LEASEHOLD DEED OF TRUST AND SECURITY AGREEMENT

Exhibit 10.1

LEASEHOLD DEED OF TRUST AND SECURITY AGREEMENT

THIS INSTRUMENT WAS PREPARED BY:

 

LEASEHOLD DEED OF TRUST AND SECURITY AGREEMENT

TABLE OF CONTENTS

 

EXHIBIT A - Legal Description

PURSUANT TO T.C.A. § 47-9-502(c), THIS LEASEHOLD DEED OF TRUST AND SECURITY AGREEMENT CONSTITUTES A FINANCING STATEMENT FILED AS A FIXTURE FILING TO BE INDEXED IN THE REAL PROPERTY RECORDS. THE METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, TENNESSEE, A TENNESSEE MUNICIPAL CORPORATION IS THE RECORD OWNER OF THE PROPERTY.

THE BENEFICIARY EXPRESSLY OBJECTS TO THE PRIORITY OF ANY MECHANICS’ OR MATERIALMEN’S LIENS IMPOSED SUBSEQUENT TO THE DATE OF THE RECORDATION OF THIS LEASEHOLD DEED OF TRUST AND SECURITY AGREEMENT AS SUCH PRIORITY WOULD OTHERWISE BE ALLOWED PURSUANT TO THE TERMS OF T.C.A. § 66-11-108.

PURSUANT TO T.C.A. § 47-28-104(B), NOTICE IS HEREBY GIVEN THAT THIS LEASEHOLD DEED OF TRUST AND SECURITY AGREEMENT SECURES FUTURE ADVANCES WHICH ARE OBLIGATORY FOR THE PURPOSES OF SUCH STATUTE, AND WHICH ARE MADE FOR COMMERCIAL PURPOSES.

LEASEHOLD DEED OF TRUST AND SECURITY AGREEMENT

Renaissance Nashville Hotel

Nashville, Tennessee

THIS LEASEHOLD DEED OF TRUST AND SECURITY AGREEMENT (this “ Deed of Trust ”) is made as of the 13th day of March, 2006 by HH NASHVILLE LLC, a Delaware limited liability company and having its principal place of business at c/o Highland Hospitality Corporation, 8405 Greensboro Drive, Suite 500, McLean, Virginia 22102 (“ Borrower ”) and HHC TRS NASHVILLE LLC , a Delaware limited liability company, having its principal place of business at c/o Hospitality Corporation, 8405 Greensboro Drive, Suite 500, McLean, Virginia 22102 (“ Operating Tenant ” and, together with Borrower, collectively referred to herein as “ Grantor ”), to W. ROWLETT SCOTT, TRUSTEE , a resident of Shelby County, Tennessee, having an address of Armstrong Allen, PLLC, 80 Monroe Avenue, Suite 700, Memphis, Tennessee 38103, subject to substitution as provided in Section 49 (such named person or any successor or substitute appointed and designated as herein provided from time to herein referred to as “ Trustee ”), in favor of CONNECTICUT GENERAL LIFE INSURANCE COMPANY , a Connecticut corporation, having its principal place of business at c/o CIGNA Realty Investors, 280 Trumbull Street, Hartford, Connecticut 06103, Attention: Debt Asset Management, H-11G (hereinafter referred to as “ Beneficiary ”).

W I T N E S S E T H :

THAT , pursuant to that certain First Amended and Restated Agreement of Lease by and between The Metropolitan Government of Nashville and Davidson County, Tennessee, a Tennessee municipal corporation (the “ Ground Lessor ”) and Holdings of Nashville, Inc., a

 

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Tennessee corporation (“ Holdings of Nashville ”), dated as of December 19, 1989 and recorded on March 18, 1990, of record in Book 8054, page 493, official record in the Register’s Office for Davidson County, Tennessee (“ Register’s Office ”); as amended by First Amendment to First Amended and Restated Agreement of Lease between Ground Lessor and Holdings of Nashville dated September 18, 1990 and recorded October 8, 1990 in Book 8212, Page 839, official record in the Register’s Office and rerecorded on December 5, 1990 in Book 8251, Page 361, official records in the Register’s Office; as assumed by Assumption of Leasehold Interest Agreement between Holdings of Nashville and Stouffer Hotel Company (Hawaii) Ltd., dated December 11, 1990 and recorded December 10, 1990 in Book 8254, Page 884, official record in the Register’s Office; as assigned to and assumed by CTF Nashville Hotel LLC, a Delaware limited liability company, now known as RHOC Nashville Hotel, LLC, a Delaware limited liability company (“ RHOC Nashville Hotel ”) (by virtue of that certain Certificate of Amendment to Certificate of Formation filed with the Office of the Secretary of the State of Delaware on July 1, 2005 and recorded March 2, 2006, as Instrument No. 20060302-0024343, official record in the Register’s Office) by Assignment and Assumption of Leasehold Interest from CTF Nashville Hotel (Hawaii) Ltd. dated October 24, 2003 and recorded October 28, 2003 as Instrument No. 20031028-0158626, official records in the Register’s Office; as further assigned to and assumed by Borrower by Assignment and Assumption of Leasehold Interest from RHOC Nashville Hotel dated as of February 24, 2006 and recorded March 2, 2006, as Instrument No. 20060302-0024344, official record in the Register’s Office (collectively the “ Ground Lease ”), Borrower owns leasehold title to the Real Property (as defined below);

THAT , pursuant to (i) that certain Deed of Leasehold Interest from RHOC Nashville Hotel to Borrower effective as of February 24, 2006 and recorded March 2, 2006, as Instrument No. 20060302-0024345, official record in the Register’s Office and (ii) the certain Quitclaim Deed of Leasehold Interest from RHOC Nashville Hotel to Borrower effective as of February 24, 2006 and recorded March 2, 2006, as Instrument No.20060302-0024346, official record in the Register’s Office, Borrower owns leasehold title to that certain condominium unit described as the “ Hotel Unit ” in the horizontal property regime known as Nashville Hotel Properties Regime, as more particularly set forth in the Master Lease that certain First Amended and Restated Master Lease by Holdings of Nashville, Joe Rodgers and Ted H. Welch, former shareholders of Rodgers/Welch Venture, Inc., a Tennessee corporation and Rodgers/Welch Ventures, a Tennessee general partnership, collectively, as the Declarant dated as of December 7, 1990 and recorded December 7, 1990 in Book 8253, Page 378, official record in Register’s Office (collectively, the “ Master Lease ”), Borrower owns leasehold title to the Hotel Unit.

