, Tarrant County, Texas;
as amended by First Amendment to Master Declaration of Easements, Covenants,
Conditions and Restrictions filed July 22, 1997, recorded in Volume 12842, Page
397, Deed Records, Tarrant County, Texas, in and to the Project Roads, the
Project Sidewalks and/or Common Areas, as defined therein; and

Tract IV:
Non-Exclusive Easement Rights created in that certain Signage and Access
Agreement dated December 19, 1998, filed for record in Volume 13576, Page 270,
Deed Records, Tarrant County, Texas.
 

 
 

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EXHIBIT “A-1”

Legal Description for Tract I

[ex-10_701.jpg]

 
 

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EXHIBIT “B”

List of Certain Collateral Loan Documents

1.           Real Estate Lien Note (Non-Recourse) dated August 5, 2008, by
Collateral Note Maker to Secured Party, in the original principal amount of
$13,000,000.00.

2.           Deed of Trust, Security Agreement and Financing Statement dated
August 5, 2008 (the “Collateral Deed of Trust”), executed by Collateral Note
Maker in favor of Secured Party, recorded under Document No. D208315128 of the
Real Property Records of Tarrant County, Texas.

3.           Assignment of Rents dated August 5, 2008, executed by Collateral
Note Maker for the benefit of Secured Party, recorded under Document No.
D208315129 of the Real Property Records of Tarrant County, Texas.

4.           Commercial Loan Agreement dated August 5, 2008, between Collateral
Note Maker and Secured Party.

5.           Environmental Certificate with Representations, Covenants and
Warranties dated August 5, 2008, executed by Collateral Note Maker for the
benefit of Secured Party.

6.           Agreement of Property Manager dated July 5, 2008, executed by
Intercoastal Hospitality, LLC, a Louisiana limited liability company in favor of
Secured Party.

7.           Subordination, Non-Disturbance and Attornment Agreement dated
August 5, 2008, executed by Collateral Note Maker, Master Tenant, and Secured
Party, recorded under Document No. D208315131 of the Real Property Records of
Tarrant County, Texas.

8.           Modification Agreement dated March 5, 2010, to be effective as of
March 5, 2010, among Collateral Note Maker, Master Tenant and Secured Party,
recorded under Document No. D210064198 of the Real Property Records of Tarrant
County, Texas.

9.           Amended and Restated Commercial Loan Agreement dated March 5, 2010,
to be effective as of March 5, 2010, between Collateral Note Maker and Secured
Party.

10.           Pledge and Security Agreement dated March 5, 2010, to be effective
as of March 5, 2010, executed by Collateral Note Maker in favor of Secured
Party.

11.           UCC-1 Financing Statement, with Collateral Note Maker as Debtor
and Secured Party as Secured Party, recorded under Initial Filing No.
2008-2801387 of the UCC Filing Section of the Delaware Department of State.

12.           UCC-1 Financing Statement, with Moody National HP Grapevine MT,
LP, a Delaware limited partnership, as Debtor, Collateral Note Maker as
Assignor, and Secured Party as Secured Party, recorded under Initial Filing No.
2008-2801353 of the UCC Filing Section of the Delaware Department of State.