Exhibit 10.28.4
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Sidley Austin LLP
One South Dearborn Street
Chicago, Illinois 60603
Attention: Charles E. Schrank
 
FELCOR ESMERALDA (SPE), L.L.C., as trustor
And
FELCOR ESMERALDA LEASING (SPE), L.L.C., as trustor
To
FIRST AMERICAN TITLE INSURANCE COMPANY, as trustee
And

GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
as Lender
(Lender)
AMENDED AND RESTATED DEED OF TRUST,
SECURITY AGREEMENT AND FIXTURE FILING
Dated: As of December 14, 2007

             
 
  Location:   44-400 Indian Wells Lane    
 
      Indian Wells, CA    
 
           
 
  County:   Riverside    

 

 

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AMENDED AND RESTATED DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING
          THIS AMENDED AND RESTATED DEED OF TRUST, SECURITY AGREEMENT AND
FIXTURE FILING(this “Security Instrument”) is made as of this 14th day of
December, 2007, by FELCOR ESMERALDA (SPE), L.L.C., a Delaware limited liability
company, having its principal place of business at c/o FelCor Lodging Trust
Incorporated, 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas 75062
(“Hotel Owner”) and FELCOR ESMERALDA LEASING (SPE), L.L.C., a Delaware limited
liability company, having its principal place of business at c/o FelCor Lodging
Trust Incorporated, 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas
75062 (“Hotel Operator”; Hotel Owner and Hotel Operator, individually and
collectively, as the context requires, with such determination to be made by
Lender in its sole discretion, are referred to herein as “Borrower”) to FIRST
AMERICAN TITLE INSURANCE COMPANY, a California corporation, as trustee, having
an address at 1 First American Way, Santa Ana, CA 92707 (“Trustee”) for the
benefit for the benefit of GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a
Delaware corporation, having an address at 600 Steamboat Road, Greenwich, CT
06830, as mortgagee (“Lender”).
W I T N E S S E T H:
     WHEREAS, the Lender is presently the owner and holder of the following
described instruments, as well as other loan documents executed in connection
with a mortgage loan which encumbers certain personal property and real property
situate in Riverside County, California, to wit:
     1. That certain Promissory Note by WSRH Indian Wells, L.L.C., a Delaware
limited liability company (“Prior Owner”) in favor of Lender (the “Original
Note") dated April 9, 2007, representing an indebtedness in the original
principal amount of Eighty Seven Million Nine Hundred Seventy Five Thousand and
No/100 Dollars ($87,975,000.00) (the “Loan” ), the current principal balance of
which is $87,975,000.00;
     2. That certain Deed of Trust and Security Agreement by Prior Owner to
Lender dated April 9, 2007 and recorded on April 11, 2007 as Instrument
#2007-0245109 in the office of the County Recorder of Riverside County, State of
California (the “Original Security Instrument");
     3. That certain Assignment of Leases and Rents by Prior Owner in favor of
Lender dated April 9, 2007 and recorded on April 11, 2007 as Instrument
#2007-0245110 in the office of the County Recorder of Riverside County, State of
California (the “Original Assignment"); and
     4. Certain other agreements, documents and instruments evidencing or
securing the Loan or delivered in connection therewith (together with the
Original Note, the Original Security Instrument and the Original Assignment,
collectively, the “Original Loan Documents”);
     WHEREAS, Hotel Owner has acquired the Property from Prior Owner and Hotel
Operator is leasing the Property from Hotel Owner pursuant to the terms and
conditions set forth

 

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in that certain unrecorded lease dated as of the date hereof between Hotel Owner
and Hotel Operator (as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time, the “Hotel Operating Lease”);
     WHEREAS, pursuant to the terms of that certain Assumption Agreement dated
as of the date hereof, by and among Borrower, Lender and Prior Owner
(“Assumption Agreement”), Borrower has agreed to assume the obligations of Prior
Owner under the Original Loan Documents and Lender has agreed to the assumption
of the Loan by Borrower in accordance with the terms and conditions set forth in
the Assumption Agreement;
     WHEREAS, pursuant to the Assumption Agreement, Borrower and Lender have
entered into that certain Amended and Restated Loan Agreement, dated as of the
date hereof, between Borrower and Lender (as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time, the “Loan
Agreement”);
     WHEREAS, Borrower has agreed to amend, restate and supersede the Original
Note pursuant to that certain Amended and Restated Promissory Note, dated the
date hereof, made by Borrower in favor of Lender in the original principal
amount of Eighty Seven Million Nine Hundred Seventy Five Thousand and No/100
Dollars ($87,975,000.00) (as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, the “Note").
     WHEREAS, Borrower has agreed to amend and restate the Original Security
Instrument, as well as to modify and restate the terms and conditions of said
document, all as set forth in this Security Instrument, and has agreed that this
Security Instrument is given to secure the Loan assumed by Borrower pursuant to
the Assumption Agreement and the Loan Agreement, and evidenced by the Note;
          WHEREAS, Borrower desires to secure the payment of the Debt (as
defined in the Loan Agreement) and the performance of all of its obligations
under the Note, the Loan Agreement and the other Loan Documents (as herein
defined); and
          WHEREAS, 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, the Note, and that
certain Amended and Restated Assignment of Leases and Rents of even date
herewith made by Borrower in favor of Lender delivered in connection with this
Security Agreement (as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time, the "Assignment of Leases”), 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, the Assignment of Leases and Rents and all other
documents evidencing or securing the Debt or executed or delivered in connection
therewith, are hereinafter referred to collectively as the “Loan Documents”).