THAT , pursuant to that certain Lease Agreement (the “ Operating Lease ”) by and between Borrower, as lessor and Operating Tenant, as lessee, dated as of February 24, 2006, Operating Tenant leased from Borrower, the Hotel Unit;

THAT , to secure (i) payment to Beneficiary of the principal indebtedness of Fifty-Two Million and No/100 Dollars ($52,000,000.00), together with interest thereon (the “ Loan ”), as evidenced by that certain Promissory Note of even date herewith in the original principal amount of Fifty-Two Million and No/100 Dollars ($52,000,000.00) from Borrower, payable to Beneficiary (the “ Note ”), and any renewals, extensions or modifications thereof (including, without limitation, any modification increasing the Interest Rate (defined in the Note), the

 

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principal amount, the monthly payments or extending the maturity date) with the final payment of the entire outstanding balance of the Note being due and payable on April 1, 2013, in and by which Note Grantor promises to pay the said principal indebtedness and interest at the rate and in installments as provided in the Note, (ii) the performance of the covenants herein contained and the payment of any monies expended by Beneficiary in connection therewith, (iii) the payment of all obligations and the performance of all covenants of Grantor under any other loan documents, agreements or instruments between Grantor and Beneficiary given in connection with or related to this Deed of Trust or the Note and (iv) any and all additional advances made by Beneficiary to protect or preserve the Security (hereinafter defined) or the security interest created hereby on the Security, or for taxes, assessments, or insurance premiums as hereinafter provided or for performance of any of Grantor’s obligations hereunder or for any other purpose provided herein (whether or not the original Grantor remains the owner of the Security at the time of such advances) (all of the aforesaid indebtedness and obligations being herein called the “ Indebtedness ”, and all of the documents, agreements and instruments now or hereafter evidencing or securing the repayment of, or otherwise pertaining to, the Indebtedness being herein collectively called the “ Loan Documents ”), Grantor does hereby irrevocably mortgage, grant, bargain, sell, assign, pledge, transfer, and convey unto Trustee and to Trustee’s successors and assigns, in trust, with power of sale and right of entry and possession, all of the following described land, improvements, real and personal property, rents and leases, and all of Grantor’s estate, right, title and interest therein and thereto (hereinafter collectively called the “ Security ”):

The leasehold estate of Borrower (pursuant to the Ground Lease) and Operating Tenant (pursuant to the Operating Lease) in the real property, as more particularly described in Exhibit A attached hereto and made a part hereof, situated, lying and being in the City of Nashville, County of Davidson and State of Tennessee (the “ Land ”) and the leasehold estate of Borrower (pursuant to the Leasehold Lease) in the Hotel Unit, as more particularly described in said Exhibit A , situated on the Land all right, title and interest of Grantor in, to and under the Master Lease; all of Grantor’s rights as a member of the Nashville Hotel Property Owner’s Association, Inc. (the “ Declaration Interests ”);

TOGETHER with all buildings and other improvements (including, but not limited to the Hotel Unit) now or hereafter located on the Land or any part thereof including but not limited to, all extensions, betterments, renewals, renovations, substitutes and replacements of, and all additions and appurtenances to the Security (the “ Improvements ”);

TOGETHER with all of the right, title and interest, if any, of Grantor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Land to the center lines thereof;

TOGETHER with (to the extent assignable) all of the right, title and interest, if any, that Grantor may have in the right to use, in connection with the operation of the Security, the name “Renaissance” and any other name similar thereto, and any other licenses, trademarks, service marks or trade names, and good will associated therewith, used in connection with the Security;

TOGETHER with all easements now or hereafter located on or appurtenant to the Land and/or Improvements or under or above the same or any part thereof, rights-of-way, licenses, permits, approvals, and privileges, belonging or in any way appertaining to the Land and/or

 

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Improvements including without limitation (i) any drainage ponds or other like drainage areas not located on the Land which may be required for water run-off, (ii) any easements necessary to obtain access from the Land to such drainage areas, or to any other location to which Grantor has a right to drain water or sewage, (iii) any land required to be maintained as undeveloped land by the zoning rules and regulations applicable to the Real Property, and (iv) any easements and agreements which are or may be established to allow inter alia , parking (whether on-site or off-site), satisfactory ingress to, egress from and operation of the Real Property, and any other easement agreement or covenant or benefit as to land use (collectively, the “ Easement Agreements ”);

TOGETHER with any and all awards heretofore made and hereafter to be made by any municipal or other governmental authorities to the present and all subsequent owners of the Security for the taking of all or any portion of the Security by power of eminent domain, including, without limitation, awards for damage to the remainder of the Security and any awards for any change or changes of grade of streets affecting the Security, which said awards are hereby assigned to Beneficiary, and Beneficiary, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such awards from the authorities making the same and to give proper receipts and acquittances therefor, and, subject to the terms hereof, to apply the same toward the payment of the Indebtedness, notwithstanding the fact that such amount may not then be due and payable; and Grantor hereby covenants and agrees to and with Beneficiary, upon request by Beneficiary, to make, execute and deliver, at Grantor’s expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid awards to or for the benefit of Beneficiary, free, clear and discharged of any and all encumbrances of any kind or nature whatsoever (all of the foregoing Hotel Unit, Land, Improvements, estates, interests, rights, easements, rights-of-way, licenses, privileges, and awards, collectively, the “ Real Property ”);

TOGETHER with all proceeds, insurance or otherwise, paid for the damage done to any of the Security and all proceeds of the conversion, voluntarily or involuntarily, of any of the Security into cash or liquidated claims;

TOGETHER with all fixtures, machinery, equipment, furniture, goods, and every other article of personal property, tangible and intangible, now or hereafter attached to or used in connection with the Real Property, or placed on any part thereof and whether or not attached thereto, appertaining or adapted to the use, management, operation or improvement of the Real Property, insofar as the same and any reversionary right thereto may now or hereafter be owned or acquired by Grantor, including, but without limitation, all goods, supplies, equipment, appliances, implements, furniture, furnishings, fixtures, machinery, inventory and construction materials and all personal property used in the operation of a hotel on the Real Property, including, without limiting the generality of the foregoing, all hotel furniture, furnishings and equipment, heating, lighting, plumbing, ventilating, refrigerating, incinerating, elevator, escalator, air conditioning and communication plants or systems with appurtenant fixtures; vacuum cleaning systems; call systems; sprinkler systems and other fire prevention and extinguishing apparatus and materials; all telephone, computer and other electronic equipment and appurtenances thereto, including any software owned by Grantor and necessary for the operation of the Security (except to the extent the transfer thereof would cause a material breach of any licensing agreement in connection therewith) but expressly excluding software that is

 

