DEED OF TRUST, LEASEHOLD DEED OF TRUST. ASSIGNMENT OF LEASES AND PROFITS, SECURITY AGREEMENT AND FIXTURE FILING

Exhibit 10.15

EXECUTION COUNTERPART

Loan No. 01-1054853

 

DEED OF TRUST, LEASEHOLD DEED OF TRUST.

ASSIGNMENT OF LEASES AND PROFITS, SECURITY AGREEMENT

AND FIXTURE FILING

from

KPA HI ONTARIO LLC

as Borrower

and

KPA ONTARIO LESSEE LLC

as Accommodation Grantor

to

CHICAGO TITLE INSURANCE COMPANY

as Trustee for the benefit of

CAPMARK BANK

as Beneficiary

Dated: October 4, 2006

PREPARED BY AND AFTER RECORDATION RETURN TO:

Katten Muchin Rosenman LLP

1025 Thomas Jefferson Street, N.W.

Suite 700, East Lobby

Washington, D.C. 20007-5201

Attn: Christopher J. Hart, Esq.

 

TABLE OF CONTENTS

 

 

i

 

ii

DEED OF TRUST, LEASEHOLD DEED OF TRUST,

ASSIGNMENT OF LEASES AND PROFITS, SECURITY AGREEMENT

AND FIXTURE FILING

This DEED OF TRUST, LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND PROFITS, SECURITY AGREEMENT AND FIXTURE FILING (this “ Deed of Trust ”) is dated this 4 ^th day of October, 2006 from KPA HI ONTARIO LLC, a Delaware limited liability company, having an address at c/o Innkeepers USA Trust, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida, 33480, (“ Borrower ”), and KPA ONTARIO LESSEE LLC , a Delaware limited liability company, having an address at Innkeepers USA Trust, 340 Poinciana Way, Suite 306, Palm Beach, Florida, 33480 (“ Accommodation Grantor ”) (Borrower and Accommodation Grantor, collectively, and jointly and severally, “ Grantor ”) to CHICAGO TITLE INSURANCE COMPANY , whose address is 700 South Flower, Suite 800, Los Angeles, California 90017, as Trustee (“ Trustee ”), for the benefit of CAPMARK BANK , a Utah industrial bank, with an address at 6955 Union Park Center, Suite 330, Midvale, Utah 84047, Attention: President (“ Beneficiary ”).

GRANTOR , in consideration of the indebtedness herein recited and the trust herein created, and in consideration of the sum of Ten and No/100 Dollars ($10.00) in hand paid by Trustee, the receipt of which is hereby acknowledged, does hereby irrevocably grant, bargain, sell, pledge, assign, warrant, transfer and convey unto Trustee and its successors and assigns forever, in trust, with power of sale, all of Grantor’s right, title and interest in and to certain land in San Bernardino County, California, more particularly described in Exhibit “A” attached hereto and made a part hereof (the “ Land ”) and all of Borrower’s and Accommodation Grantor’s right, title and interest as lessor and lessee, respectively, in and to the Operating Lease (as hereinafter defined) and the leasehold estate created thereunder and upon the Land, together with all credits, deposits, options, privileges and rights of Accommodation Grantor, as lessee thereunder (the Land and the leasehold estate created pursuant to the Operating Lease, together with all of the following described property, collectively, the “ Property ”);

TOGETHER WITH all of Grantor’s interest in all buildings, structures and improvements now or hereafter situated or to be situated on the Land or appurtenant thereto, including without limitation, that certain “Hilton” hotel currently operating on the Land (collectively, the “ Improvements ”).

TOGETHER WITH all of Grantor’s interest in all machinery, furnishings and equipment including, without limitation, all furnaces, boilers, oil burners, radiators and piping, coal stokers, refrigeration and sprinkler systems, wash-tubs, sinks, gas and electric fixtures, awnings, window shades, kitchen cabinets, plants and shrubbery and all other equipment and machinery, motor vehicles and other vehicles, appliances, fittings and fixtures of every kind in or used in the operation of the Land and the Improvements, together with any and all replacements thereof and additions thereto, fixtures (including, without limitation, all heating, air conditioning, plumbing and bathroom, lighting, communications and elevator fixtures), inventory and articles of personal property and

accessions thereof and renewals, replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washers and dryers), other customary equipment and other property of every kind and nature, whether tangible or intangible, whatsoever owned by Grantor, or in which Grantor has or shall have an interest, now or hereafter located upon the Land and the Improvements, and usable in connection with the present or future operation and occupancy of the Land and the Improvements and all equipment, materials and supplies of any nature whatsoever owned by Grantor, or in which Grantor has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, or usable in connection with the present or future operation, enjoyment and occupancy of the Land and the Improvements (collectively, the “ Personal Property ”), and all proceeds and products of any such property;

TOGETHER WITH all of Grantor’s interest in all accounts, escrows (including, without limitation, the Accounts), documents, instruments, chattel paper, claims, deposits, deposit accounts, payment intangibles, investment property and general intangibles, as such terms are defined in the Uniform Commercial Code, and all agreements, contracts, certificates, instruments, and other documents, now or hereafter entered into, including, without limitation, the Management Agreement and the Franchise Agreement (to the extent permitted by the Management Agreement, the Franchise Agreement and any other such agreements), and all proceeds, substitutions and replacements thereof, all contract rights, insurance proceeds, condemnation award or proceeds, security deposits, franchises, books, records, appraisals, architectural and engineering plans, specifications, environmental and other reports relating to the Land, trademarks, trade names, servicemarks, logos, copyrights, goodwill, symbols, permits, licenses, approvals, actions, tenant or guest lists, correspondence with present and prospective purchasers, tenants, guests and suppliers, advertising materials and telephone exchange numbers as identified in such materials, all refunds, rebates or credits in connection with a reduction in real estate taxes and assessments charged against the Land as a result of tax certiorari or any applications or proceedings for reduction, and causes of action which now or hereafter relate to, are derived from or are used in connection with the Land, or the use, operation, maintenance, occupancy or enjoyment thereof or the conduct of any business or activities thereon (collectively, “ Intangibles ”);

 

2

TOGETHER WITH all of Grantor’s interest in all leases and other agreements affecting the use, enjoyment or occupancy of the Land or the Improvements heretofore or hereafter entered into (including, without limitation, subleases, licenses, concessions, tenancies and other occupancy agreements covering or encumbering all or any portion of the Land, together with any guarantees, supplements, amendments, modifications, extensions and renewals of any thereof, and all additional remainders, reversions, and other rights and estates appurtenant thereto, as the same may be amended from time to time (collectively, “ Leases ”);

TOGETHER WITH all of Grantor’s right, title and interest in and to any easements and appurtenances affecting the Property;

TOGETHER WITH all of Grantor’s right, title and interest in and to the Operating Agreements (as hereinafter defined), together with any amendments, modifications, extensions and renewals of any thereof, and all subordinations, estoppels and other rights in connection therewith;

TOGETHER WITH all of Grantor’s interest in the purchase and sale agreement (and all indemnities and ongoing seller obligations therein) pursuant to which Borrower purchased the Property and all other agreements (including, without limitation, the Management Agreement (as hereinafter defined), the Franchise Agreement (as hereinafter defined) and all agreements now or hereafter entered into for the use and enjoyment of all food, liquor and other beverage licenses), contracts, certificates, instruments, franchises, permits, licenses (including, without limitation, food, liquor and other beverage licenses, to the extent assignable), plans, specifications and other documents, now or hereafter entered into, together with any amendments, modifications, extensions and renewals of any thereof, and all subordinating estoppel rights therein and thereto, respecting or pertaining to the use, occupation, construction, management or operation of the Land and any part thereof and any Improvements or respecting any business or activity conducted on the Land and any part thereof and all right, title and interest of Grantor therein and thereunder, including, without limitation, the right, while an Event of Default (as hereinafter defined) remains uncured, to receive and collect any sums payable to Grantor thereunder;

TOGETHER WITH the right, in the name and on behalf of Grantor, to commence any action or proceeding to protect the interest of Beneficiary in the Property and while an Event of Default remains uncured, to appear in and defend any action or proceeding brought with respect to the Property;

TOGETHER WITH all of Grantor’s interest in all (i) income, rents, room rates, receipts, issues, profits, revenues (including all oil and gas or other mineral royalties or bonuses), deposits and other benefits now due or which may become due or to which Grantor is now or hereafter may become entitled or which Grantor may demand or claim arising or issuing from or out of the operation of the business at the Land or any part thereof and all amounts paid as rents for such Land or the fees, charges, accounts or other payments for the use or occupancy of rooms and other public facilities in hotels, motels or other lodging facilities, including, without limitation, all revenues and credit card

 

3

receipts collected from guest rooms, restaurants, bars, mini-bars, meeting rooms, banquet rooms, recreational facilities and otherwise; and (ii) receivables, customer obligations, installment payment obligations and other payment obligations whether already accrued, now accruing or to accrue in the future for the occupancy or use of the Property or any part thereof, or arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the possession, use or occupancy of all or any portion of the Land or personality located thereon, or the rendering of services by Grantor or any operator or manager of the hotel or the commercial space located in the Improvements or acquired from others including, without limitation, from the rental of any office space, retail space, commercial space, parking space, guest rooms or other space, halls, stores or offices, including any deposits securing reservations of such space, exhibit or sales space of every kind, license, lease, sublease and concession fees and rentals, health club membership fees, food and beverage wholesale and retail sales, service charges, vending machine sales and proceeds, if any, from business interruption or other loss of income insurance relating to the use, enjoyment or occupancy of the Land, regardless of whether the revenues described in the preceding clauses (i) and (ii) are paid or accrued before or after the filing by or against Grantor of any petition for relief under any state or federal bankruptcy or insolvency laws (collectively, “ Profits ”); and

TOGETHER WITH all awards heretofore and hereafter made to Grantor for taking by eminent domain the whole or any part of the Land or any easement therein, including any awards for changes of grade of streets; and

TOGETHER WITH any and all rights of Grantor in and to the foregoing.