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          NOW THEREFORE, in consideration of the making of the Loan by Lender,
the consenting by Lender to the assumption of the Loan by Borrower and the
covenants, agreements, representations and warranties set forth in this Security
Instrument:
ARTICLE 1 — GRANTS OF SECURITY
          Section 1.1 Property Mortgaged. Borrower does hereby irrevocably
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Lender and its successors and assigns 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”);
          (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) Hotel Operating Lease. The Hotel Operating Lease and the leasehold
estate created thereby and all of Hotel Operator’s estate, right, title and
interest in and under the Hotel Operating Lease and in and to the leasehold
estate created thereby, including but not limited to (i) all assignments,
modifications, extensions and renewals of the Hotel Operating Lease, (ii) all
credits, deposits, options, privileges and rights of Hotel Operator under the
Hotel Operating Lease, (iii) all rights of first refusal, if any, and all
rights, if any, to renew or extend the Hotel Operating Lease for a succeeding
term or terms, (iv) all rights or privileges, if any, of Hotel Operator to
terminate, cancel, surrender or merge the Hotel Operating Lease, (v) all right,
title, claim or demand whatsoever of Hotel Operator either in law or in equity,
in possession or expectancy, of, in and to any right, as tenant under the Hotel
Operating Lease, to elect under Section 365(h)(1) of the Bankruptcy Code (as
hereinafter defined), to terminate or treat the Hotel Operating Lease as
terminated in the event (A) of the bankruptcy, reorganization or insolvency of
the lessor thereunder, and (B) the rejection of the Hotel Operating Lease by the
lessor thereunder, as debtor in possession, or by a trustee for the lessor
thereunder, pursuant to Section 365 of the Bankruptcy Code;
          (d) 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”);
          (e) 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 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,

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titles, interests, rights of dower, 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;
          (f) Equipment. All “equipment,” as such term is defined in Article 9
of the Uniform Commercial Code (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, but not limited to, 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 (hereinafter defined) or any property manager or any leased equipment
except to the extent that Borrower shall have any right or interest therein;
          (g) 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,
without limitation, 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, but not limited to, engines, devices for
the operation of pumps, pipes, plumbing, call and sprinkler systems, fire
extinguishing apparatuses and equipment, heating, ventilating 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;
          (h) Personal Property. All furniture, furnishings, objects of art,
machinery, goods, tools, supplies, appliances, general intangibles to the extent
assignable, contract rights, accounts, accounts receivable, franchises to the
extent assignable, licenses to the extent assignable, certificates and permits
to the extent assignable, and all other personal property of any kind or
character whatsoever as defined in and subject to the provisions of the Uniform
Commercial Code, whether tangible or to the extent assignable intangible, other
than Fixtures, which are now or hereafter owned by Borrower and which 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

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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;
          (i) Leases and Rents. All 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”), whether before or after the filing by or against
Borrower of any petition for relief under 11 U.S.C. § 101 et seq., as the same
may be amended from time to time (the “Bankruptcy Code”) and all right, title
and interest of Borrower, its successors and assigns therein and thereunder,
including, without limitation, cash or securities deposited thereunder to secure
the performance by the lessees of their obligations thereunder to the extent
assignable and all rents, additional rents, revenues, issues and profits
(including all oil and gas or other mineral royalties and bonuses) 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, 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 which may heretofore and hereafter
be made with respect to the Property, whether from the exercise of the right of
eminent domain (including, but not limited to, 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 Insurance Proceeds in respect of the
Property under any Policies covering the Property, including, without
limitation, the right to receive and apply the proceeds of any Policies,
judgments, or settlements made in lieu thereof, in connection with a Casualty to
the Property;
          (l) Tax Certiorari. All refunds, rebates or credits in connection with
reduction in Taxes or Other Charges charged against the Property;
          (m) Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation, Insurance
Proceeds and Awards, into cash or liquidation claims;
          (n) Rights. The right, in the name and on behalf of Borrower in
accordance with Section 7.4 hereof, 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. To the extent assignable all agreements, contracts,
certificates, instruments, franchises, permits, licenses to the extent
assignable, plans,

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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 any business or activity conducted on the Land and any part
thereof and all right, title and interest of Borrower therein and thereunder,
including, without limitation, the right, upon the occurrence and during the
continuance of any Event of Default hereunder, to receive and collect any sums
payable to Borrower thereunder;
          (p) Trademarks. To the extent assignable, Borrower’s interest in 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. Subject to the provisions of the Management Agreement,
all reserves, escrows and deposit accounts maintained by Borrower with respect
to the Property, including, without limitation, all accounts established or
maintained pursuant to the Cash Management Agreement; together with all deposits
or wire transfers made to such accounts and 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) Interest Rate Cap Agreement. The Interest Rate Cap Agreement,
including, but not limited to, all “accounts”, “chattel paper”, “general
intangibles” and “investment property” (as such terms are defined in the Uniform
Commercial Code as from time to time in effect) constituting or relating to the
foregoing; and all products and proceeds of any of the foregoing; and
          (s) Other Rights. Any and all other rights of Borrower in and to the
items set forth in Subsections (a) through (q) 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 mortgaged hereby.
          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 Assignment of Leases, the Cash Management Agreement and Section 7.l(h) of
this Security Instrument, Lender grants to Borrower a revocable license 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 mortgage 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 to the full extent that the Fixtures, the Equipment and the Personal
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,
without limiting the generality of the foregoing, 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 reasonable 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.
          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.
          Section 1.5 Pledges of Monies Held. Borrower hereby pledges to Lender
any and all monies now or hereafter held by Lender or on behalf of Lender,
including, without limitation, any sums deposited in the Lockbox Account, the
Cash Management Account, the Reserve Funds and Net Proceeds, as additional
security for the Obligations until expended or applied as provided in the Loan
Agreement, this Security Instrument or the Cash Management Agreement.

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CONDITIONS TO GRANT
          TO HAVE AND TO HOLD the above granted and described Property unto
Trustee for and on behalf of Lender and to the use and benefit of Lender,
Trustee, and for their 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 (hereafter defined) 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 2 — DEBT AND OBLIGATIONS SECURED
          Section 2.1 Debt. This Security Instrument and the grants, assignments
and transfers made in Article 1 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 1 are also given for the
purpose of securing the following (collectively, the “Other Obligations”): the
performance of all other obligations of Borrower contained herein; the
performance of each obligation of Borrower contained in the Loan Agreement and
any other Loan Document; and 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.
          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 3 — BORROWER COVENANTS
          Borrower covenants and agrees that:
          Section 3.1 Payment of Debt. Borrower will 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. All the covenants, conditions
and agreements contained in (a) the Loan Agreement, (b) the Note and (c) all and
any of the other