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owned by or licensed to the Manager under the Management Agreement (as such terms are defined below); and all other machinery, pipes, poles, appliances, equipment, wiring, fittings, panels and fixtures; and any proceeds therefrom, any replacements thereof or additions or accessions thereto; curtains, draperies, hangings, televisions, radios, phonographs and stereo equipment, pianos, organs, paintings, pictures, frames, sculptures, mirrors, lamps, bric-a-brac, vases, ornaments, carpets, rugs, beds, springs, mattresses, bedding, pillows, blankets, comforters, spreads, bed linens, vanities, secretaries, bureaus, chiffonniers, chests, love seats, benches, night stands, costumers, smoking stands, sand jars, statuary, china, glassware, table linens, towels, bath mats, shower curtains, hollowware, flatware, cutlery, cooking, baking, and other kitchen utensils and apparatus, crockery, kettles, pots, pans, pails, toasters, mixers, trays, racks, electric irons and apparatus, bathroom furniture and furnishings, hamperettes, cash registers, typewriters, typewriter stands, adding machines, calculators, comptometers, multilith machines, addressographs, graphotypes, time stamps, time recorders, posting machines, bookkeeping machines, checking machines, payroll machines, computer reservation systems, accounting and other computer software, and other office and accounting equipment, drills, presses, planers, saws, and other tools, scales, uniforms, and all other tangible personal property used or to be used or placed or to be placed in the rooms, halls, lounges, offices, lobbies, lavatories, basements, cellars, vaults and other portions of said Real Property or any building or buildings hereafter constructed or erected thereon, whether herein enumerated or not, and whether or not contained in any such building, and which are used or useful in the operation and maintenance thereof, or in the business conducted therein, including the operation of any restaurants on the Real Property by or on behalf of Grantor, including but not limited to all restaurant furnishings and equipment, foodstuffs, and beverages, including (to the extent assignable or transferable) wine and other alcoholic beverages owned by Grantor, and all replacements and substitutions for all personal property from time to time be located, placed, installed or used in or upon, or procured for use, or useful in connection with the operation of the whole, or any useful part of, the Real Property (the foregoing items of furniture, furnishings, fixtures and equipment collectively are referred to as “ FF&E ”); provided, however, FF&E shall not include any of the foregoing items which are owned by parties other than Grantor including, but not limited to, any tenants of the Real Property or the operator under any management agreement; and all building materials, supplies and other property delivered to the Real Property for incorporation into the Improvements thereon, all of which, to the extent permitted by law, are declared to be a part of the realty and covered by the lien hereof, but said lien shall not cover any fixture, machinery, equipment or article of personal property which is owned by a tenant, other than Operating Tenant, provided said fixture, machinery, equipment or article of personal property is not permanently affixed to the realty and may be removed without material damage thereto and is not a replacement of any item which shall have been subject to the lien hereof, but said lien shall include any other fixture, machinery, equipment or article of personal property so incorporated into the Improvements so as to constitute realty under applicable law, whether or not owned by Grantor;

TOGETHER with all of Grantor’s books of account and records relating to the Security, including, without limitation, all information stored on computers and software to the extent relating thereto;

TOGETHER with all (i) contracts, agreements, assignable permits and licenses, including occupancy permits, business licenses and liquor licenses, warranties and

 

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representations relating to or governing the use, occupancy, operation, management, hotel group, name or chain affiliation and/or guest reservation system, repair or service of the Real Property, (ii) all agreements with credit card issuers, sponsors or administrators, (iii) all rights to payment for the rental of guest rooms, banquet rooms, retail premises and other facilities on the Real Property, (iv) all rights to payment from any credit/charge card organization or entity such as or similar to, and including, without limitation, the organizations or entities which sponsor and administer the American Express Card, the Discovery Card, the Visa Card, the Carte Blanche Card, the Diners Club card and the MasterCard; and (v) all leases, occupancy agreements, registration and concession agreements, and commitments to provide rooms or facilities in the future to the extent that they are not solely interests in real estate, including all amendments, modifications and supplements to any of the foregoing;

TOGETHER with all cars, trucks, trailers, construction and earth moving equipment and other vehicles owned by Grantor covered by a certificate of title law of any state used in the operation of the Real Property and all tires and other appurtenances to any of the foregoing;

TOGETHER with all of Grantor’s right, title and interest of in, to and under the Ground Lease and the Operating Lease;

TOGETHER with all of Grantor’s right, title and interest as lessee in, to and under any equipment or personal property leases (the “ Personalty Leases ”) for the lease of any furniture, equipment and/or other personal property used by Grantor in the operation of the Improvements or otherwise located on the Real Property (the “ Leased Personalty ”);

TOGETHER with all of Grantor’s right, title and interest in, to and under that certain Management Agreement dated as of February 24, 2006, by and between Renaissance Hotel Management Company, LLC., a Delaware limited liability company (“ Manager ”), and Operating Tenant (the “ Management Agreement ”);

TOGETHER with all contracts for sale and leases in the nature of sales of the Real Property, or any portion thereof, now and hereafter entered into and all right, title and interest of Grantor thereunder, including, without limitation, cash or securities deposited thereunder to secure performance by the lessees or contract purchasers; all letter of credit rights; all proceeds and revenues arising from or out of the Real Property or any part thereof including, without limitation, room revenues, banquet revenues and cancellation payments relating to the use and enjoyment of the Real Property; all sanitary sewer, drainage, water and utility service agreements benefiting the Real Property or any part thereof, together with all accounts, accounts receivable, credit card receipts, contract rights, reserve accounts required to be established hereunder or under any management agreement affecting the Real Property; inventory, operating supplies, general intangibles, documents, instruments and chattel paper and proceeds of any of the foregoing arising from or in connection with the Real Property, including all books and records in connection with the operations of the Real Property; and all rights of Grantor under any leases, covenants, agreements, restrictions or declarations recorded with respect to, or as an appurtenance to, the Real Property or any part thereof (all of the tangible and intangible personal property described in this and the previous nine paragraphs collectively, the “ Personal Property ”);

 

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TOGETHER with all of the right, title and interest of Grantor in and to all and singular the tenements, hereditaments and appurtenances belonging to or in any way pertaining to the Security; all the estate, right, title and claim whatsoever of Grantor, either in law or in equity, in and to the Security; and any and all other, further or additional title, estate, interest or right which may at any time be acquired by Grantor in or to the Security, and if Grantor shall at any time acquire any further estate or interest in or to the Security, the lien of this Deed of Trust shall attach, extend to, cover and be a lien upon such further estate or interest automatically without further instrument or instruments, and Grantor, upon request of Beneficiary, shall execute such instrument or instruments as shall reasonably be requested by Beneficiary to confirm such lien;

TO HAVE AND TO HOLD the Security together with all hereditaments and appurtenances thereunto belonging or in any wise appertaining, and each and every part thereof, unto the Trustee and its successors and assigns in trust, for the purposes and uses herein set forth.

UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set forth;

PROVIDED, HOWEVER , that if Grantor pays or causes to be fully and irrevocably paid to Beneficiary all sums secured by this Deed of Trust on the dates and in the manner provided in the Note and in this Deed of Trust, and observes and performs all of the terms, conditions and obligations contained in this Deed of Trust and the Note, then the estate, right, title and interest of the Beneficiary in and to the Security shall cease, and upon proof being given to the satisfaction of the Beneficiary that the Indebtedness has been paid or satisfied according to the terms of the Note, and that all of Grantor’s obligations under this Deed of Trust have been fully satisfied, and upon payment of all fees, costs, charges and liabilities chargeable to or incurred by the Beneficiary pursuant to the Note or otherwise provided for in this Deed of Trust, the Beneficiary shall, on receipt of a written request therefore from Grantor, and at Grantor’s sole expense, (a) release and discharge the lien of this Deed of Trust, (b) deliver to Grantor the original Note, and (c) transfer and deliver to Grantor, without warranty, any security which is then subject to the lien of this Deed of Trust and is in Beneficiary’s possession.