TO HAVE AND TO HOLD the Property unto the Trustee and unto its successors and assigns in fee simple forever with all appurtenances hereunto belonging, together with all Profits therefrom.

PROVIDED, HOWEVER, that upon full payment of the Debt, and upon performance of all covenants, obligations and indemnities hereby secured, the Property shall be reconveyed and released to Grantor.

TO SECURE to Beneficiary:

(a) Payment of all indebtedness evidenced by an interest-bearing loan and debt in the original principal sum of THIRTY-FIVE MILLION AND NO/100 DOLLARS ($35,000,000.00) (the “ Loan ”) evidenced by that certain Deed of Trust Note dated as of the date hereof from Borrower, as maker, to Beneficiary, as payee (the “ Note ”), the terms of which are incorporated herein by reference as well as all renewals, extensions, modifications, restatements and recastings of the Note.

(b) The performance of all covenants, obligations, indemnities and agreements required of Grantor, under this Deed of Trust, and all other agreements, documents, and instruments evidencing, securing or otherwise relating to the indebtedness hereby secured (the Note, this Deed of Trust, the Lease Assignment, the Assignment of Lease Assignment, the Contract Assignment, the Assignment of Contract

 

4

Assignment, the Financing Statements, the Manager Subordination Agreement and all such other agreements, documents and instruments are hereinafter referred to collectively as the “ Loan Documents ”); provided , however , that this Deed of Trust shall not secure the covenants, obligations, indemnities and agreements of Grantor and/or Guarantor under the Environmental Agreement and the Guaranty.

(c) The payment of (i) interest, default interest, late charges and other sums as provided in the Loan Documents; and (ii) all other monies agreed or provided to be paid by Grantor in the Loan Documents.

(d) The payment of any and all future advances made to Grantor hereunder or under any of the Loan Documents.

(e) The payment of all costs and expenses, including court costs, attorneys’ fees, witness fees (including fees of expert witnesses), paid, advanced, or incurred by Beneficiary to protect or preserve the Property or the validity or priority of this Deed of Trust, or to enforce the remedies of Beneficiary or Trustee with respect to the obligations of Grantor as provided for herein or in the other Loan Documents.

(f) The performance by Grantor of all obligations of Grantor as landlord under any Lease of all or any portion of the Property, the performance by Grantor of all obligations of Grantor under the Management Agreement and the performance by Grantor of all obligations of Grantor under the Franchise Agreement and Management Agreement.

1. Defined Terms

The following terms shall have the following meanings:

(a) “ Access Laws ” shall have the meaning set forth in Section 39(a) hereof.

(b) “ Accommodation Grantor ” shall have the meaning set forth in the preamble to this Deed of Trust.

(c) “ Accounts ” shall have the meaning set forth in Section 7 hereof.

(d) “ Asbestos ” shall have the meaning set forth in Section 36 hereof.

(e) “ Assignment of Contract Assignment ” shall have the meaning set forth in Section 2(b) hereof.

(f) “ Assignment of Lease Assignment ” shall have the meaning set forth in Section 2(b) hereof.

(g) “ Beneficiary ” shall have the meaning set forth in the preamble to this Deed of Trust.

 

5

(h) “ Borrower ” shall have the meaning set forth in the preamble to this Deed of Trust.

(i) “ Budget ” shall mean the budget for the use and application of the Loan and gross income derived from the operation of the Property, including all expenses to be satisfied from the Accounts, as set forth in the budget delivered by Grantor to Beneficiary on the date hereof with respect to the balance of the current calendar year, and the annual budget to be delivered in accordance with the terms hereof for each subsequent calendar year for so long as any portion of the Debt remains outstanding.

(j) “ Closing Date ” shall mean the date hereof.

(k) “ Code ” means the Internal Revenue Code of 1986, as amended, and the related Treasury Department regulations, including temporary regulations.

(l) “ Collateral ” shall have the meaning set forth in Section 29 hereof.

(m) “ Condemnation ” shall have the meaning set forth in Section 8(a) hereof.

(n) “ Contract Assignment ” shall have the meaning set forth in Section 2(b) hereof.

(o) “ Debt ” shall mean the outstanding principal balance of the Note from time to time, with all accrued and unpaid interest thereon, and all other sums now or hereafter due under the Loan Documents, and as described in the last paragraph of this Section.

(p) “ Debt Service Coverage Ratio ” shall mean the ratio of:

(i) the NOI produced by the operation of the Property during the twelve (12) calendar month period immediately preceding the calculation, to

(ii) the projected payments of principal and interest due under the Note for the twelve (12) calendar month period immediately following the calculation, as said coverage ratio is reasonably calculated by Beneficiary in accordance with its then-applicable underwriting standards and a mortgage loan constant of not less than seven and forty-five one-hundredths percent (7.45%).

(q) “ Deed of Trust ” shall have the meaning set forth in the recitals of this Deed of Trust.

(r) “ Default Rate ” shall mean the rate of interest payable from and after the occurrence of an Event of Default (hereinafter defined), as more particularly described in the Note; provided , however , that with respect to an Event of Default of the type described in Section 24(a) hereof, such rate of interest shall apply from and after the date on which any such payment is due, without any period of grace or cure.

 

6

(s) “ Environmental Agreement ” shall have the meaning set forth in Section 2(b) hereof.

(t) “ Environmental Laws ” shall have the meaning set forth in Section 35 hereof.

(u) “ Equipment ” shall mean all machinery, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions thereof and renewals, replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other property of every kind and nature, whether tangible or intangible, whatsoever owned by Grantor, or in which Grantor has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, and used in connection with the present or future operation and occupancy of the Land and the Improvements and all building equipment, materials and supplies of any nature whatsoever owned by Grantor, or in which Grantor has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, or used in connection with the present or future operation, enjoyment and occupancy of the Land and the Improvements.

(v) “ ERISA ” shall have the meaning set forth in Section 40(a) hereof.

(w) “ Event of Default ” shall have the meaning set forth in Section 24 hereof.

(x) “ Expenses ” shall mean the aggregate of the following items (capitalized terms in this subsection (p) and not otherwise defined herein shall have the meanings ascribed to such terms by the Hotel Standard Chart of Accounts) actually incurred by Grantor, whether or not paid, during the twelve (12) month period ending one (1) month prior to the date on which the NOI is to be calculated (except that capital expenses and reserves set forth in subsection (viii) below shall be adjusted by Beneficiary to reflect projected adjustments for the subsequent twelve (12) month period beginning on the date on which the NOI is to be calculated):

(i) departmental expenses incurred at departments within the Property including rooms, food and beverage, telephone and other;

 

7

(ii) the Property’s pro rata share of costs and expenses of the national and regional reservations system service under the Franchise Agreement;

(iii) administrative and general expenses incurred by the Property;

(iv) marketing, advertising and business promotion expenses incurred by the Property;

(v) franchise fees and other fees due under the Franchise Agreement;

(vi) all costs and fees of technical consultants and operational experts who are retained or employed by Manager for specialized services (including, without limitation, quality assurance inspectors) and the costs of attendance by employees of the Property at training and manpower development programs sponsored by Manager;

(vii) all utility costs including heat, light power, water, telephone, and computer line charges;

(viii) operations and maintenance expenses, which include the cost of necessary repair or replacement of Improvements or replacement of Equipment of like kind and quality or such kind or quality that is necessary to maintain the Property to the standards which are required under the Management Agreement or Franchise Agreement, this Deed of Trust or any of the Loan Documents, as determined by Beneficiary (to the extent such are paid for by Grantor from sources other than the Replacement Reserve Account);

(ix) common area maintenance fees and improvement district assessments;

(x) actual base and incentive management fees (not to exceed five percent (5%) of the gross income derived from the operation of the Property and reasonable reimbursements);

(xi) any costs and expenses incurred by Manager in terminating its employees at the Property pursuant to the Management Agreement;

(xii) Taxes and Other Charges paid by Grantor;

(xiii) general and operating insurance premiums (to the extent such are paid by Grantor);

 

8

(xiv) monthly installments made by Grantor to the Tax and Insurance Escrow Account and the Replacement Reserve Account (each if applicable);

(xv) lease payments and associated costs on any operating (as opposed to capital) leases of Equipment;

(xvi) rental payments pursuant to any ground lease;

(xvii) all costs and fees of independent professionals or other third parties who are retained by Manager to perform services required or permitted under the Management Agreement; and

(xviii) such other costs and expenses incurred by Manager, Borrower or Accommodation Grantor as are otherwise reasonably necessary for the proper and efficient operation of the Property.