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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 in accordance with the
terms of the Loan Agreement. The Improvements, the Fixtures, the Equipment and
the Personal Property shall not be removed, demolished or materially altered
(except for normal replacement of the Fixtures, the Equipment or the Personal
Property, tenant finish and refurbishment of the Improvements) without the
consent of Lender (which consent shall not be unreasonably withheld, conditioned
or delayed) or as otherwise permitted pursuant to the Loan Agreement. Subject to
the terms of the Loan Agreement, 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 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 knowingly suffer any
physical waste of the Property 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 knowingly permit to
be done thereon anything that may in any way materially adversely impair the
value of the Property or the security of this Security Instrument. Borrower will
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.
          Section 3.6 Payment for Labor and Materials. (a) Subject to
Section 3.6(b) hereof, Borrower will 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 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, deed of trust 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) such proceeding shall be permitted
under and

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be conducted in accordance with the provisions of any other instrument to which
Borrower is subject and shall not constitute a default thereunder, (v) neither
the Property nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, canceled or lost, and (vi) Borrower shall have
furnished the security as may be required in the proceeding, or as may be
reasonably requested by Lender, to insure the payment of any contested Labor and
Material Costs, together with all interest and penalties thereon.
          Section 3.7 Performance of Other Agreements. Borrower shall observe
and perform 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 material 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. Except as expressly
permitted under the Loan Agreement, 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, in the case of a change in Borrower’s structure, without first
obtaining the prior written consent of Lender, except as otherwise permitted
pursuant to Section 5.2.10 of the Loan Agreement. Borrower shall execute and
deliver to Lender, 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.
          Section 3.9 Title. Borrower has good, marketable and insurable fee
simple title to the real property comprising part of the Property and good title
to the balance of the Property, free and clear of all Liens whatsoever except
the Permitted Encumbrances, such other Liens as are permitted pursuant to the
Loan Documents and the Liens created by the Loan Documents. To the best of
Borrower’s knowledge, the Permitted Encumbrances in the aggregate do not
materially and adversely affect the operation or use of the Property (as
currently used) 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 the real
property portion of the 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), 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. To
Borrower’s knowledge after due inquiry, there are no claims for payment for
work, labor or materials affecting the Property which are or may become a Lien
prior to, or of equal priority with, the Liens created by the Loan Documents.
ARTICLE 4 — OBLIGATIONS AND RELIANCES

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          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 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.
          Section 4.2 No Reliance on Lender. The general partners, members,
principals and (if Borrower is a trust) beneficial owners of Borrower 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,
without limitation, any Officer’s Certificate, balance sheet, statement of
profit and loss or other financial statement, survey, appraisal, or Policy,
Lender shall not be deemed to have warranted 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 5 — 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, will 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. Except as expressly

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provided in the Loan Agreement, Borrower will pay all taxes, filing,
registration or recording fees, and all reasonable expenses incident to the
preparation, execution, acknowledgment and/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 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.
          Section 5.2 Further Acts, etc. Borrower will, at the reasonable cost
of Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all 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, will execute and deliver, and in the event it shall fail to so execute
and deliver following five (5) Business Days’ notice to Borrower, 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. In (i) such case set forth in the immediately preceding sentence or
(ii) upon the occurrence and during an Event of Default, 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 without limitation, 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 will 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, provided that the Debt shall not
be subject to any prepayment fee, premium or penalty in connection with any
payment under this Section 5.3(a) but shall be otherwise due and payable in
accordance with the provisions of the Loan Agreement.
          (b) Borrower will 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

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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
provided that the Debt shall not be subject to any prepayment fee, premium or
penalty in connection with any payment under this Section 5.3(b) but shall be
otherwise due and payable in accordance with the provisions of the Loan
Agreement.
          (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 will pay for
the same, with interest and penalties thereon, if any.
          Section 5.4 Severing of Mortgage. Subject to the terms of the Loan
Agreement, this Security Instrument and the Note shall, at any time until the
same shall be fully paid and satisfied, at the sole election of Lender be
severed into two or more notes and two or more security instruments in such
denominations as Lender shall determine in its sole discretion, each of which
shall cover all or a portion of the Property to be more particularly described
therein. To that end, subject to the terms of the Loan Agreement, Borrower, upon
written request of Lender, shall execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered by the then owner of the Property to
Lender and/or its designee or designees, substitute notes and security
instruments in such principal amounts, aggregating not more than the then unpaid
principal amount of this Security Instrument, and containing terms, provisions
and clauses similar to those contained herein and in the Note, and such other
documents and instruments as may be required by Lender at no additional cost,
expense or liability to Borrower.
          Section 5.5 Replacement Documents. Upon receipt of an affidavit of an
officer of Lender 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 will 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 6 — 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 in owning and
operating properties such as the Property in agreeing to make the Loan, and,
subject to the terms of the Loan Agreement, 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.

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ARTICLE 7 — 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, but not limited
to, 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 sole
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;
          (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) subject to Section 9.4 of the Loan Agreement, 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 the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of Borrower,
any guarantor, indemnitor with respect to the Loan or of any Person liable for
the payment of the Debt;
          (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
subject to the provisions of the Management Agreement, take possession of all
books, records and accounts relating thereto and Borrower agrees to surrender
possession of the Property and of such books, records and accounts to Lender
upon demand, and

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thereupon subject to the provisions of the Management Agreement, 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 reasonably 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, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for,
collect and receive all Rents; (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) 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 sole discretion after
deducting therefrom all expenses (including reasonable attorneys’ fees) incurred
in connection with the aforesaid operations and all amounts necessary to pay the
Taxes, Other Charges, Insurance Premium and other expenses in connection with
the Property, as well as just and reasonable compensation for the services of
Lender, its counsel, agents and employees;
          (i) exercise any and all rights and remedies granted to a secured
party upon default under the Uniform Commercial Code, including, without
limiting the generality of the foregoing: (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 ten
(10) Business Days prior to such action, shall constitute commercially
reasonable notice to Borrower;
          (j) 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 sole discretion:
     (i) Taxes and Other Charges;
     (ii) Insurance Premiums;
     (iii) Interest on the unpaid principal balance of the Note;
     (iv) Intentionally omitted;
     (v) All other sums payable pursuant to the Note, the Loan Agreement, this
Security Instrument and the other Loan Documents, including, without limitation,
advances made by Lender pursuant to the terms of this Security Instrument;
     (k) pursue such other remedies as Lender may have under applicable law; or

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          (l) 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 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.
          Section 7.2 Application of Proceeds. Upon the occurrence and during
the continuance of an Event of Default, 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, 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 out-of-pocket cost and expense thereof
(including reasonable 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. Upon the occurrence and during
the continuance of an Event of Default, 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. Subject to
Section 9.4 of the Loan Agreement, 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 a default or defaults by
Borrower existing at the time such earlier action was commenced.