AND , Grantor hereby further covenants, agrees and warrants as follows:

1. Payment of Indebtedness . Grantor will pay the principal indebtedness and interest thereon in accordance with the provisions of the Note and all prepayment premiums, late charges and fees required thereunder, and all extensions, renewals, modifications, amendments and replacements thereof, and will keep and perform all the covenants, promises and agreements, and pay all sums provided in (i) the Note or any other promissory note or notes at any time hereafter issued to evidence the Indebtedness, (ii) this Deed of Trust and (iii) any and all other Loan Documents, all in the manner herein or therein set forth. If, at any time in the future transfers shall occur such that Grantor shall become more than one party, then each of the entities constituting a Grantor shall be fully liable for such payment and performance, and such liability shall be joint and several, subject to all of the terms and provisions of Section 41 of this Deed of Trust.

 

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2. Covenants of Title . Borrower has good and indefeasible leasehold title to the entire Land, has absolute unencumbered title to the Improvements, the Personal Property (other than the Leased Personalty) and the Personalty Leases, and has good right and full power to sell, mortgage and convey the same; the Security is free and clear of easements, restrictions, liens, leases and encumbrances, except those easements, restrictions, liens, leases and encumbrances listed on Schedule B of the policy or policies of title insurance delivered to Beneficiary as of the recordation of this Deed of Trust (the “ Permitted Encumbrances ”), to which this Deed of Trust is expressly subject, or which may hereafter be created in accordance with the terms hereof; and Borrower will warrant and defend title to the Security against all claims and demands whatsoever except the Permitted Encumbrances. Beneficiary shall have the right, at its option and at such time or times as it, in its sole discretion, shall deem necessary, to take whatever action it may deem necessary to defend or uphold the lien of this Deed of Trust or otherwise enforce any of the rights of Beneficiary hereunder or any obligation secured hereby, including without limitation, the right to institute appropriate legal proceedings for such purposes.

3. Usury . All agreements between Grantor and Beneficiary, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of the Note or otherwise, shall the interest contracted for, charged or received by Beneficiary exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to Beneficiary in excess of the maximum lawful amount, the interest payable to Beneficiary shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance Beneficiary shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal of the Note and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of the Note such excess shall be promptly refunded to Grantor. All amounts paid or agreed to be paid to Beneficiary for the use, forbearance, or detention of the Indebtedness, whether designated as interest herein or judicially or otherwise interpreted or deemed to be interest, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full period until payment in full of the principal (including the period of any renewal or extension of the Note) so that the interest on the Note for such full period shall not exceed the maximum amount permitted by applicable law. The terms “ maximum amount permissible under applicable law ”, “ the maximum lawful amount ,” and similar terms refer to the law in effect on the date of the first disbursement of the Note; provided that if it subsequently becomes lawful to charge more interest on the Note, then such terms shall refer to the maximum interest which may from time to time be lawfully charged. This paragraph shall control all agreements with respect to the Loan between Grantor and Beneficiary.

4. Impositions . Grantor shall pay, or cause to be paid pursuant to the Management Agreement (or any Replacement Agreement, as defined below), not later than the last day on which the same may be paid without penalty or interest, all real estate taxes and payments due in lieu of real estate taxes (collectively, the “ Real Estate Taxes ”) (unless there shall be in full force and effect a Tax Escrow Agreement [defined in Section 5 hereinbelow] with respect to which Grantor shall have performed its obligations), and any municipal sewer rents, municipal water charges, municipal electric and all other municipal and governmental assessments, rates, charges, or impositions which are secured by liens on the Real Property (including the Real Estate Taxes,

 

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collectively hereinafter referred to as “ Impositions ”) which now or hereafter are imposed by law upon the Security, whether relating directly to the Security or to property adjoining or abutting the Security. If any Imposition is not paid within the time hereinabove specified, Beneficiary shall have the right to pay the same, together with any penalty and interest thereon, and the amount or amounts so paid or advanced shall forthwith be payable by Grantor to Beneficiary and shall be secured by the lien of this Deed of Trust; but Grantor may in good faith contest, at Grantor’s sole cost and expense, by proper legal proceedings, the validity or amount of any Imposition, on the condition that Grantor first shall deposit with or provide evidence to Beneficiary that Manager has escrowed an amount sufficient to pay such contested Imposition, as security for the payment of such contested item, an amount equal to the contested item plus all penalties and interest which would be payable if Grantor is ultimately required to pay such contested item, and on the further condition that no amount so contested may remain unpaid for such length of time as shall permit the Security, or the lien thereon created by the item being contested, to be sold for the nonpayment thereof, or as shall permit an action, either of foreclosure or otherwise, to be commenced by the holder of any such lien. Grantor will not claim any credit on, or make any deduction from the Indebtedness by reason of the payment of, any Imposition.

Grantor hereby assigns to Beneficiary all rights of Grantor now or hereafter arising in and to the refund of any Imposition and any interest thereon. If following receipt of any such refund by Beneficiary there exists no Event of Default hereunder, then Beneficiary shall pay over the same to Grantor promptly; if there exists an Event of Default hereunder, Beneficiary may apply said refund in reduction of the Indebtedness in whatever order Beneficiary may elect.

5. Tax Deposits . Grantor and Beneficiary have entered into a certain Real Estate Tax Escrow and Security Agreement of even date herewith (the “ Tax Escrow Agreement ”), the terms of which provide for the escrow and payments of money with respect to Real Estate Taxes imposed on the Real Property under certain circumstances as described therein. Notwithstanding the provisions of Section 4 hereof, Grantor covenants to perform its obligations under the Tax Escrow Agreement and Beneficiary has agreed that Grantor may perform its obligations under this Deed of Trust with respect to the Real Estate Taxes in accordance with the Tax Escrow Agreement. During any period that Grantor shall be in default under the Tax Escrow Agreement, or the Tax Escrow Agreement shall be terminated for any reason, or in the event that the Tax Escrow Agreement becomes ineffective or otherwise unenforceable, then the balance of the terms and conditions of this Section 5 shall be applicable and control with respect to the payment of Real Estate Taxes imposed on the Real Property.

On receipt of the Activation Notice (as defined in the Tax Escrow Agreement), Grantor shall thereafter deposit with Beneficiary, or with an escrow agent selected by Beneficiary, commencing on the Activation Date (as defined in the Tax Escrow Agreement) and on the first day of each calendar month thereafter (each of which dates is hereinafter called the “ monthly tax deposit date ”) until the payment in full of the Indebtedness, a sum equal to one-twelfth (1/12) of the Real Estate Taxes to be levied, charged, assessed or imposed upon or for the Security within one (1) year after said monthly tax deposit date. If on any monthly tax deposit date the amount of Real Estate Taxes to be levied, charged, assessed or imposed within the ensuing one year period shall not be fixed, such amount for the purpose of computing the

 

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deposit to be made by Grantor hereunder, shall be reasonably estimated by Beneficiary based upon prior payments of Real Estate Taxes imposed on the Real Property, with appropriate adjustment when such amount is fixed.