(y) “ FF&E Financing ” shall have the meaning set forth in Section 10(x) hereof.

(z) “ Financing Statements ” shall mean any and all UCC financing statements filed by or on behalf of Beneficiary as additional security hereunder.

(aa) “ Franchise Agreement ” shall mean the Franchise License Agreement dated substantially of even date herewith between Grantor and Franchisor pursuant to which Grantor has the right to operate the hotel located on the Property under a name and/or hotel system controlled by Franchisor.

(bb) “ Franchisor ” shall mean Hilton Inns, Inc., a Delaware corporation.

(cc) “ Governmental Authority ” shall mean any nation or government, any state or other political subdivision thereof, and any Person exercising executive legislative, judicial, regulatory or administrative functions of or pertaining to such government.

(dd) “ Grantor ” shall have the meaning set forth in the preamble to this Deed of Trust.

(ee) “ Guarantor ” shall mean, Innkeepers USA Trust, a Maryland real estate investment trust, under trust agreement dated July 5, 1994.

(ff) “ Guaranty ” shall have the meaning set forth in Section 2(b) hereof.

(gg) “ Hazardous Substances ” shall have the meaning set forth in Section 35 hereof.

(hh) “ Improvements ” shall have the meaning set forth in the recitals of this Deed of Trust.

 

9

(ii) “ Insurance Premiums ” shall have the meaning set forth in Section 4(e) hereof.

(jj) “ Insured Casualty ” shall have the meaning set forth in Section 4(f)(ii) hereof.

(kk) “ Intangibles ” shall have the meaning set forth in the recitals of this Deed of Trust.

(ll) “ Investor ” shall have the meaning set forth in Section 21 hereof.

(mm) “ Land ” shall mean the real property comprising the Property, more particularly described on Exhibit “A” to this Deed of Trust.

(nn) “ Lease Assignment ” shall have the meaning set forth in Section 2(b) hereof.

(oo) “ Leases ” shall have the meaning set forth in the recitals of this Deed of Trust.

(pp) “ Loan ” shall have the meaning set forth in the recitals of this Deed of Trust.

(qq) “ Loan Documents ” shall have the meaning set forth in the recitals of this Deed of Trust.

(rr) “ Management Agreement ” shall mean (v) the Hotel Management Agreement dated substantially of even date herewith between Accommodation Grantor and Manager, pursuant to which Manager operates the Property as a hotel.

(ss) “ Manager ” means Innkeepers Hospitality Management, Inc., a Florida corporation.

(tt) “ Manager Subordination Agreement ” shall have the meaning set forth in Section 2(b) hereof.

(uu) “ Maturity Date ” shall mean the Maturity Date (as such term is defined in the Note) or any earlier acceleration of sums due under the Note pursuant to Beneficiary’s declaration of an Event of Default.

(vv) “ NOI ” shall mean as of any date of determination, the aggregate amount of the gross income derived from the operation of the Property for the twelve (12) month period prior to each respective date of determination, or an actual annualized basis, to the extent there is not a twelve (12) calendar month period immediately preceding the date of determination, less the aggregate amount of Expenses for the twelve (12) month period, or such actual annualized basis, ending one (1) month prior to each respective date of determination, adjusted as Beneficiary deems reasonably necessary to reflect the net operating income of the Property in accordance with Beneficiary’s then

 

10

current underwriting standards, provided , however , that such adjustments shall include (a) an adjustment for management fees equal to the greater of actual fees (base, incentive and other fees) paid under the Management Agreement or four percent (4%) of aggregate Property gross revenues, and (b) an adjustment for replacement reserves equal to four percent (4%) of aggregate Property gross revenues. NOI shall include only Profits and such other income, including any rent loss, business interruption or business income insurance proceeds, vending or concession income, late fees, forfeited security deposits and other miscellaneous tenant charges, which are actually received and Expenses actually incurred or payable during the period for which the NOI is being calculated, as set forth on operating statements satisfactory to Beneficiary. NOI shall be calculated on an accrual basis in accordance with generally accepted accounting principles consistently applied, based on the Uniform System of Accounts.

(ww) “ Note ” shall have the meaning set forth in the recitals of this Deed of Trust.

(xx) “ O&M Plan ” shall have the meaning set forth in Section 36 hereof.

(yy) “ OFAC List ” shall mean the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and any other similar list maintained by the U.S. Treasury Department, Office of Foreign Assets Control pursuant to any Requirements of Law, including, without limitation, trade embargo, economic sanctions, or other prohibitions imposed by an Executive Order of the President of the United States. The OFAC List currently is accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.

(zz) “ Operating Agreements ” shall have the meaning set forth in Section 20 hereof.

(aaa) “ Operating Lease ” means that certain Operating Lease between Borrower, as lessor, and Accommodation Grantor, as lessee, dated substantially of even date herewith with respect to the property.

(bbb) “ Other Charges ” shall have the meaning set forth in Section 5 hereof.

(ccc) “ Person ” shall mean an individual, partnership, limited partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

(ddd) “ Phase I ” shall have the meaning set forth in Section 35 hereof.

(eee) “ PIP ” shall mean that certain Property improvement plan required by the Franchisor as set forth in Exhibit A to the Franchise Agreement.

(fff) “ Policies ” shall have the meaning set forth in Section 4(e) hereof.

 

11

(ggg) “ Profits ” shall have the meaning set forth in the recitals of this Deed of Trust.

(hhh) “ Property ” shall have the meaning set forth in the recitals of this Deed of Trust.

(iii) “ Remedial Work ” shall have the meaning set forth in Section 37 hereof.

(jjj) “ Replacement Reserve Account ” shall have the meaning set forth in Section 7(b) hereof.

(kkk) “ Requirements of Law ” shall mean (a) the organizational documents of an entity, and (b) any law, regulation, ordinance, code, decree, treaty, ruling or determination of an arbitrator, court or other Governmental Authority, or any Executive Order issued by the President of the United States, in each case applicable to or binding upon such Person or to which such Person, any of its property or the conduct of its business is subject including, without limitation, laws, ordinances and regulations pertaining to the zoning, occupancy and subdivision of real property.

(lll) “ Securities ” shall have the meaning set forth in Section 21(b) hereof.

(mmm) “ Substitute Franchise Agreement ” shall have the meaning set forth in Section 38(f) hereof.

(nnn) “ Substitute Franchisor ” shall have the meaning set forth in Section 38(f) hereof.

(ooo) “ Tax and Insurance Escrow Account ” shall have the meaning set forth in Section 7(b) hereof.

(ppp) “ Tax and Insurance Escrow Fund ” shall have the meaning set forth in Section 6 hereof.

(qqq) “ Taxes ” shall have the meaning set forth in Section 5 hereof.

(rrr) “ TRIA ” shall have the meaning set forth in Section 4(c)(xi) hereof.

(sss) “ Trustee ” shall have the meaning set forth in the preamble to this Deed of Trust.

(ttt) “ Uniform Commercial Code ” shall mean the Uniform Commercial Code, as adopted and enacted by the State or States where any of the Property is located.

(uuu) “ Uniform System of Accounts ” shall have the meaning set forth in Section 10(k) hereof.

 

12

Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Note. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Deed of Trust may be used interchangeably in singular or plural form and the word “ Grantor ” shall mean “each Grantor or any part thereof or any interest therein”, the word “ Beneficiary ” shall mean “Beneficiary, its successors and assigns, and any subsequent holder of the Note”, the word “ Debt ” shall mean “any indebtedness evidenced by the Note and any other evidence of indebtedness secured by this Deed of Trust”, the word “ Property ” shall include any portion of the Property and any interest therein, and the words “ attorneys’ fees ” shall include any and all attorneys’ fees, paralegal and law clerk fees including, without limitation, fees at the pretrial, trial and appellate levels incurred or paid by Beneficiary in protecting its interest in the Property and Collateral and enforcing its rights hereunder. 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.

2. The Loan

(a) Upon and subject to the terms and conditions herein set forth, Beneficiary agrees to lend to Grantor and Grantor agrees to borrow from Beneficiary, the principal sum not to exceed THIRTY-FIVE MILLION and No/100 Dollars ($35,000,000.00). Grantor will pay the Debt at the time and in the manner provided in the Note, this Deed of Trust and the other Loan Documents. All payments made to Beneficiary in respect of the Debt after payment of principal and interest due and payable under the Note shall be applied by Beneficiary in the following order of priority:

(i) first, to fund the Tax and Insurance Escrow Account (if applicable);

(ii) next, to reimburse Beneficiary for any unpaid costs, sums and expenses incurred or advanced by Beneficiary on Grantor’s behalf or in the enforcement of Beneficiary’s rights hereunder;

(iii) next, to fund the Replacement Reserve Account (if applicable); and

(iv) thereafter, one hundred percent (100%) of the balance, if any, to reduce the outstanding principal balance of the Loan.