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          Section 7.6 Examination of Books and Records. Subject to the
provisions of the Management Agreement, at reasonable times and upon reasonable
notice, Lender and at Lender’s expense (unless an Event of Default has occurred
and is continuing), 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 such
right to be exercised not more frequently than once per year unless an Event of
Default exists. Lender and its agents shall have the right to make copies and
extracts from the foregoing records and other papers.
          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 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 (except upon repayment in full of the Debt), 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) Upon the occurrence and during the continuance of an Event of
Default, 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

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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. Subject to the terms of the Loan
Agreement, if the Property is not in material compliance with Legal
Requirements, Lender may impose reasonable additional requirements upon Borrower
in connection herewith including, without limitation, monetary reserves or
financial equivalents.
          Section 7.10 Intentionally Omitted.
          Section 7.11 Right of Entry. Subject to the terms of the Loan
Agreement and the Management Agreement, upon reasonable notice to Borrower,
Lender and its agents shall have the right to enter and inspect the Property at
all reasonable times.
ARTICLE 8 — INDEMNIFICATION
          Section 8.1 General Indemnification. Borrower shall, at its sole cost
and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties (hereinafter defined) from and against any and all third
party claims, suits, liabilities (including, without limitation, strict
liabilities), actions, proceedings, obligations, debts, actual losses,
reasonable costs, reasonable expenses, fines, penalties, charges, fees,
judgments, awards, amounts paid in settlement, damages (but not lost revenues,
diminution in value and other consequential and punitive damages) of whatever
kind or nature (including, but not limited, to reasonable attorneys’ fees and
other costs of defense) (collectively, the “Losses”) imposed upon or incurred by
or asserted against any Indemnified Parties (other than claims against Lender by
banking regulatory authorities or shareholders of Lender) and 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 requested by
Borrower; (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 indemnitor and/or any partner, member, 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) any failure on the part of Borrower to perform or be in compliance with any
of the terms of this Security Instrument, the Note, the Loan Agreement or any of
the other Loan Documents; (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 Borrower 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, if 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

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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 8;
(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; or (l) 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. Any amounts payable to Lender by reason of the application of this
Section 8.1 shall become due and payable within ten (10) Business Days of notice
from Lender and, if not paid within such ten (10) Business Day period, shall
bear interest at the Default Rate from the date loss or damage is sustained by
Lender until paid. For purposes of this Article 8, the term “Indemnified
Parties” means Lender and any Person who is or will have been involved in the
origination of the Loan, any Person who is or will have been involved in the
servicing of the Loan, any Person in whose name the encumbrance created by this
Security Instrument is or will have been recorded, Persons who may hold or
acquire or will have held a full or partial interest in the Loan (including, but
not limited to, investors or prospective investors in the Securities, as well as
custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in the Loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, partners, employees, agents,
servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including, but not limited to, any other Person who holds or acquires
or will have held a participation or other full or partial interest in the Loan,
whether during the term of the Loan or as a part of or following a foreclosure
of the Loan and any successors by merger, consolidation or acquisition of all or
a substantial portion of Lender’s assets and business). Notwithstanding the
provisions of this Section 8.1, (A) Borrower shall have no liability to Lender
or any other Indemnified Party for any Losses caused by the gross negligence,
willful misconduct or fraud of Lender or such other Indemnified Party, and
(B) the obligations of Borrower under this Section 8.1 shall exclude Losses
arising solely from a state of facts that first came into existence after
Lender, its nominee or designee, or a bona fide third party acquired title to
the Property through foreclosure, exercise of a power of sale or deed in lieu of
foreclosure. For the purpose of this Section 8.1 only, successors and assigns
shall not include any bona fide third party who purchases title to the Property
through foreclosure, deed in lieu of foreclosure or the exercise of any other
remedies available to Lender hereunder, under the Note or under any of the other
Loan Documents, or who purchased title to the Property at a foreclosure sale.
          Section 8.2 Mortgage and/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 arising out of or in any way
relating to any tax on the making and/or recording of this Security Instrument,
the Note or any of the other Loan Documents, but excluding any income, franchise
or other similar taxes.
          Section 8.3 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, without
limitation, reasonable 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 by any
applicable federal,

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state, county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities) that Lender may incur, as a result of a default under
Sections 4.1.9 or 5.2.9 of the Loan Agreement.
          Section 8.4 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 reasonably 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 and/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. Within ten (10) days of written demand, Borrower shall pay or, in the
sole and absolute discretion of the Indemnified Parties, reimburse, the
Indemnified Parties for the payment of reasonable fees and disbursements of
attorneys, engineers, environmental consultants, laboratories and other
professionals in connection therewith.
ARTICLE 9 — WAIVERS
          Section 9.1 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 9.2 Marshalling and Other Matters. To the extent permitted by
applicable law, Borrower hereby waives the benefit of all 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.
          Section 9.3 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
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 does not specifically and expressly provide for the giving
of notice by Lender to Borrower.