The sums deposited by Grantor under this Section 5 shall be held in an interest bearing account with interest being retained by Beneficiary and free of trust except to the extent, if any, that applicable law shall otherwise require and applied in payment of the Real Estate Taxes when due. Grantor or Manager on behalf of Grantor shall give fifteen (15) days’ prior written notice to Beneficiary in each instance when an Imposition is due, specifying the Imposition to be paid and the amount thereof, the place of payment and the last day on which the same may be paid in order to be within the time limit specified in Section 4 hereof entitled “Impositions”.

Notwithstanding the foregoing provision, so long as Grantor holds title to and controls the Security, Impositions are paid in full when due and there has occurred no Event of Default, or any state of facts which, with the passage of time or giving of notice, or both, would constitute an Event of Default under the Loan Documents, the interest earned by such escrows, less reasonable escrow costs, will, at Grantor’s option, be (i) credited to Grantor against escrow payments next becoming due, or (ii) paid to Grantor on each real estate tax payment date.

If for any reason the sums on deposit with Beneficiary as escrow agent under this Section shall not be sufficient to pay any Real Estate Taxes within the time specified in Section 4 hereof, then Grantor shall, on the earlier of (A) three (3) Business Days prior to the date the payment of such Impositions becomes delinquent or (B) within ten (10) Business Days after notice by Beneficiary, deposit sufficient sums so that Beneficiary may pay such Real Estate Taxes in full, together with any penalty and interest thereon. Beneficiary may change its estimate of Real Estate Taxes for any period, on the basis of a change in an assessment or tax rate or on the basis of a prior miscalculation, in which event Grantor shall deposit with Beneficiary as escrow agent within ten (10) Business Days after demand the amount of any excess of the deposits which would theretofore have been payable under the revised estimate over the sums actually deposited.

If any Real Estate Taxes shall be levied, charged, assessed or imposed upon or for the Security, or any portion thereof, and if such Real Estate Taxes shall also be a levy, charge, assessment or imposition upon or for any other premises not covered by the lien of this Deed of Trust, then the computation of the amounts to be deposited under this Section 5 shall be based upon the entire amount of such Real Estate Taxes and Grantor shall not have the right to apportion any deposit with respect to such Real Estate Taxes.

Upon an assignment of this Deed of Trust, Beneficiary shall have the right to arrange to transfer all amounts deposited and still in its possession to the assignee and Beneficiary shall thereupon be completely released from all liability with respect to such deposit and Grantor or owner of the Security shall look solely to the assignee or transferee in reference thereto.

Upon the payment in full by Grantor of the entire Indebtedness, any sums then held by Beneficiary under this Section 5 shall be promptly refunded to Grantor.

 

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All amounts deposited shall be held by Beneficiary as additional security for the sums secured by this Deed of Trust, and Grantor hereby grants to Beneficiary a security interest in such sums, and upon the occurrence of an Event of Default hereunder Beneficiary may, in its sole and absolute discretion, apply said amounts to the payment of the Indebtedness in whatever order Beneficiary may elect.

Immediately upon receipt of such by Grantor, Grantor shall deliver to Beneficiary copies of all notices, demands, claims, bills, and receipts in relation to the Impositions.

6. Change in Taxes . In the event any tax shall be due or become due and payable to the United States of America, the State of Tennessee or any political subdivision thereof with respect to the execution and delivery or recordation of this Deed of Trust or any other Loan Document or the interest of Beneficiary in the Security except for taxes in the nature of income or franchise taxes, Grantor shall pay such tax at the time and in the manner required by applicable law and Grantor shall hold Beneficiary harmless and shall indemnify Beneficiary against any liability of any nature whatsoever as a result of the imposition of any such tax. In the event of the enactment, after the date of this instrument, of any law changing in any way the present law as to the taxation of notes or debts secured by mortgages, for Federal, State, or local purposes (except for changes in income or franchise taxes), or the manner of collection of any Impositions, so as to affect this Deed of Trust or the Note secured hereby, then Grantor shall upon demand make such payments to Beneficiary and take such other steps, as may be necessary in Beneficiary’s reasonable judgment, to place Beneficiary in the same financial position as it was prior to any such enactment, failing which, or if the Grantor is not permitted by law to make such payments, the Indebtedness shall, at the option of Beneficiary, immediately become due and payable at par.

7. Insurance . Borrower (to the extent of Grantor’s obligations set forth in this Section 7) and Operating Tenant (to the extent of its obligations under the Operating Lease) shall at all times until the Indebtedness shall be paid in full, keep the Security insured against loss or damage in an amount sufficient to prevent Beneficiary or Grantor from becoming a co-insurer under the terms of the applicable policies, but in any event in an amount not less than 100% of the then full replacement cost of the Improvements (exclusive of the cost of excavations, foundations and footings below the lowest basement floor) without deduction for physical depreciation (which replacement cost shall be reset once a year at Beneficiary’s option in accordance with then customary insurance underwriting standards used by reasonable and prudent mortgage lenders for a property of comparable size, mass, construction, type, location, and use) under policies of All Risk Replacement Cost Insurance (including nuclear explosion, if available), and otherwise upon the following terms and conditions:

(a) Grantor shall further provide the following insurance in such amounts as shall be reasonably approved by Beneficiary: flood insurance (if the Security is situated in an area that is considered a flood risk area by the federal government agency thereof); boiler and machinery insurance; earthquake insurance; rent loss insurance in an amount sufficient to cover the total of all rents (including any expenses payable by tenants) accruing from the Security for a one year period; business interruption and “Extra Expense” insurance (either as endorsements to policies satisfying commercial general liability insurance requirements as herein provided or on a separate policy) written on an

 

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“all risks” form on an “Actual Loss Sustained” basis in an amount equal to at least one (1) year’s net income from the Property before income taxes plus continuing normal operating expenses, including Manager’s Fixed Management Fee and Incentive Management Fee (as such terms are defined in the Management Agreement), and other fees and reimbursable expenses and other amounts payable to Manager under the Management Agreement, that continue, notwithstanding the business interruption; the insurance shall also provide “extended period of indemnity” for payment of loss until normal operations resume, but in any event for a period of not less than one hundred eighty (180) days after business operations have resumed; the insurance shall also include an “ordinary payroll endorsement” for a minimum of ninety (90) days. The insurance shall also include the following: commercial general liability insurance in a minimum amount of One Million Dollars ($1,000,000), and excess or umbrella liability of at least One Hundred Million Dollars ($100,000,000); comprehensive automobile liability in an amount not less than One Million Dollars ($1,000,000) per occurrence covering liability for bodily injury and property damage arising out of the ownership, maintenance or use of all private passenger and commercial vehicles, including but not limited to owned, hired and non-owned autos and other equipment required to be licensed for road use; safe depository insurance in an amount not less than One Hundred Thousand Dollars ($100,000) per occurrence; innkeeper’s legal liability insurance covering the property of hotel guests in an amount not less than One Thousand Dollars ($1,000) per guest and One Hundred Thousand Dollars ($100,000) per occurrence; employment practices liability with minimum limits of Two Million Dollars ($2,000,000) per occurrence or in such amounts as Manager or Beneficiary shall reasonably require; fiduciary liability (ERISA liability) insurance with minimum limits of Five Million Dollars ($5,000,000) per occurrence or in such amounts as Manager or Beneficiary shall reasonably require; broad form umbrella/excess liability insurance, which shall cover defense costs on a “first dollar” basis and shall provided coverage not less than “following form” in respect of all underlying coverages, in an amount not less than One Hundred Million Dollars ($100,000,000) per occurrence, and such other appropriate insurance as Beneficiary may require from time to time.