(b) All the covenants, conditions and agreements contained in the Note, the Assignment and Leasehold Assignment of Leases, Rents and Profits dated as of the date hereof from Accommodation Grantor to Borrower (the “ Lease Assignment ”), Assignment of Assignment and Leasehold Assignment of Leases, Rents and Profits dated as of the date hereof from Borrower to Beneficiary (the “ Assignment of Lease Assignment ”), the Environmental Indemnity Agreement dated as of the date hereof among Beneficiary, Borrower and Guarantor (the “ Environmental Agreement ”), the Guaranty of Recourse Obligations dated as of the date hereof from Guarantor to

 

13

Beneficiary (the “ Guaranty ”), the Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated as of the date hereof from Accommodation Grantor for the benefit of Borrower (the “ Contract Assignment ”), the Assignment of Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated as of the date hereof from Borrower for the benefit of Beneficiary (the “ Assignment of Contract Assignment ”), the Consent, Subordination and Recognition Agreement dated as of the date hereof among Borrower, Accommodation Grantor, Manager and Beneficiary (the “ Manager Subordination Agreement ”), and the other Loan Documents are hereby made a part of this Deed of Trust to the same extent and with the same force as if fully set forth herein.

3. Warranty of Title

Borrower represents and warrants that Borrower has good, marketable and indefeasible fee simple title and Borrower and Accommodation Grantor each has the full power, authority and right to execute, deliver and perform its respective obligations under this Deed of Trust and to acquire, encumber, mortgage, give, grant, bargain, sell, alienate, enfeoff, convey, confirm, pledge, assign, hypothecate and grant a security interest in the Property and that Borrower possesses an unencumbered fee estate in the Land and the Improvements, and that Borrower and Accommodation Grantor own the Property free and clear of all liens, encumbrances and charges whatsoever except for those exceptions approved by Beneficiary and shown in the title insurance policy insuring the lien of this Deed of Trust. Grantor further represents and warrants that this Deed of Trust is and will remain a valid and enforceable first lien on and security interest in the Property, subject only to such exceptions. Grantor shall forever warrant, defend and preserve such title and the validity and priority of the lien of this Deed of Trust and shall forever warrant and defend such title, validity and priority to Beneficiary against the claims of all persons whomsoever.

4. Insurance

(a) Intentionally deleted.

(b) Grantor, at its sole cost and expense, will keep the Property insured during the entire term of this Deed of Trust for the mutual benefit of Grantor and Beneficiary in accordance with the terms and provisions of this Section against loss or damage by fire and standard “all risk” perils pursuant to an insurance policy covering “all risks of physical loss” including, without limitation, riot and civil commotion, vandalism, malicious mischief, burglary and theft, without any exclusion for losses due to windstorm. No such insurance policy shall contain an exception or exclusion for terrorism or terrorist acts. Such insurance policy shall (i) contain an income loss endorsement, (ii) be on a replacement cost basis with an “agreed amount” endorsement attached or with no co-insurance and, (iii) if any of the Improvements or the use of the Property shall at any time constitute legal nonconforming structures or uses, a law and ordinance endorsement. Such insurance shall be in an amount equal to the greater of: (A) the original principal amount of the Loan (in no event less than the minimum amount required to compensate for damage or loss on a replacement cost basis), (B) the then full

 

14

replacement cost of the Improvements and the Equipment, without deduction for physical depreciation; and (C) such amount that the insurer would not deem Grantor or Beneficiary a co-insurer under such policies. The deductible in respect of such insurance shall not exceed Twenty-Five Thousand and No/100 Dollars ($25,000.00), unless a higher deductible is required by law. The premiums for the insurance carried in accordance with this Section shall be paid annually in advance and each policy shall contain the “Replacement Cost Endorsement” with a waiver of depreciation. In no event may the premiums for such insurance be financed on behalf of Grantor or any affiliate thereof, on a secured or unsecured basis, whether through any “premium lenders”, “premium finance firms” or the like (“ Insurance Premium Financing ”).

(c) Grantor shall also obtain and maintain during the entire term of this Deed of Trust, at its sole cost and expense, for the mutual benefit of Grantor and Beneficiary, the following policies of insurance:

(i) Flood insurance if any part of the Property is currently or at any time in the future located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (and any amendment or successor act thereto) in an amount at least equal to the lesser of: (A) the outstanding principal amount of the Note; or (B) the full replacement cost of the Improvements and the Equipment, having a deductible of not more than Twenty Five Thousand and No/100 Dollars ($25,000.00) or five percent (5%) of NOI after the payment of debt service under the Loan, whichever is less;

(ii) (A) Comprehensive public liability insurance, including broad form property damage, blanket contractual and personal injuries (including death resulting therefrom) coverages and “Dram shop” or other liquor liability coverage if alcoholic beverages are sold from or may be consumed at the Property, and containing minimum limits per occurrence of One Million and No/100 Dollars ($1,000,000.00) and Two Million and No/100 Dollars ($2,000,000.00) general aggregate for the Land and the Improvements, or such greater amount as may be required under the Franchise Agreement; and (B) Umbrella liability insurance containing minimum limits of Ten Million and No/100 Dollars ($10,000,000.00) for the Land and the Improvements, or such greater amount as may be required under the Franchise Agreement;

(iii) Intentionally omitted;

(iv) Business interruption insurance: (A) with loss payable to Beneficiary, its successors and/or assigns, as their respective interests may appear; (B) covering all risks required to be covered by the insurance provided for in Section 4(b); (C) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and all personal property has been repaired, the continued loss of income will be insured until the Property is restored (or if such income is not as of the date of restoration at the same level

 

15

it was at prior to the loss, then until two (2) months following the restoration date), or the expiration of twelve (12) months from the date of the loss, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to Four Million Eight Hundred Thousand and No/100 Dollars ($4,800,000.00) (based on Expenses and NOI for the Property). The amount of such business interruption insurance shall be determined prior to the date hereof and at least once each year thereafter based on clause 4(c)(iv)(D). All insurance proceeds payable to Beneficiary pursuant to this Section shall be held by Beneficiary and shall be applied to the obligations secured hereunder from time to time due and payable hereunder and under the Note; provided , however , that nothing herein contained shall be deemed to relieve Grantor of its obligations to pay the obligations secured hereunder on the respective dates of payment provided for in the Note except to the extent such amounts are actually and timely paid out of the proceeds of such business interruption insurance;

(v) Insurance, in an amount equal to the lesser of Two Million and No/100 Dollars ($2,000,000.00) per occurrence or the insurable value of the Improvements and the Equipment, against loss or damage from: (A) leakage of sprinkler systems; and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements;

(vi) Worker’s compensation insurance with respect to any employees of Grantor, as required by any governmental authority or legal requirement;

(vii) Motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles, containing minimum limits per occurrence of One Million and No/100 Dollars ($1,000,000.00) with the same minimum limits of liability umbrella coverage as is specified under clause (c)(ii)(B) above or such greater amount as may be required under the Franchise Agreement;

(viii) Blanket crime and fidelity bond insurance coverage insuring against losses resulting from dishonest or fraudulent acts committed by Grantor’s or Manager’s personnel;

(ix) Earthquake insurance (including subsidence), insuring in an amount equal to one times (1X) the probable maximum loss of the Property (as determined by Beneficiary) with a maximum deductible of no greater than ten percent (10%) of the face amount of the Policy or Twenty-Five Thousand and No/100 Dollars ($25,000.00); provided , however , that if the deductible exceeds five percent (5%), Beneficiary shall have the right to require Grantor to escrow funds with Beneficiary in an amount sufficient to fund the amount of the deductible in excess of five percent (5%); provided , however , that Beneficiary acknowledges it shall not require earthquake insurance for the Property based on the current probable maximum loss;

 

16

(x) if required by Beneficiary, ordinance or law coverage to compensate for the cost of demolition and the increased cost of construction;

(xi) insurance coverage for terrorism and terrorist acts, in form and content and with coverages satisfying all requirements of the Terrorism Risk Insurance Act as the same may be amended or supplemented, or any successor or replacement legislation (“ TRIA ”); provided , however , in the event that TRIA is not renewed, Grantor shall procure coverage for terrorism and terrorist acts in form and content acceptable to Beneficiary in its sole discretion, as long as such coverage is commercially available; and

(xii) Such other insurance as may from time to time be reasonably required by Beneficiary or as may be required by the Franchise Agreement, including, without limitation, during the course of any construction of, or repairs to, any Improvements, builder’s completed value risk insurance against “all risks of physical loss” including (A) collapse, damage resulting from errors in design or faulty workmanship or materials, water damage, flood damage (if applicable) and transit coverage, in a nonreporting form, covering the total value of work performed or contracted for and equipment, supplies and materials furnished or contracted for, plus interest, costs and other “soft” construction costs as Beneficiary deems appropriate, and (B) a full installation floater to insure all materials stored on the Land but not yet part of the permanent installation.