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          Section 9.4 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.
          Section 9.5 Survival. The indemnifications made pursuant to
Section 8.3 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
interest 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, but not limited to, 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.
ARTICLE 10 — EXCULPATION
          The provisions of Section 9.4 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 11 — NOTICES
          All notices or other written communications hereunder shall be
delivered in accordance with Section 10.6 of the Loan Agreement.
ARTICLE 12 — APPLICABLE LAW
          Section 12.1 Governing Law. (a) THE PARTIES HEREBY AGREE AND
IRREVOCABLY ELECT THAT, IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS SECURITY INSTRUMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION,
AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH
THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT
PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE

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CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL OF THE OBLIGATIONS ARISING
HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS SECURITY INSTRUMENT, AND THIS SECURITY
INSTRUMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.
          (b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER
ARISING OUT OF OR RELATING TO THIS SECURITY INSTRUMENT MAY AT LENDER’S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW
YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE
AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT,
ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT:
CT CORPORATION SYSTEM
111 EIGHTH AVENUE, 13th FLOOR
NEW YORK, NEW YORK 10011
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
          Section 12.2 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 Legal

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Rate or amount, (b) in calculating whether any interest exceeds the Maximum
Legal Rate, 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 Maximum Legal Rate, 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 12.3 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 13 — DEFINITIONS
          All capitalized terms not defined herein shall have the respective
meanings set forth in the Loan Agreement. 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 “each Borrower and any subsequent owner or
owners of 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 subject to the provisions of the Loan
Documents, the phrases “attorneys’ fees”, “legal fees” and “counsel fees” shall
include any and all attorneys’, paralegal and law clerk fees and disbursements,
including, but not limited to, 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 14 — MISCELLANEOUS PROVISIONS
          Section 14.1 No Oral Change. This Security Instrument, and any
provisions hereof, 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.
          Section 14.2 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 14.3 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

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unenforceable in any respect, the Loan Agreement, the Note and this Security
Instrument shall be construed without such provision.
          Section 14.4 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 14.5 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 14.6 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 14.7 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 14.8 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 unless such loss or damage is caused by
fraud, willful misconduct, gross negligence or bad faith of Lender or its
agents. Nothing herein contained shall be construed as constituting Lender a
“mortgagee in possession.”
          Section 14.9 Conflict. In the event of any inconsistencies between the
terms and conditions hereof and the terms and conditions of the Loan Agreement,
the terms of the Loan Agreement shall control and be binding.

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ARTICLE 15 — DEED OF TRUST PROVISIONS
          Section 15.1 Concerning the Trustee. If directed by Lender to
foreclose the lien and security interest of this Security Instrument, Trustee
will either personally or by agent give notice of the foreclosure sale as
required by the California Civil Code of Procedure § 725a et. seq. as then in
effect and sell and convey all or part of the Property “AS IS” to the highest
bidder for cash, without any covenant or warranty, expressed or implied, subject
to all matters of record and without representation or warranty, express or
implied by Trustee. Trustee shall pay from the proceeds of the sale, in this
order: (a) expenses of foreclosure, including, a reasonable commission to
Trustee; (b) to Lender, the full amount of principal, interest, attorney’s fees,
and other charges due and unpaid; (c) any amounts required by law to be paid
before payment to Borrower; and (d) to Borrower, any balance. 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 sole 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 15.2 Trustee’s Fees. Borrower shall pay all reasonable
out-of-pocket 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 15.3 Certain Rights. During the existence of an Event of
Default, 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, 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 and (c) 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

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proposed to be taken by Trustee hereunder, believed by Trustee in good faith to
be genuine. Trustee shall be entitled to reimbursement for actual reasonable
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.
          Section 15.4 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 15.5 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 and/or filed by Borrower.
          Section 15.6 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 16 — HOTEL OPERATING LEASE PROVISIONS
          Section 16.1 No Merger of Fee and Leasehold Estates; Releases. So long
as any portion of the Debt shall remain unpaid, unless Lender shall otherwise
consent, the fee title to the Land and the leasehold estate therein created
under the Hotel Operating Lease shall not merge but shall always be kept
separate and distinct, notwithstanding the union of such estates in Hotel Owner,
the lessor thereunder, or in any other Person by purchase, operation of law or
otherwise. Lender reserves the right, at any time, to release portions of the
Property, including, but not limited to, the leasehold estate created by the
Hotel Operating Lease, with or without consideration, at Lender’s election,
without waiving or affecting any of its rights hereunder or under the Note or
the other Loan Documents and any such release shall not affect Lender’s rights
in connection with the portion of the Property not so released.
ARTICLE 17 — STATE-SPECIFIC PROVISIONS
     Section 17.1 Principles of Construction. In the event of any
inconsistencies between the terms and conditions of this Article 17 and the
terms and conditions of this Security Instrument, the terms and conditions of
this Article 17 shall control and be binding.

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          Section 17.2 Remedies Not Exclusive; Waiver. Trustee and Lender shall
have all powers, rights and remedies under applicable law whether or not
specifically or generally granted or described in this Security Instrument.
Nothing contained herein shall be construed to impair or to restrict such
powers, rights and remedies or to preclude any procedures or process otherwise
available to trustees or beneficiaries under deeds of trust in the State of
California. Trustee and Lender, and each of them, shall be entitled to enforce
the payment and performance of any indebtedness or obligations secured hereby
and to exercise all rights and powers under this Security Instrument or under
any other Loan Document or other agreement or any laws now or hereafter in
force, notwithstanding the fact that some or all of the indebtedness and
obligations secured hereby may now or hereafter be otherwise secured, whether by
mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the
acceptance of this Security Instrument nor its enforcement, whether by court
action or pursuant to the power of sale or other powers contained herein, shall
prejudice or in any manner affect Trustee’s or Lender’s right to realize upon or
enforce any other rights or security now or hereafter held by Trustee or Lender.
Trustee and Lender, and each of them, shall be entitled to enforce this Security
Instrument and any other rights or security now or hereafter held by Lender or
Trustee in such order and manner as they or either of them may in their absolute
discretion determine. No remedy herein conferred upon or reserved to Trustee or
Lender is intended to be exclusive of any other remedy contained herein or by
law provided or permitted, but each shall be cumulative and in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity.
Every power or remedy given by any of the Loan Documents to Trustee or Lender,
or to which either of them may be otherwise entitled, may be exercised,
concurrently or independently, from time to time and as often as may be deemed
expedient by Trustee or Lender, and either of them may pursue inconsistent
remedies. By exercising or by failing to exercise any right, option or election
hereunder, Lender shall not be deemed to have waived any provision hereof or to
have released Borrower from any of the obligations secured hereby unless such
waiver or release is in writing and signed by Lender. The waiver by Lender of
Borrower’s failure to perform or observe any term, covenant or condition
referred to or contained herein to be performed or observed by Borrower shall
not be deemed to be a waiver of such term, covenant or condition or of any
subsequent failure of Borrower to perform or observe the same or any other such
term, covenant or condition referred to or contained herein, and no custom or
practice which may develop between Borrower and Lender during the term hereof
shall be deemed a waiver of or in any way affect the right of Lender to insist
upon the performance by Borrower of the obligations secured hereby in strict
accordance with the terms hereof or of any other Loan Document
          Section 17.3 Power of Sale. (i) Should Lender elect to foreclose by
exercise of the power of sale contained herein, Lender shall notify Trustee and
shall, if required, deposit with Trustee the Note, the original or a certified
copy of this Security Instrument, and such other documents, receipts and
evidences of expenditures made and secured hereby as Trustee may require. Upon
receipt of such notice from Lender, Trustee shall cause to be recorded and
delivered to Borrower such notice as may then be required by law and by this
Security Instrument. Trustee shall, without demand on Borrower, after lapse of
such time as may then be required by law and after recordation of such notice of
default and after notice of sale has been given as required by law, sell the
Collateral at the time and place of sale fixed by it in said notice of sale,
either as a whole or in separate lots or parcels or items as Trustee shall deem
expedient, and in such order as it may determine, at public auction to the
highest bidder for cash in lawful money of the United States payable at the time
of sale. Trustee shall deliver to the purchaser or