(b) Such insurance shall contain no exclusion for acts of terrorism and shall include: (i) coverage for acts of domestic and international terrorism, (ii) coverage whether or not a specific act is certified under the Terrorism Risk Insurance Act of 2002 as an act of terrorism by the U.S. Secretary of the Treasury, and (iii) coverage amounts, deductibles and limits/sublimits acceptable to Beneficiary in its sole discretion.

(c) During any period of restoration, Grantor shall provide a policy or policies of builder’s “all risk” insurance in an amount not less than the full insurable value of the Security.

(d) Grantor will assign and deliver to Beneficiary an original certificate of the policy or policies of all insurance required to be provided hereunder and provide copies of the policy or policies described therein to Beneficiary unless Grantor participates in Manager’s insurance program, in which event Grantor shall provide a copy of the description of coverages provided by Manager to Grantor. Each policy of insurance provided by Grantor shall (i) be issued by a company or companies approved by

 

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Beneficiary and rated not less than a Best’s rating of A-/X, (ii) name Beneficiary as an additional insured or loss payee, as the case may be, (iii) provide that all proceeds shall be payable to Beneficiary, (iv) provide that it may not be cancelled or modified except upon thirty (30) days prior written notice to Beneficiary, (v) provide that no act or thing done by Grantor shall invalidate the policy as against Beneficiary, (vi) be endorsed with standard noncontributory Beneficiary clauses in favor of and in form acceptable to Beneficiary, and (vii) otherwise be in such form as shall be reasonably acceptable to Beneficiary, so that at all times until the payment in full of the Indebtedness, Beneficiary shall have and hold the said policy and policies as further collateral for the payment of all Indebtedness.

(e) If Grantor shall fail to obtain any such policy or policies required by Beneficiary, or shall fail to deliver an original certificate evidencing the same to Beneficiary, then Beneficiary may obtain such insurance and pay the premium or premiums therefore, in which event Grantor shall, on demand of Beneficiary, repay such premium or premiums to Beneficiary and such repayment shall be secured by the lien of this Deed of Trust. If Grantor fails to maintain the level of insurance required under this Deed of Trust, then Grantor shall indemnify Beneficiary to the extent that a casualty occurs and insurance proceeds would have been available had such insurance been maintained.

(f) Grantor shall promptly provide to Beneficiary copies of any and all notices (including notice of non renewal), claims, and demands which Grantor receives from insurers of the Security.

(g) Effective from and after any Event of Default, Grantor hereby assigns to Beneficiary all rights of Grantor in and to any unearned premiums on any insurance policy required to be furnished by Grantor.

Anything in this Section 7 to the contrary notwithstanding, as long as (i) Manager is managing the Real Property and Grantor participates in Manager’s insurance programs, (ii) there then exists no default under the Management Agreement or Event of Default hereunder, (iii) Manager is making all required insurance payments as and when due pursuant to the Management Agreement, and (iv) Grantor provides to Beneficiary acceptable evidence that such insurance is, at all times, in full force and effect as regards the Real Property, then Beneficiary acknowledges and agrees that the insurance requirements set forth in the Management Agreement shall govern and control over any inconsistent provisions set forth in the provisions of this Section 7.

8. Insurance/Condemnation Proceeds . Subject to the terms of the Ground Lease and the Operating Lease, Grantor hereby assigns to Beneficiary all insurance proceeds or Condemnation (defined in Section 9 below) awards which Grantor may be entitled to receive for loss or damage to, or a taking of, the Security. In the event of loss or damage to, or a taking of, the Security, the proceeds of said insurance or Condemnation award shall be payable to Beneficiary alone and Grantor hereby authorizes and directs any affected insurance company or government agency to make payment of the insurance proceeds or Condemnation awards directly to Beneficiary. In the event that any such insurance proceeds or Condemnation awards are paid directly to Grantor, Grantor shall make such proceeds or awards available to Beneficiary

 

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within five (5) Business Days of Grantor’s receipt thereof. No such loss or damage shall itself reduce the Indebtedness unless Beneficiary elects to apply the proceeds and such proceeds are actually applied to the Indebtedness as provided in Section 10 below. Prior to an Event of Default, Grantor and Beneficiary shall jointly and reasonably agree on the prompt adjustment and compromise of such loss, to collect and receive such proceeds or awards and to endorse any check in payment thereof. During an Event of Default, or in the event of a loss or damage to, or a taking of, the security in excess of $1,500,000, Beneficiary is authorized to adjust and compromise such loss without the consent of Grantor, to collect and receive such proceeds or awards in the name of Beneficiary and Grantor and to endorse Grantor’s name upon any check in payment thereof. Furthermore, if an insurance claim is no greater than $250,000 (a “ Minor Claim ”), Beneficiary agrees that insurance proceeds may be made available directly to the Grantor provided that no Event of Default is then in existence and so long as Grantor promptly commences and diligently pursues to completion any required restoration Work utilizing such insurance proceeds. Subject to the provisions of Sections 9, 10 and 11 hereof, such proceeds or awards shall be applied first toward reimbursement of all costs and expenses of Beneficiary in collecting said proceeds or awards, then toward payment of the Indebtedness or any portion thereof, whether or not then due and payable, in whatever order Beneficiary may elect, or Beneficiary may, at its option, make said insurance proceeds or Condemnation awards available to Grantor in whole or in part toward restoration of the Security for which such insurance proceeds or Condemnation awards shall have been paid.

In the event of foreclosure of this Deed of Trust or other transfer of title to the Security and extinguishment, in whole or in part, of the Indebtedness, all right, title, and interest of Grantor in and to any insurance policy, or premiums or payments in satisfaction of claims or any other rights thereunder then in force, shall pass to the purchaser or grantee notwithstanding the amount of any bid at such foreclosure sale. Nothing contained herein shall prevent the accrual of interest as provided in the Note on any portion of the principal balance due under the Note until such time as the insurance proceeds or Condemnation awards are actually received and applied to reduce the principal balance outstanding.