The insurance coverage required under this Section 4(c) may be offered under a blanket policy or policies covering the Property and other properties and assets not constituting a part of the security hereunder; provided that any such blanket policy shall specify, except in the case of public liability insurance, the portion of the total coverage of such policy that is allocated to the Property and identify the Property, with a mortgagee clause naming Beneficiary, its successors and/or assigns specifically for the Property.

(d) Grantor shall increase the amount of insurance required to be provided hereunder at the time that each such policy is renewed (but, in any event not less frequently than once during each twelve (12) month period) by using the F.W. Dodge Building Index to determine whether there has been an increase in the replacement cost of the Improvements since the most recent adjustment of any such policy and, if there has been any such increase, the amount of insurance required to be provided hereunder shall be adjusted accordingly.

(e) All policies of insurance required pursuant to this Section (collectively, the “ Policies ”) shall: (i) be issued by an insurer fully licensed in the state where the Property is located, with such insurer having at least an investment grade, claims paying ability rating, of “A-”or better by Standard & Poors Rating Group, Moody’s or Fitch IBCA or an equivalent rating from a rating agency of similar stature

 

17

and quality or issued by an insurer otherwise acceptable to Beneficiary in its reasonable discretion (or, if not acceptably rated by any of the foregoing, a cut through endorsement from an acceptably rated company will be required, with a reinsurance agreement having a total value, one hundred percent (100%) assumption of liability endorsement, which must include a requirement for at least ninety (90) days notice of cancellation thereof); (ii) contain a standard “noncontributory mortgagee” clause or endorsement and a “lender’s loss payable endorsement” or their equivalents and shall name Beneficiary, its successors and/or assigns, as their respective interests may appear, as an additional insured and loss payee and as the person to which all payments made by such insurance company shall be paid; (iii) contain a waiver of subrogation against Beneficiary; (iv) be maintained throughout the term of this Deed of Trust without cost to Beneficiary; (v) be assigned and delivered to Beneficiary; (vi) contain such provisions as Beneficiary deems reasonably necessary or appropriate to protect its interest including, without limitation, endorsements providing that neither Grantor, Beneficiary nor any other party shall be a co-insurer thereunder, that Beneficiary shall have no liability for insurance premiums thereunder and that Beneficiary shall receive at least thirty (30) days prior written notice of any modification, reduction or cancellation; provided , however , Beneficiary must receive at least ten (10) days advance written notice in the event of a cancellation due to non-payment of any premium; and (vii) be satisfactory in form and substance to Beneficiary and be approved by Beneficiary as to amounts, form, risk coverage, deductible, loss payees and insureds. Grantor shall have delivered an original of each of the Policies to Beneficiary or a copy, certified as true, correct and complete by the insurance agent, of each of the Policies. Unless such premiums are deposited in the Tax and Insurance Escrow Account, Grantor shall pay or cause Manager to pay the premiums for the Policies (the “ Insurance Premiums ”) as they become due and payable. As soon as the same is available, but in any event prior to the expiration date of each of the Policies, Grantor will deliver to Beneficiary satisfactory evidence of the renewal of each Policy. Notwithstanding anything to the contrary herein, in the event that the Franchise Agreement requires (1) greater amounts of coverage for any insurance required hereunder, or (2) additional types of insurance coverage, then the Franchise Agreement insurance requirements shall prevail. In the event Grantor fails to provide, maintain, keep in force, or deliver and furnish to Beneficiary the Policies, Beneficiary may procure such insurance or single-interest insurance for such risks covering Beneficiary’s interest, and Grantor will reimburse Beneficiary for all premiums paid by Beneficiary, together with interest thereon from the date paid at the Default Rate, promptly upon demand by Beneficiary. Until such payment is made by Grantor, the amount of all such premiums, together with interest thereon, shall be secured by this Deed of Trust.

(f) If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Grantor shall give prompt written notice thereof to Beneficiary.

(i) In the case of a loss covered by Policies, Beneficiary may: (A) settle and adjust any claim with the prior consent of Grantor, not to be unreasonably withheld or (B) allow Grantor to agree with the insurance company or companies on the amount to be paid upon the loss; provided , however , that, if no Event of Default shall have occurred and be continuing, Grantor may adjust losses aggregating not in excess of Two Hundred Fifty Thousand and No/100

 

18

Dollars ($250,000.00) (the “ Cut-Off Amount ”) if such adjustment is carried out in a competent and timely manner and provided in such case that Grantor shall be, and is hereby, authorized to collect and receive any such insurance proceeds. The expenses incurred by Beneficiary in the adjustment and collection of insurance proceeds shall become part of the Debt, shall be secured by this Deed of Trust and shall be reimbursed by Grantor to Beneficiary on demand.

(ii) In the event of any insured damage to or destruction of the Property or any part thereof (an “ Insured Casualty ”), the proceeds of insurance collected shall, if in excess of the Cut-Off Amount, at the option of Beneficiary in its sole discretion, be applied either to the payment of the Debt or applied to reimburse Grantor for the cost of restoring, repairing, replacing or rebuilding the Property or the part thereof subject to the Insured Casualty, in the manner set forth below. In no case shall any such application reduce or postpone any payments otherwise required pursuant to the Note. In the event of any Insured Casualty where: (A) the proceeds of insurance are sufficient to enable Grantor to fully restore the Property; (B) the term of, and proceeds derived from, Grantor’s business interruption insurance (or other similar insurance) shall be sufficient to fully cover the period that the Property is undergoing restoration; (C) Beneficiary determines that the restoration is reasonably capable of being completed, and is actually completed, at least nine (9) months prior to the Maturity Date; (D) the Franchise Agreement has not been terminated as a result of the Insured Casualty; (E) the restoration can be completed within nine (9) months from the date that the Insured Casualty occurred, or within such shorter time period as may be required by the Franchise Agreement; (F) the restoration is permitted or required under the Franchise Agreement, and (G) the Debt Service Coverage Ratio upon completion of the restoration is reasonably estimated by Beneficiary to be a minimum of 1.30:1.0, then, if no Event of Default shall have occurred and be continuing, the proceeds of insurance shall be applied to the cost of restoring, repairing, replacing or rebuilding the Property or the part thereof subject to the Insured Casualty, as provided for below; and Grantor hereby covenants and agrees forthwith to commence and diligently to prosecute such restoring, repairing, replacing or rebuilding. NOI for purposes of this calculation shall be NOI for the twelve (12) calendar month period immediately preceding the casualty, unless the appraiser referenced in clause 4(f)(ii)(D) above estimates that NOI after the restoration will be more than ten percent (10%) less than NOI for such twelve (12) calendar month period, in which case the Debt Service Coverage Ratio shall be calculated using the appraiser’s estimate of NOI.

(iii) In the event that proceeds of insurance, if any, shall be made available to Grantor for the restoring, repairing, replacing or rebuilding of the Property, Grantor hereby covenants to restore, repair, replace or rebuild the Property to be of at least equal value and of substantially the same character as prior to such damage or destruction, all to be effected in accordance with applicable law and plans and specifications approved in advance by Beneficiary and otherwise in accordance with the requirements of the Franchise Agreement, if any; provided , however , that Grantor shall pay all costs of such restoring,

 

19

repairing, replacing or rebuilding in excess of the net proceeds of insurance required to be made available pursuant to the terms hereof and, upon Beneficiary’s request, Grantor shall provide Beneficiary evidence reasonably satisfactory to Beneficiary that sufficient funds for the such restoration, repair, replacement or rebuilding in excess of the net proceeds of insurance are available to Grantor for such purpose.

(iv) In the event Grantor is entitled to reimbursement out of insurance proceeds held by Beneficiary, such proceeds shall be disbursed from time to time upon Beneficiary being furnished with: (A) evidence satisfactory to it of the estimated cost of completion of the restoration, repair, replacement and rebuilding; (B) funds, or, at Beneficiary’s option, assurances satisfactory to Beneficiary that such funds are available, sufficient in addition to the proceeds of insurance to complete the proposed restoration, repair, replacement and rebuilding; and (C) such architect’s certificates, waivers of lien for work previously performed or contemporaneously funded, contractor’s sworn statements, title insurance endorsements, bonds, plats of survey and such other evidences of cost, payment and performance as Beneficiary may reasonably require and approve. Beneficiary may, in any event, require that all plans and specifications for such restoration, repair, replacement and rebuilding be submitted to and approved by Beneficiary prior to commencement of work (which approval shall not be unreasonably withheld). No payment made prior to the final completion of the restoration, repair, replacement and rebuilding shall exceed ninety percent (90%) of the value of the work performed from time to time, other than with respect to subcontracts where the entire scope of work thereunder has been substantially completed. Funds other than proceeds of insurance shall be disbursed prior to disbursement of such insurance proceeds, and at all times the undisbursed balance of such proceeds remaining in Beneficiary’s possession, together with funds held by Grantor or irrevocably committed to the satisfaction of Beneficiary by or on behalf of Grantor for that purpose, shall be at least sufficient in the judgment of Beneficiary to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens and claims of lien. Any surplus which may remain out of insurance proceeds held by Beneficiary after payment of such costs of restoration, repair, replacement or rebuilding shall be delivered to Grantor, provided such restoration was performed in accordance with the provisions of this Section and Grantor is not then in default of its obligations under the Loan Documents. If the conditions in the immediately preceding sentence have not been satisfied, Beneficiary shall apply such surplus proceeds to the payment of the Debt in any order in its sole discretion.