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purchasers at such sale its good and sufficient deed or deeds conveying the
property so sold, but without any covenant or warranty, express or implied. The
recitals in such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including, without limitation, Borrower,
Trustee or Lender, may purchase at such sale, and Borrower hereby covenants to
warrant and defend the title of such purchaser or purchasers.
     (ii) After deducting all costs, fees and expenses of Trustee and of this
Security Instrument, including, without limitation, costs of evidence of title
and actual and customary attorneys’ fees of Trustee or Lender in connection with
a sale as provided in subparagraph (i) above, Trustee shall apply the proceeds
of such sale (a) first, to the payment of all sums expended by Lender under the
terms of any of the Loan Documents and not yet repaid, together with interest on
such sums at the Default Rate as set forth in the Loan Agreement, (b) second, to
the payment of all sums expended under the terms hereof not then repaid, with
accrued interest at the rate of interest equal to the rate then in effect under
the Note, or if the Note has been repaid, the rate that would have been in
effect under the Note, (c) third, to the payment of all other sums then secured
hereby, and (d) fourth, the remainder, if any, to the person or persons legally
entitled thereto.
          Section 17.4 Right of Rescission. Lender may from time to time rescind
any notice of default or notice of sale before any Trustee’s sale in accordance
with the laws of the State of California. The exercise by Lender of such right
of rescission shall not constitute a waiver of any breach or default then
existing or subsequently occurring, or impair the right of Lender to execute and
deliver to Trustee, as above provided, other declarations or notices of default
to satisfy the obligations of this Security Instrument or secured hereby, nor
otherwise affect any provision, covenant or condition of any Loan Document or
any of the rights, obligations or remedies of Trustee or Lender hereunder or
thereunder.
          Section 17.5 Full Reconveyance. Upon written request of Lender stating
that all sums secured hereby have been paid, upon surrender to Trustee of the
Note and the original or a certified copy of this Security Instrument for
cancellation and retention, and upon payment of its fees, Trustee shall fully
reconvey, without warranty, the entire remaining Collateral then held hereunder.
The recitals in such reconveyance of any matters of facts shall be conclusive
proof of the truthfulness thereof. The grantee in such reconveyance may be
described as “the person or persons legally entitled thereto.”
          Section 17.6 Fixture Filing. This Security Instrument constitutes a
fixture filing under the fixture filing provisions of the UCC, Sections 9334 and
9502(c) as enacted and under the equivalent statutes in the State of California,
as amended or recodified from time to time.
          Section 17.7 Border Zone Property. Borrower represents and warrants
that to Borrower’s actual knowledge, the Land has not been designated as Border
Zone Property under the provisions of California Health and Safety Code,
Sections 25220 et. seq. or any regulation adopted in accordance therewith, and
to Borrower’s actual knowledge, there has been no occurrence or condition on any
real property adjoining or in the vicinity of the Land that is reasonably likely
to cause the Property or any part thereof to be designated as Border Zone
Property.

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          Section 17.8 Additional Security Agreement Provisions.
     (a) With respect to fixtures, Lender or Trustee may elect to treat same as
either real property or personal property and proceed to exercise such rights
and remedies applicable to the categorization so chosen. Lender may proceed
against the items of real property and any items of Collateral separately or
together in any order whatsoever, without in any way affecting or waiving
Lender’s rights and remedies under the Uniform Commercial Code, this Security
Instrument or the Note. Borrower acknowledges and agrees that Lender’s rights
and remedies under this Security Instrument and the Note shall be cumulative and
shall be in addition to every other right and remedy now or hereafter existing
at law, in equity, by statute or by agreement of the parties.
     (b) Borrower agrees that this Security Instrument constitutes a financing
statement filed as a fixture filing in the Official Records of Riverside County
with respect to any and all fixtures included within the term “Land” or
“Collateral” as used herein and with respect to any goods and other personal
property that may now be or hereafter become fixtures. The names and mailing
addresses of the debtor (Borrower) and the secured party (Lender) are set forth
on the first page of this Security Instrument. Borrower is the record owner of
the Collateral. The personal property described above is the collateral covered
by this financing statement. Any reproduction of this Security Instrument or any
other security agreement or financing statement shall be sufficient as a
financing statement.
          Section 17.9 Additional Waivers.
     (a) Borrower has read and hereby approves the Note, this Security
Instrument, the other Loan Documents and all other agreements and documents
relating thereto executed by Borrower. Borrower acknowledges that it has been
represented by counsel of its choice to review this Security Instrument, the
Note, the other Loan Documents and all other documents relating thereto and said
counsel has explained and Borrower understands the provisions thereof, or that
Borrower has voluntarily declined to retain such counsel.
     (b) Borrower hereby expressly waives diligence, demand, presentment,
protest and notice of every kind and nature whatsoever (unless as otherwise
required under this Security Instrument or the other Loan Documents) and waives
any right to require Lender to enforce any remedy against any guarantor,
endorser or other person whatsoever prior to the exercise of its rights and
remedies hereunder or otherwise. Borrower waives any right to require Lender to:
(i) proceed or exhaust any collateral security given or held by Lender in
connection with the Obligations; (ii) give notice of the terms, time and place
of any public or private sale of any real or personal property security for the
Obligations or other guaranty of the Obligations except as otherwise required
herein or by applicable law; or (iii) pursue any other remedy in Lender’s power
whatsoever.
          (c) Until all Obligations shall have been paid in full, except as
otherwise permitted under the Loan Documents, Borrower: (i) shall not have any
right of subrogation to