9. Restoration Following Fire and Other Casualty or Condemnation . In the event of damage to the Security by reason of fire or other hazard or casualty, Grantor shall give prompt written notice thereof to Beneficiary, and, so long as Beneficiary provides its consent that any insurance proceeds can be made available as provided in Section 10 hereof, shall proceed with reasonable diligence to perform repair, replacement and/or rebuilding work (hereinafter referred to as the “ Work ”) to restore the Security to its condition prior to such damage in full compliance with all legal requirements; provided, however, in the event that Beneficiary does not provide its consent that any insurance proceeds can be made available, nothing contained herein shall prevent Grantor from using other funds to perform the Work in Grantor’s sole discretion. In the event of a taking by power of eminent domain or conveyance in lieu thereof (a “ Condemnation ”), if restoration is feasible as reasonably determined by Beneficiary, then Grantor shall proceed with reasonable diligence to perform such restoration (also referred to herein as the “Work”). Before commencing the Work, Grantor shall comply with the following requirements:

(a) With respect to any Work reasonably expected to exceed One Million Five Hundred Thousand Dollars ($1,500,000) in cost (“ Major Work ”), Grantor shall furnish

 

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to Beneficiary complete plans and specifications for the Work, for Beneficiary’s approval, which approval shall not be unreasonably withheld. Said plans and specifications shall bear the signed approval thereof by an architect reasonably satisfactory to Beneficiary and shall be accompanied by the architect’s signed estimate, bearing the architect’s seal, of the entire cost of completing the Work, and shall provide that upon completion of the Work, the Security shall be at least equal in value and general utility to its value and general utility prior to the damage or Condemnation.

(b) Grantor shall furnish to Beneficiary certified copies of all permits and approvals required by law in connection with the commencement and conduct of the Work.

(c) With respect to any Major Work, Grantor shall furnish to Beneficiary, prior to the commencement of the Work, a surety bond for or guaranty of timely completion of and payment for the Work, which bond or guaranty shall be in form reasonably satisfactory to Beneficiary and shall be signed by a surety or sureties, or guarantor or guarantors, as the case may be, who are reasonably acceptable to Beneficiary, and in an amount not less than the architect’s estimate of the entire cost of completing the Work, less the amount of insurance proceeds or Condemnation award, if any, then held by Beneficiary and which Beneficiary shall have elected or shall be required to apply toward restoration of the Security as provided in Section 10 hereof.

Grantor shall not commence any of the Work until Grantor shall have complied with the above requirements, and thereafter Grantor shall perform the Work diligently and in good faith in accordance with the plans and specifications referred to in subsection (a) above.

If, as provided in Section 10 hereof, Beneficiary shall have elected or is required to apply any insurance proceeds or Condemnation awards toward repair or restoration of the Security, then so long as the Work is being diligently performed by Grantor in accordance with the provisions of this Deed of Trust, Beneficiary shall disburse such insurance proceeds or Condemnation awards to Grantor from time to time during the course of the Work in accordance with the following provisions:

A. The Work shall be in the charge of an experienced construction manager reasonably satisfactory to Beneficiary with the consultation of an architect or engineer if the scope of the work so requires (provided, the project property manager shall be acceptable so long as it does not constitute Major Work);

B. Each request for payment shall not be made more often than at thirty (30) day intervals, on ten (10) Business Days (as defined in Section 59 hereinbelow) prior notice to Beneficiary, and shall be accompanied by a certificate reasonably satisfactory to Beneficiary, of the architect or engineer, dated not more than ten (10) days prior to the application for withdrawal of funds, stating:

 

(i)

that all of the Work for which payment is being requested is in place and has been completed in compliance with the approved plans and specifications and all applicable legal requirements;

 

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(ii)

that the sum then requested to be withdrawn has been paid by Grantor and/or is justly due to contractors, subcontractors, materialmen, engineers, architects or other persons (whose names and addresses shall be stated) who have rendered or furnished certain services or materials for the Work and giving a brief description of such services and materials and the principal subdivisions or categories thereof and the respective amounts so paid or due to each of said persons in respect thereof and stating the progress of the Work up to the date of said certificate;

 

(iii)

that the sum requested to be withdrawn, plus all sums previously withdrawn, does not exceed the cost of the Work insofar as actually accomplished up to the date of such certificate;

 

(iv)

that the remainder of the moneys held by Beneficiary will be sufficient to pay in full for the completion of the Work; and

 

(v)

that no part of the cost of the services and materials described in the foregoing paragraph (ii) of this Clause B has been or is being made the basis of the withdrawal of any funds in any previous or then pending application.

Grantor shall also provide Beneficiary with respect to any Major Work such other evidence as Beneficiary shall reasonably require that: (1) all of the Work for which payment is being requested is in place and has been completed in substantial compliance with all applicable legal requirements; (2) that the sum then requested to be withdrawn, plus all sums previously withdrawn, does not exceed the cost of the Work insofar as actually accomplished up to the date of such certificate; (3) that the remainder of the moneys held by Beneficiary will be sufficient to pay in full for the completion of the Work; (4) that the Work is anticipated to be completed consistent with all requirements, including applicable zoning provisions, pertinent to preserve any and all rights, including, without limitation, with respect to any non-conforming use; and (5) that, except for the amounts, if any, specified in the foregoing paragraph (ii) of this Clause B to be due for services or materials, there is no outstanding indebtedness known, after due inquiry, which is then due and payable for work, labor, services or materials in connection with the Work which, if unpaid, might become the basis of a vendor’s, mechanic’s, laborer’s or materialmen’s statutory or other similar lien upon the Security or any part thereof.

C. Grantor shall deliver to Beneficiary reasonably satisfactory evidence that the Security and every part thereof, and all materials and all property described in the certificate furnished pursuant to the foregoing Clause B, are free and clear of all mortgages, liens, charges or encumbrances, except (a) encumbrances, if any, securing indebtedness due to persons (whose names and addresses and the several amounts due them shall be stated) specified in said certificate furnished pursuant to the foregoing Clause B, which encumbrances will be discharged upon disbursement of the funds then being requested, and (b) this Deed of Trust. Beneficiary shall accept as satisfactory evidence under this Clause C a certificate of a title insurance company acceptable to

 

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Beneficiary or an endorsement to Beneficiary’s existing loan title policy insuring the lien of this Deed of Trust, dated as of the date of the making of the disbursement, confirming the foregoing.

D. If the Work affects the foundation, or changes in the footprint of the Improvements, Grantor shall deliver to Beneficiary a survey of the Security dated as of a date within ten (10) days prior to the making of the advance (or revised to a date within ten days prior to the advance) showing no encroachments other than those, if any, acceptable to Beneficiary.

E. There exists no Event of Default, or any state of facts existing which, with the passage of time or the giving of notice, or both, would constitute an Event of Default.

Beneficiary at its option may waive any of the foregoing requirements.

Upon compliance by Grantor with the foregoing Clauses A, B, C, D, and E (except for such requirements, if any, as Beneficiary at its option may have waived), Grantor shall, to the extent of the insurance proceeds or Condemnation awards, if any, which Beneficiary shall have elected or shall be required to apply to restoration of the Security, pay or cause to be paid to the persons named in the certificate furnished pursuant to the foregoing Clause B, the respective amounts stated in said certificate to be due them, less ten percent (10%) retainage (“ Retainage ”), and Beneficiary shall pay to Grantor the amounts stated in said certificate to have been paid by Grantor, less Retainage.