(g) Grantor shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Section. Notwithstanding the foregoing, Grantor may carry insurance not required under this Deed of Trust, provided any such insurance affecting the Property shall be for the mutual benefit of Grantor and Beneficiary, as their respective interests may appear, and shall be subject to all other provisions of this Section.

 

20

(h) Prior to/or contemporaneous with the execution of this Deed of Trust, Grantor shall provide Beneficiary with evidence that the insurance required hereunder is in full force and effect in accordance with the terms hereof, with all premiums due thereunder prepaid through the first twelve (12) months subsequent to the execution of this Deed of Trust or such shorter period as Beneficiary may require.

5. Payment of Taxes

Grantor shall pay all taxes, assessments, water rates and sewer rents, now or hereafter levied, assessed or imposed against the Property or any part thereof (collectively, the “ Taxes ”) and all ground rents, maintenance charges, other governmental impositions, and other charges including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Land, now or hereafter levied, assessed or imposed against the Property or any part thereof (collectively, the “ Other Charges ”) as they become due and payable. Grantor will deliver to Beneficiary evidence satisfactory to Beneficiary that the Taxes and Other Charges have been so paid, or are not then delinquent, no later than thirty (30) days following the date on which the Taxes and/or Other Charges would otherwise be delinquent if not paid. Grantor shall not suffer, and shall promptly cause to be paid and discharged, any lien or charge whatsoever which may be or become a lien or charge against the Property, and shall promptly pay for all utility services provided to the Property. Grantor shall furnish to Beneficiary or its designee receipts for the payment of the Taxes, Other Charges and charges for utility services prior to the date that such obligations shall become delinquent. Grantor shall be entitled to contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount of any Taxes or Other Charges. Notwithstanding the preceding sentence, during the pendency of any such contest Grantor shall pay or cause to be paid all Taxes and Other Charges as and when due and payable otherwise in accordance with Section 32 hereof.

6. Tax and Insurance Escrow Fund

Beneficiary shall not require escrows for Taxes, Other Charges or Insurance Premiums unless Beneficiary does not receive evidence that Grantor is remaining current in its payment of all such items. If Beneficiary determines that Grantor or its agents have not stayed current in the payment of all Taxes, Other Charges and Insurance Premiums (a “ Trigger Event ”), Beneficiary shall provide notice thereof to Grantor and immediately thereafter, Grantor shall pay to Beneficiary an initial deposit to the Tax and Insurance Escrow Fund in an amount which, when added to the monthly amounts to be deposited as specified below, will be sufficient in Beneficiary’s estimation, to satisfy the next due Taxes and Other Charges and the next due Insurance Premiums. Grantor shall thereafter pay to Beneficiary monthly on the first (1st) day of each calendar month: (a) one-twelfth (1/12th) of an amount which would be sufficient to pay the Taxes and Other Charges payable, or estimated by Beneficiary to be payable, during the next ensuing twelve (12) months; and (b) one-twelfth (1/12th) of an amount which would be sufficient to pay the Insurance Premiums due for the renewal of the coverage afforded by the Policies upon the expiration thereof (the amounts described in clauses (a) and (b) of Section 4 above, collectively, the “ Tax and Insurance Escrow Fund ”). The Tax and Insurance Escrow

 

21

Fund and the monthly installments of principal and interest payable under the Note shall be added together and shall be paid as an aggregate sum by Grantor to Beneficiary. Grantor hereby pledges to Beneficiary any and all monies hereafter deposited in the Tax and Insurance Escrow Fund as additional security for the payment of the Debt. Beneficiary will apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to be made by Grantor pursuant to Sections 4 and 5 hereof. If the amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance Premiums pursuant to Sections 4 and 5 hereof, Beneficiary shall, in its discretion, return any excess to Grantor or credit such excess against future payments to be made to the Tax and Insurance Escrow Fund. If the Tax and Insurance Escrow Fund is not sufficient to pay the items set forth in Sections 4 and 5 above, Grantor shall promptly pay to Beneficiary, upon demand, an amount which Beneficiary shall estimate as sufficient to make up the deficiency. Upon the occurrence of an Event of Default, Beneficiary may apply any sums then comprising the Tax and Insurance Escrow Fund to the payment of the Debt in any order in its sole discretion. Until expended or applied as above provided, any amounts in the Tax and Insurance Escrow Fund shall constitute additional security for the Debt. To the extent permitted by applicable law, the Tax and Insurance Escrow Fund shall not constitute a trust fund and may be commingled with other monies held by Beneficiary. No earnings or interest on the Tax and Insurance Escrow Fund, if applicable, shall be payable to Grantor.

7. Annual Budget; Accounts

(a) No later than December 3l of each year, Grantor shall submit to Beneficiary, for Beneficiary’s approval, a form of Budget for the twelve (12) calendar months succeeding the term covered by the last approved Budget. So long as no Event of Default has occurred and is continuing, Beneficiary’s approval of the Budget shall not be required. If an Event of Default has occurred which is continuing such that Beneficiary’s approval of the Budget is required hereunder, Beneficiary’s approval of any proposed budget shall not be unreasonably withheld, conditioned or delayed. If Beneficiary’s approval or disapproval is required hereunder and such approval is not given prior to January 31, Grantor shall be deemed to be authorized to operate the Property in accordance with the most recently approved Budget with each line item increased by five percent (5%).

(b) Beneficiary shall this day, or as soon hereafter as is practicable, but subject to the terms and conditions set forth in Section 6 hereof, establish and shall thereafter maintain the following escrow accounts at one or more federally insured institutions selected by Beneficiary (collectively, the “ Accounts ”), each of which shall be in Beneficiary’s name and shall constitute additional security for the Loan:

(i) Replacement Reserve Account (“ Replacement Reserve Account ”), which shall be an interest-bearing account from which Grantor may request, absent the existence of an Event of Default, withdrawals no more frequently than once any calendar month to refurbish, repair or replace Equipment at the Property (“ Replacements ”), ordinary maintenance and upkeep expenses excluded, in a manner and upon terms and conditions reasonably acceptable to

 

22

Beneficiary; provided , however , there shall be no requirement for a Replacement Reserve Account for the first five (5) years of the Loan term, but beginning on the sixth (6) anniversary of the date hereof and annually thereafter, Grantor shall have provided to Beneficiary evidence reasonably acceptable to Beneficiary that Grantor has invested an average of at least four percent (4%) of Property gross revenues per annum during the Loan term for the purchase and installation of Replacements at the Property. If Grantor does not adequately demonstrate that it has made such qualified expenditures, Beneficiary shall require that Grantor, immediately thereafter, make monthly deposits to Beneficiary, at the time of and in the same manner as payments are made under the Note, in an amount equal to one-twelfth of the positive difference between (1) four percent (4%) of the Property’s gross revenues for the preceding calendar year and (2) the amount of actual approved Replacements made by Grantor during such calendar year; and

(ii) Tax and Insurance Escrow Account, into which shall be deposited, following a Trigger Event as described in Section 6 above and thereafter monthly on the first (1st) day of each calendar month, pursuant to the Budget, an amount sufficient to satisfy Grantor’s obligations under Section 6 hereof (the “ Tax and Insurance Escrow Account ”).

(c) Beneficiary shall have sole signatory authority with respect to any and all withdrawals from the Accounts. All such withdrawals shall be made solely in accordance with the applicable Loan Documents, and by this instrument Grantor does hereby irrevocably authorize and direct Beneficiary to make all such withdrawals on Grantor’s behalf to satisfy Grantor’s obligations hereunder and under such Loan Documents.

8. Condemnation

(a) Grantor shall promptly give Beneficiary written notice of the actual or threatened commencement of any condemnation or eminent domain proceeding (a “ Condemnation ”) and shall deliver to Beneficiary copies of any and all papers served in connection with such proceedings. Beneficiary is hereby irrevocably appointed as Grantor’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any award or payment for such Condemnation above the Cut-Off Amount and to make any compromise or settlement in connection with such proceeding, subject to the provisions of this Deed of Trust, including specifically but without limitation, those set forth in Section 8(b)(ii) hereof. Notwithstanding any taking by any public or quasi-public authority through eminent domain or otherwise (including, without limitation, any transfer made in lieu of or in anticipation of the exercise of such taking), Grantor shall continue to pay the Debt at the time and in the manner provided for in the Note, this Deed of Trust and the other Loan Documents, and the Debt shall not be reduced until any award or payment therefor shall have been actually received after expenses of collection and applied by Beneficiary to the discharge of the Debt. Beneficiary shall not be limited to the interest paid on the award by the condemning authority but shall be entitled to receive out of the award interest at the rate or rates provided in the Note.

 

23

(b) If the Property shall be the subject of a Condemnation, in whole or in part, Grantor shall give prompt written notice thereof to Beneficiary.