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any of the rights of Lender against any guarantor, maker or endorser;
(ii) waives any right to enforce any remedy which Lender now has or may
hereafter have against any other guarantor, maker or endorser; and (iii) waives
any benefit of and any other right to participate in, any collateral security
for the Obligations or any guaranty of the Obligations now or hereafter held by
Lender.
          Section 17.10 Additional Environmental Provisions. The following
statutes are hereby deemed to be included in the Environmental Laws as described
in the Environmental Indemnity: the Porter-Cologne Water Control Act; the Waste
Management Act of 1980; the Toxic Pit Cleanup Act; the Underground Tank Act of
1984; the California Water Quality Improvement Act; and California Health and
Safety Codes §§ 25117 and 25316.
          Section 17.11 Request for Notices. Pursuant to California Government
Code Section 27321.5(b), Borrower requests that a copy of any notice of sale
hereunder be mailed to it at the address set forth in the first paragraph of
this Security Instrument.
[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:
FELCOR ESMERALDA (SPE), L.L.C.,
a Delaware limited liability company

         
 
       
By:
Name:
  /s/ Charles N. Nye              
 
   Charles N. Nye                       
Title:
  Vice President                           

FELCOR ESMERALDA LEASING (SPE), L.L.C.,
a Delaware limited liability company

         
 
       
By:
Name:
  /s/ Charles N. Nye              
 
   Charles N. Nye                       
Title:
  Vice President                           

 

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STATE OF TEXAS
    )      
 
    )     ss
COUNTY OF DALLAS
    )      

          I, the undersigned, a Notary Public in and for said county in the
state aforesaid, do hereby certify that Charles N. Nye, the Vice President of
FelCor Esmeralda (SPE), L.L.C., a Delaware limited liability company, who is
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that s/he signed and delivered the said instrument as such Officer as his/her
own free and voluntary act and as the free and voluntary act of said company,
for the uses and purposes set forth therein.
          WITNESS my hand and official seal

            Signature     /s/ Dana K. Drake       Dana K. Drake           

         
 
       
Official Seal of
               
Notary Public State of   
         TX                     
My Commission Expires    
       April 13, 2008    

 

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STATE OF TEXAS
    )      
 
    )     ss
COUNTY OF DALLAS
    )      

          I, the undersigned, a Notary Public in and for said county in the
state aforesaid, do hereby certify that Charles N. Nye, the Vice President of
FelCor Esmeralda Leasing (SPE), L.L.C., a Delaware limited liability company,
who is personally known to me to be the same person whose name is subscribed to
the foregoing instrument, appeared before me this day in person and acknowledged
that s/he signed and delivered the said instrument as such Officer as his/her
own free and voluntary act and as the free and voluntary act of said Company,
for the uses and purposes set forth therein.
          WITNESS my hand and official seal

            Signature     /s/ Dana K. Drake       Dana K. Drake           

         
 
       
Official Seal of
               
Notary Public State of   
        TX                     
My Commission Expires  
        April 13, 2008    

 

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                ACKNOWLEDGED AND CONSENTED TO BY:    
 
                GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,         a Delaware
corporation    
 
           
 
  By:        
 
  Print Name:  
 
   
 
  Title:  
 
   
 
     
 
   

                     
 
                        ACKNOWLEDGMENTS    
 
                   
 
  STATE OF     )          
 
        )     s.s.:    
 
  COUNTY OF     )          

          On December                     , 2007, before me,
                                         , personally appeared
                                        , personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity(ies) upon behalf of which the person(s) acted, executed the instrument.
          Witness my hand and official seal.
 

 

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EXHIBIT A
(Legal Description)
REAL PROPERTY IN THE CITY OF INDIAN WELLS, COUNTY OF RIVERSIDE, STATE OF
CALIFORNIA, DESCRIBED AS FOLLOWS:
PARCEL 1:
THAT PORTION OF THE NORTHEAST QUARTER OF SECTION 23, TOWNSHIP 5 SOUTH, RANGE 6
EAST, SAN BERNARDINO BASE AND MERIDIAN, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHWEST CORNER OF THE NORTHEAST QUARTER OF SAID SECTION 23,
BEING THE SOUTHWEST CORNER OF PARCEL 1 AS DESCRIBED IN DEED RECORDED MAY 31,
1985 AS INSTRUMENT NO. 117221 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY,
CALIFORNIA;
THENCE ALONG THE BOUNDARY OF SAID PARCEL 1 AND ALONG THE NORTHERLY LINE OF THAT
CERTAIN PARCEL ACQUIRED BY THE STATE OF CALIFORNIA BY DECREE OF CONDEMNATION
RECORDED JULY 12, 1937 IN BOOK 332 PAGE 302 OF OFFICIAL RECORDS OF RIVERSIDE
COUNTY, CALIFORNIA, THE FOLLOWING COURSES:
THENCE, NORTH 86 DEGREES 14’ 13” EAST, 344.37 FEET;
THENCE, NORTH 89 DEGREES 35’ 24” EAST, 1142.49 FEET TO THE BEGINNING OF A CURVE,
CONCAVE SOUTHERLY, HAVING A RADIUS OF 5066 FEET (RECORDED 5055 FEET);
THENCE SOUTHEASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 5 DEGREES 38’
22”, AN ARC DISTANCE OF 498.62 FEET TO A POINT; SAID POINT BEING ON THE
SOUTHERLY LINE OF THE AFORESAID NORTHEAST QUARTER OF SECTION 23; A RADIAL
BEARING PASSING THROUGH SAID POINT BEARS NORTH 5 DEGREES 13’ 46” EAST;
THENCE, LEAVING SAID NORTHERLY LINE OF THE STATE OF CALIFORNIA PARCEL, NORTH 89
DEGREES 42’ 59” EAST, ALONG SAID SOUTHERLY LINE, A DISTANCE OF 315.91 FEET;
THENCE NORTH 0 DEGREES 00’ 25” EAST, PARALLEL WITH THE WESTERLY LINE OF SAID
NORTHEAST QUARTER OF SECTION 23, A DISTANCE OF 533.74 FEET;
THENCE NORTH 76 DEGREES 26’ 51” WEST, A DISTANCE OF 1304.17 FEET TO THE