(i) In the case of a Condemnation, provided that no Event of Default has occurred and is continuing, Beneficiary may: (A) settle and adjust any claim with the prior written consent of Grantor, or (B) allow Grantor to agree with the condemning authority on the amount to be paid upon the Condemnation; provided , however , that, if no Event of Default shall have occurred and be continuing, Grantor may adjust losses aggregating not in excess of the Cut-Off Amount if such adjustment is carried out in a competent and timely manner, and provided in such case that Grantor shall be, and is hereby, authorized to collect and receive for any such Condemnation award or proceeds. Notwithstanding the foregoing, if an Event of Default shall have occurred and be continuing, Beneficiary may settle and adjust any claim without the consent of Grantor. The expenses incurred by Beneficiary in the adjustment and collection of a Condemnation award or proceeds shall become part of the Debt, shall be secured by this Deed of Trust and shall be reimbursed by Grantor to Beneficiary on demand.

(ii) In the event of any Condemnation affecting all or any portion of the Property, the award or proceeds above the Cut-Off Amount collected upon any Condemnation shall, at the option of Beneficiary in its sole discretion, be applied to the payment of the Debt or applied to the cost of restoring, repairing, replacing or rebuilding the Property or the part thereof subject to the Condemnation in the manner set forth below. In no case shall any such application reduce or postpone any payments otherwise required pursuant to the Note. In the event of any Condemnation where: (A) the Condemnation proceeds are sufficient to enable Grantor to fully restore the Property; (B) the term of, and proceeds derived from, Grantor’s business interruption insurance (or other similar insurance) shall be sufficient to fully cover the period that the Property is undergoing restoration; (C) Beneficiary determines that the restoration is reasonably capable of being completed, and is actually completed, at least nine (9) months prior to the Maturity Date; (D) the Franchise Agreement has not been terminated as a result of the Condemnation; (E) the restoration can be completed within nine (9) months from the date that the Condemnation occurred, or within such shorter time period as may be required by the Franchise Agreement; (F) the restoration is permitted or required under the Franchise Agreement, and (G) the Debt Service Coverage Ratio upon completion of the restoration is reasonably estimated by Beneficiary to be a minimum of 1.30:1.0, then, if no Event of Default shall have occurred and be continuing, the proceeds of insurance shall be applied to the cost of restoring, repairing, replacing or rebuilding the Property or the part thereof subject to the Condemnation, as provided for below; and Grantor hereby covenants and agrees forthwith to commence and diligently to prosecute such restoring, repairing, replacing or rebuilding. NOI for purposes of this calculation shall be NOI for the twelve (12) calendar month period immediately preceding the casualty, unless the appraiser referenced in clause 8(b)(ii)(D) above estimates that NOI after the restoration will be more than ten percent (10%) less than NOI for such twelve (12) calendar month period in which case the Debt Service Coverage Ratio shall be calculated using the appraiser’s estimate of NOI.

 

24

(iii) In the event that a Condemnation award or proceeds, if any, shall be made available to Grantor for the restoring, repairing, replacing or rebuilding of the Property, Grantor hereby covenants to restore, repair, replace or rebuild the Property to be of at least equal value and of substantially the same character as prior to such Condemnation, all to be effected in accordance with applicable law and plans and specifications approved in advance by Beneficiary; provided , however , that Grantor shall pay all costs of such restoring, repairing, replacing or rebuilding in excess of the net proceeds or award required to be made available pursuant to the terms hereof and, upon Beneficiary’s request, Grantor shall provide Beneficiary evidence reasonably satisfactory to Beneficiary that sufficient funds for the such restoration, repair, replacement or rebuilding in excess of the net proceeds or award are available to Grantor for such purpose.

(iv) In the event Grantor is entitled to reimbursement out of proceeds held by Beneficiary, such proceeds shall be disbursed from time to time upon Beneficiary being furnished with: (A) evidence satisfactory to it of the estimated cost of completion of the restoration, repair, replacement and rebuilding; (B) funds, or, at Beneficiary’s option, assurances satisfactory to Beneficiary that such funds are available, sufficient in addition to the Condemnation award or proceeds to complete the proposed restoration, repair, replacement and rebuilding; and (C) such architect’s certificates, waivers of lien for work previously performed or contemporaneously funded, contractor’s sworn statements, title insurance endorsements, bonds, plats of survey and such other evidences of cost, payment and performance as Beneficiary may require and approve. Beneficiary may, in any event, require that all plans and specifications for such restoration, repair, replacement and rebuilding be submitted to and approved by Beneficiary prior to commencement of work (which approval shall not be unreasonably withheld). No payment made prior to the final completion of the restoration, repair, replacement and rebuilding shall exceed ninety percent (90%) of the value of the work performed from time to time, other than with respect to subcontracts where the entire scope of the work thereunder has been substantially completed. Funds other than the proceeds or award shall be disbursed prior to disbursement of such proceeds or award, and at all times the undisbursed balance of such proceeds or award remaining in Beneficiary’s possession, together with funds held by Grantor or irrevocably committed to the satisfaction of Beneficiary by or on behalf of Grantor for that purpose, shall be at least sufficient in the judgment of Beneficiary to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens and claims of lien. Any surplus which may remain out of a Condemnation award or proceeds held by Beneficiary after payment of such costs of restoration, repair, replacement or rebuilding shall be delivered to Grantor, provided such restoration was performed in accordance with the provisions of this Section, and Grantor is not then in default of its obligations under the Loan Documents.

 

25

(c) Grantor unconditionally and irrevocably waives all rights of a property owner under Section 1265.225(a) of the California Code of Civil Procedure or any successor statute providing for the allocation of condemnation proceeds between a property owner and a lien holder.

9. Leases and Profits

(a) In connection with the Loan, Grantor has absolutely and unconditionally assigned to Beneficiary all of Grantor’s right, title and interest in all current and future Leases and Profits, it being intended by Grantor that such assignment constitutes a present, absolute assignment and not an assignment for additional security only. Such assignment to Beneficiary shall not be construed to bind Beneficiary to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise to impose any obligation upon Beneficiary. Grantor shall execute and deliver to Beneficiary such additional instruments, in form and substance reasonably satisfactory to Beneficiary, as may hereafter be requested by Beneficiary to further evidence and confirm such assignment. Nevertheless, subject to the terms of this Section, Beneficiary has granted to Grantor a revocable license to operate and manage the Property and to collect the Profits. Grantor shall hold the Profits, or a portion thereof sufficient to discharge all current sums due on the Debt, in trust for the benefit of Beneficiary and subject to the terms hereof. Upon the occurrence of an Event of Default, the license granted to Grantor shall automatically be revoked, and Beneficiary shall immediately be entitled to possession of all Profits, whether or not Beneficiary enters upon or takes control of the Property. Beneficiary is hereby granted and assigned by Grantor the right, at its option, upon revocation of the license granted herein, to enter upon the Property in person, by agent or by court-appointed receiver to collect the Profits. Any Profits collected after revocation of the license may be applied toward payment of the Debt in such priority and proportions as Beneficiary in its discretion shall deem appropriate.

(b) Grantor shall furnish Beneficiary with executed copies of all Leases, if any. All renewals of Leases and all proposed Leases shall provide for rental rates comparable to existing local market rates and shall be arms-length transactions. All Leases shall provide that they are subordinate to this Deed of Trust and that the lessee agrees to attorn to Beneficiary. Grantor shall: (A) observe and perform all the obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to materially impair the value of the Leases as security for the Debt; (B) promptly send to Beneficiary copies of all notices of default which Grantor shall send or receive thereunder; (C) enforce all of the terms, covenants and conditions contained in the Leases on the part of the lessee thereunder to be observed or performed; (D) not collect any Profits more than one (1) month in advance; (E) not execute any other assignment of the lessor’s interest in the Leases or Profits; (F) other than de minimis non-financial amendments, not alter, modify or change the terms of any Major Leases (as defined in the Assignment of Lease Assignment) without the prior written consent of Beneficiary, or, except if a lessee is in default, cancel or terminate the Leases or accept a surrender thereof or convey or transfer or suffer or permit a conveyance or transfer of all or any portion of the Property or of any interest therein so as to effect a merger of the estates and

 

26

rights of, or a termination or diminution of the obligations of, lessees thereunder; provided , however , that any Lease (except the Operating Lease) may be canceled if at the time of the cancellation thereof a new Lease is entered into with a bona fide, independent third-party on substantially the same terms or more favorable terms as the canceled Lease; (G) not alter, modify or change the terms of any guaranty of the Major Leases or cancel or terminate such guaranty without the prior written consent of Beneficiary; (H) not consent to any assignment of or subletting under the Leases not in accordance with their terms, without the prior written consent of Beneficiary; and (I) execute and deliver at the request of Beneficiary all such further assurances, confirmations and assignments in connection with the Property as Beneficiary shall from time to time request.

(c) If required by applicable law, all security deposits of lessees, if any, whether held in cash or any other form, shall not be commingled with any other funds of Grantor and, if cash, shall be deposited by Grantor into a separate “Security Deposits Account.” Any bond or other instrument which Grantor is permitted to hold in lieu of cash security deposits under any applicable legal requirements shall be maintained in full force and effect unless replaced by cash deposits as hereinabove described, shall be issued by an institution satisfactory to Beneficiary, shall, if permitted pursuant to any legal requirements, name Beneficiary as payee or mortgagee thereunder (or at Beneficiary’s option, be fully assignable to Beneficiary) and shall, in all respects, comply with any applicable legal requirements and otherwise be reasonably satisfactory to Beneficiary. Grantor shall, upon request, provide Beneficiary with evidence reasonably satisfactory to Beneficiary of Grantor’s compliance with the foregoing. Following the occurrence and during the continuance of any Event of Default, Grantor shall, upon Beneficiary’s request, if permitted by any applicable legal requirements, turn over to Beneficiary the security deposits (and any interest theretofore earned thereon) with respect to all or any portion of the Property, to be held by Beneficiary subject to the terms of the Leases.

10. Representations Concerning Loan and Anti-Terrorism Laws

Other than as disclosed to Beneficiary in writing prior to the funding of the Loan, Borrower and Accommodation Grantor, respectively, severally and not jointly (except in any instance where “Grantor” is used in this Section 10), each represents, warrants and covenants, for itself, as follows:

(a) Borrower is duly organized and validly existing in good standing under the applicable laws of the state of its creation as a limited liability company, and Borrower is qualified to do business in and is in good standing in its state of formation and in the state in which the Property is located, with full power, right, authority and legal capacity to enter into this Deed of Trust, the Loan and the Loan Documents and to operate the Property as contemplated hereunder. Borrower is a valid limited liability company for federal and state income tax purposes. If the issuance of any interest in Borrower is subject to any so-called “Blue Sky Laws” and/or any federal securities laws and regulations, each such issuance has been in compliance with all such laws and regulations to which it is subject. Innkeepers USA Limited Partnership, a Virginia limited partnership (“ Sole Member ”) is the sole member of Borrower. Sole Member is

 

27

duly organized and validly existing in good standing under the applicable laws of the state of its creation as a limited partnership, and is qualified to do business in and is in good standing in its state of formation. If the issuance of any interest in Sole Member is subject to any so-called “Blue Sky Laws” and/or any federal securities laws and regulations, each such issuance has been in compliance with all such laws and regulations to which it is subject. Sole Member is a valid partnership for federal and state income tax purposes.

(b) Accommodation Grantor is duly organized and validly existing in good standing under the applicable laws of the state of its creation as a limited liability company, and Accommodation Grantor is qualified to do business in and is in good standing in its state of formation and in the state in which the Property is located, with full power, right, authority and legal capacity to enter into this Deed of Trust and the Loan Documents to which it is a party, and to operate the Property as contemplated hereunder. Accommodation Grantor is a valid limited liability company for federal and state income tax purposes. If the issuance of any interest in Accommodation Grantor is subject to any so-called “Blue Sky Laws” and/or any federal securities laws and regulations, each such issuance has been in compliance with all such laws and regulations to which it is subject. Sole Member is the sole member of Accommodation Grantor.

(c) Borrower only represents that the execution, delivery and performance of the Loan Documents executed or delivered by Borrower and the consummation of the transactions contemplated thereby: (i) have been duly authorized by all requisite actions; (ii) have been approved or consented to by all of their respective constituent entities whose approval or consent is required to be obtained; (iii) do not require the approval or consent of any governmental authority having jurisdiction over any of Borrower or the Property; (iv) do not and will not constitute a violation of, or default under, the governing instruments of Borrower or any applicable requirement of a governmental authority; and (v) will not be in contravention of any court or administrative order or ruling applicable to Borrower or the Property, or any mortgage, indenture, agreement, commitment or instrument to which Borrower is a party or by which it or its assets are bound, nor create or cause to be created any mortgage, lien, encumbrance, or charge against the assets of Borrower other than those permitted by the Loan Documents.

(d) Accommodation Grantor only represents that the execution, delivery and performance of the Loan Documents to which it is a party executed or delivered by Accommodation Grantor and the consummation of the transactions contemplated thereby: (i) have been duly authorized by all requisite actions; (ii) have been approved or consented to by all of their respective constituent entities whose approval or consent is required to be obtained; (iii) do not require the approval or consent of any governmental authority having jurisdiction over any of Accommodation Grantor or the Property; (iv) do not and will not constitute a violation of, or default under, the governing instruments of Accommodation Grantor or any applicable requirement of a governmental authority; and (v) will not be in contravention of any court or administrative order or ruling applicable to Accommodation Grantor or the Property, or any mortgage, indenture, agreement, commitment or instrument to which

 

28

Accommodation Grantor is a party or by which it or its assets are bound, nor create or cause to be created any mortgage, lien, encumbrance, or charge against the assets of Accommodation Grantor other than those permitted by the Loan Documents.

(e) There are no actions, suits or proceedings pending, or, to the best knowledge of Borrower (as to itself) and Accommodation Grantor (as to itself), threatened, nor any pending or, to the best knowledge of Borrower (as to itself) and Accommodation Grantor (as to itself), threatened labor disputes threatened in writing, against or affecting Borrower (as to itself), Accommodation Grantor (as to itself) or the Property, or any other collateral covered by the Loan Documents, or involving the validity or enforceability of the Loan Documents or the priority of the liens created or to be created thereby, at law or in equity, or before or by any governmental authority, which, if adversely determined, would, in the determination of Beneficiary, either individually or in the aggregate, have a material adverse affect on (i) the operation of the Property as contemplated hereunder, (ii) the ability of Borrower or Accommodation Grantor to pay all of its liabilities or to perform all of its obligations in the manner and within the time periods required under the Loan Documents, (iii) the validity, enforceability or consummation of the Loan Documents or the transactions contemplated thereby, or (iv) the title to the Property, the permitted uses of the Property or the value of the security provided by the Loan Documents. Borrower has complied with all requirements of ERISA. Accommodation Grantor has complied with all requirements of ERISA.

(f) Borrower only represents that this Deed of Trust and the other Loan Documents to which it is a party are the legal, valid and binding obligations of Borrower, and are not subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, nor would the operation of any of the terms of the Note, this Deed of Trust and the other Loan Documents, or the exercise of any right thereunder, render this Deed of Trust or the other Loan Documents unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury.

(g) Accommodation Grantor only represents that this Deed of Trust and the other Loan Documents to which it is a party are the legal, valid and binding obligations of Accommodation Grantor, and are not subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, nor would the operation of any of the terms of the Note, this Deed of Trust and the other Loan Documents, or the exercise of any right thereunder, render this Deed of Trust or the other Loan Documents unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury.

(h) To the best knowledge of Grantor, all certifications, permits, licenses and approvals required for the legal use, occupancy and operation of the Property as a hotel, including, without limitation, any applicable liquor license, certificate of completion and occupancy permit, have been obtained or will be obtained and are or will be in full force and effect. To the best knowledge of Grantor, the Property is free of material damage and is in good repair, and there is no proceeding pending or, to the best of Grantor’s knowledge, threatened for the total or partial condemnation of, or affecting, the Property.

 

29

(i) To the best knowledge of Grantor, all of the Improvements which were considered in determining the appraised value of the Property lie wholly within the boundaries and building restriction lines of the Property, no improvements on adjoining properties encroach upon the Property, and no easements or other encumbrances upon the Land encroach upon any of the Improvements, so as to affect the value or marketability of the Property. To the best knowledge of Grantor, the Property is contiguous to and has access to a physically and legally open all-weather public street, has all necessary permits and approvals for ingress and egress, is adequately serviced by public water, sewer systems and utilities and is on one or more separate tax parcels, all of which are separate and apart from any other property owned by Grantor or any other person. To the best knowledge of Grantor, the Property has all necessary access by public roads or easements which in each case are not terminable and are not subordinate to any mortgage other than this Deed of Trust. To the best knowledge of Grantor, the Property and all of the Improvements comply with all laws, ordinances or regulations pertaining to the use or operation of the Property, including, without limitation, applicable zoning, subdivision and land use, fire, health and safety laws, regulations and ordinances.

(j) To the best knowledge of Grantor, the Property is not subject to any leases, licenses or other use or occupancy agreements other than the Leases, Management Agreement and Franchise Agreement and any other agreements disclosed and delivered to Beneficiary in connection with this Deed of Trust. To the best knowledge of Grantor, no person has any possessory interest in the Property or right to occupy any portion thereof except under and pursuant to the provisions of the Leases or transient hotel guests in the ordinary course of Grantor’s business.

(k) The financial statements of Borrower heretofore furnished to Beneficiary are, as of the date specified therein, complete and correct in all material respects and fairly present the financial condition of Borrower and Guarantor and are, with respect to the general partner, managing member, or manager, as appropriate, of Borrower, prepared in accordance with GAAP and the Uniform System of Accounts for hotel and motel properties as approved by the American Hotel and Motel Association (as in effect from time to time, the “ Uniform System of Accounts ”) applied on a consistent basis. Borrower and/or Guarantor does not on the date hereof have any contingent liabil