 

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BEGINNING OF A TANGENT CURVE, CONCAVE NORTHEASTERLY HAVING A RADIUS OF 20,500.00
FEET;
THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE, THROUGH A CENTRAL ANGLE OF 2
DEGREES 59’ 14”, AN ARC DISTANCE OF 1068.81 FEET TO A POINT ON THE WESTERLY LINE
OF THE AFORESAID NORTHEAST QUARTER OF SECTION 23; A RADIAL BEARING PASSING
THROUGH SAID POINT BEARS SOUTH 16 DEGREES 32’ 23” WEST;
THENCE SOUTH 0 DEGREES 00’ 25” WEST, ALONG THE WESTERLY LINE OF SAID NORTHEAST
QUARTER, A DISTANCE OF 1128.16 FEET TO THE POINT OF BEGINNING.
PARCEL 2:
THAT PORTION OF THE NORTHEAST QUARTER OF SECTION 23, TOWNSHIP 5 SOUTH, RANGE 6
EAST, SAN BERNARDINO BASE AND MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHWEST CORNER OF SAID NORTHEAST QUARTER OF SECTION 23;
THENCE SOUTH 0 DEGREES 00’ 25” WEST, ALONG THE WESTERLY LINE OF SAID NORTHEAST
QUARTER, A DISTANCE OF 1002.79 FEET TO THE TRUE POINT OF BEGINNING; SAID POINT
ALSO BEING ON THE ARC OF A NON-TANGENT CURVE, CONCAVE NORTHEASTERLY, HAVING A
RADIUS OF 20,000.00 FEET; A RADIAL BEARING PASSING THROUGH SAID POINT BEARS
SOUTH 16 DEGREES 57’ 55” WEST; AND SAID POINT ALSO BEING THE NORTHWEST CORNER OF
PARCEL 2 AS DESCRIBED IN DEED RECORDED MAY 31, 1985 AS INSTRUMENT NO. 117221 OF
OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA;
THENCE ALONG THE BOUNDARY OF SAID PARCEL 2, THE FOLLOWING COURSES:
THENCE SOUTHEASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 3
DEGREES 24’ 46”, AN ARC DISTANCE OF 1191.32 FEET;
THENCE SOUTH 76 DEGREES 26’ 51” EAST, TANGENT TO LAST MENTIONED CURVE, A
DISTANCE OF 457.49 FEET TO A POINT LYING 1429.85 FEET (RECORDED 1430.37 FEET)
SOUTHERLY OF THE NORTHERLY LINE OF THE AFORESAID NORTHEAST QUARTER OF SECTION
23, MEASURED PARALLEL WITH THE WESTERLY LINE OF SAID NORTHEAST QUARTER;
THENCE SOUTH 0 DEGREES 00’ 25” WEST, PARALLEL WITH SAID WESTERLY LINE OF THE
NORTHEAST QUARTER, A DISTANCE OF 39.63 FEET;

 

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THENCE SOUTH 54 DEGREES 13’ 47” EAST, A DISTANCE OF 870.08 FEET;
THENCE SOUTH 0 DEGREES 00’ 25” WEST, PARALLEL WITH THE AFOREMENTIONED WESTERLY
LINE OF THE NORTHEAST QUARTER, A DISTANCE OF 136.26 FEET TO A POINT; SAID POINT
BEING 533.74 NORTHERLY OF THE SOUTHERLY LINE OF THE AFOREMENTIONED NORTHEAST
QUARTER, AS MEASURED PARALLEL WITH THE WESTERLY LINE OF SAID NORTHEAST QUARTER;
THENCE NORTH 76 DEGREES 26’ 51” WEST, A DISTANCE OF 1304.17 FEET TO THE
BEGINNING OF A TANGENT CURVE, CONCAVE NORTHEASTERLY, HAVING A RADIUS OF
20,500.00 FEET;
THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 2
DEGREES 59’ 14”, AN ARC DISTANCE OF 1068.81 FEET TO A POINT ON THE WESTERLY LINE
OF AFORESAID NORTHEAST QUARTER OF SECTION 23, A RADIAL BEARING PASSING THROUGH
SAID POINT BEARS SOUTH 16 DEGREES 32’ 23” WEST;
THENCE NORTH 0 DEGREES 00’ 25” EAST, ALONG SAID WESTERLY LINE OF THE NORTHEAST
QUARTER, A DISTANCE OF 522.14 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL 3:
A PERPETUAL, NON-EXCLUSIVE EASEMENT AS DESCRIBED IN THAT CERTAIN EASEMENT
AGREEMENT DATED APRIL 8, 1985 AND RECORDED MAY 31, 1985 AS INSTRUMENT NO. 117222
OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.
AS AMENDED BY DOCUMENT ENTITLED “EASEMENT AGREEMENT AMENDMENT”, RECORDED APRIL
23, 1997 AS INSTRUMENT NO. 137528 OF OFFICIAL RECORDS.
AS FURTHER AMENDED BY DOCUMENT ENTITLED “SECOND AMENDMENT TO EASEMENT
AGREEMENT”, RECORDED JUNE 11, 2002 AS INSTRUMENT NO. 317300 OF OFFICIAL RECORDS.
AS FURTHER AMENDED BY DOCUMENT ENTITLED “PARTIAL TERMINATION OF EASEMENT
AGREEMENT, COMPLIMENTARY GOLF AGREEMENT AND G.C.E. MAP REFERENCES — AND CONSENT
TO TRAVEL EASEMENT, RECORDED OCTOBER 10, 2007, AS INSTRUMENT NO. 0648079 OF
OFFICIAL RECORDS.
SAID EASEMENT IS SUBJECT TO THE TERMS AND CONDITIONS AS SET FORTH THEREIN, AS
AMENDED. 
APN: 633-150-028-6; 633-150-044 and 633-150-071-4