If upon completion of the Work there shall be insurance proceeds or Condemnation awards held by Beneficiary over and above the amounts withdrawn pursuant to the foregoing provisions, plus Retainage, then Beneficiary, at Beneficiary’s option, may either retain such proceeds or awards and apply the same in reduction of the Indebtedness in whatever order Beneficiary may elect (without payment of any prepayment fee or premium with respect to such insurance proceeds or Condemnation awards), or Beneficiary may pay over such proceeds or awards to Grantor.

Upon completion of the Work, in addition to the requirements of the foregoing Clauses A, B, C, D, and E, Grantor shall promptly deliver to Beneficiary:

 

(1)

With respect to Major Work, a written certificate of the construction manager, architect or engineer that the Work has been fully completed in a good and workmanlike manner in accordance with the approved plans and specifications and with respect to any other Work, a certificate from Grantor or its property manager to the same effect;

 

(2)

A written report and policy of a title insurance company reasonably acceptable to Beneficiary insuring the Security against mechanics’ and materialmen’s liens;

 

(3)

A certificate by Grantor reasonably satisfactory to Beneficiary in form and substance, listing all costs and expenses in connection with the completion of the Work and the amount paid by Grantor with respect to the Work; and

 

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(4)

A temporary certificate of occupancy, if required for occupancy of any of the Improvements affected by the Work and all other applicable certificates, licenses, consents and approvals issued by governmental agencies or authorities with respect to the Security and by the appropriate Board of Fire Underwriters or other similar bodies acting in and for the locality in which the Security is situated, provided that within thirty (30) days after completion of the Work, Grantor shall obtain and deliver to Beneficiary a permanent certificate of occupancy for the Security, if a certificate of occupancy is required for any of the Improvements affected by the Work.

Upon receipt of the foregoing items, Beneficiary shall pay any Retainage held by Beneficiary to or for the benefit of Grantor.

10. Disposition of Condemnation or Insurance Proceeds . Subject to the terms of the Ground Lease and the Operating Lease, except in the case of a Minor Claim, Beneficiary, in its absolute discretion, may decide whether and to what extent, if any, proceeds of insurance or Condemnation awards will be made available to Grantor for repair or restoration of the Security, but Grantor shall effect such repair or restoration as provided above whether or not Beneficiary agrees that any available insurance proceeds and Condemnation awards may be made available for restoration. Notwithstanding the foregoing, Beneficiary shall make insurance proceeds or Condemnation awards available to Grantor for repair or restoration provided the following conditions are satisfied:

(a) Not more than thirty percent (30%) of the Real Property is damaged, and, in the case of a Condemnation, the portion remaining after the taking is still economically viable in the reasonable opinion of Beneficiary;

(b) There has been no monetary Event of Default in the prior twelve (12) months and there does not then exist an Event of Default or a state of facts which, with the passage of time or the giving of notice, or both, would constitute an Event of Default hereunder or under any other Loan Document;

(c) Grantor can demonstrate to Beneficiary’s reasonable satisfaction that Grantor has the financial ability to make all scheduled payments when due under the Loan Documents during reconstruction, whether from the proceeds of rent and/or business interruption insurance, operation of the Improvements, Grantor’s own funds or otherwise;

(d) Such damage or destruction occurs prior to the last two (2) Loan Years (as such term is defined in the Note);

(e) The funds are released under escrow/construction funding arrangements specified in Section 9 hereof;

(f) The repairs and restoration will restore the Improvements to substantially the size, design and utility as existed immediately prior to the casualty or Condemnation; and

 

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(g) Grantor can demonstrate to Beneficiary’s reasonable satisfaction that Grantor has the financial ability to complete the repair and restoration, whether from the proceeds of insurance, Grantor’s own funds, or otherwise.

Provided that there then exists no Event of Default, any application of insurance or Condemnation proceeds required by Beneficiary shall be at par without payment of any prepayment fee or premium. If Beneficiary has the right under this Deed of Trust and elects not to make the proceeds available for the Work, then such proceeds shall be applied to reduce the Indebtedness in whatever order Beneficiary may elect. Any principal reduction resulting from an early involuntary prepayment as a result of a Condemnation proceeding or insurance settlement will cause a re-calculation of debt service payments based upon the reduced Loan balance, the remaining amortization schedule and the Interest Rate.

Notwithstanding anything to the contrary contained in this Section 10, Beneficiary and Grantor acknowledge and agree that in the event of a conflict between the Master Lease or the Ground Lease and this Deed of Trust regarding the disposition of Condemnation awards or insurance proceeds for restoration of the Security, the provisions of the Master Lease and the Ground Lease shall govern the same, and Beneficiary and Grantor agree to release said awards or proceeds for restoration of the Security in accordance with the Ground Lease and the Master Lease.

11. Fire and Other Casualty; Self-Help . If within one hundred twenty (120) days after the occurrence of any damage to the Security or the condemnation of any portion of the Security, Grantor shall not have submitted to Beneficiary and received Beneficiary’s approval of plans and specifications for any Major Work or shall not have obtained approval of such plans and specifications from all governmental authorities whose approval is required for such Work, or if Grantor shall fail to promptly commence such Work, or if thereafter Grantor fails to perform the Work diligently or is delinquent in the payment to mechanics, materialmen or others of the costs incurred in connection with the Work, or, if Grantor shall fail to complete the Work promptly, then, in addition to all other rights herein set forth, Beneficiary may give written notice thereof to Grantor and if such failure is not cured within ten (10) Business Days of such written notice, then Beneficiary, or any lawfully appointed receiver of the Security, may at its respective option, perform or cause the Work to be performed, and may take such other steps as it deems advisable to perform or cause to be performed the Work, and may enter upon the Security for any of the foregoing purposes, and Grantor hereby waives, for Grantor and all others holding under Grantor, any claim against Beneficiary or such receiver arising out of anything done by Beneficiary or such receiver pursuant to this Section 11, and Beneficiary may apply insurance and/or Condemnation proceeds (without the need to fulfill the requirements of Section 9 hereof) to reimburse Beneficiary, and/or such receiver for all amounts expended or incurred by them, respectively, in connection with the performance of the Work, and any excess costs shall be paid by Grantor to Beneficiary upon demand, with interest at the Default Rate (hereinafter defined), and such payment shall be secured by the lien of this Deed of Trust.

12. Rent Insurance Proceeds . If Grantor shall promptly commence and diligently perform the Work in accordance with the requirements of Section 11 hereinabove and there shall be no Event of Default under the Loan Documents, then Beneficiary shall each month pay to Grantor out of the rent and/or business interruption insurance proceeds held by Beneficiary a

 

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sum equal to that amount, if any, of the rent and/or business interruption insurance proceeds paid by the insurer which is allocable to the Income Loss (as defined below) for the preceding month and any earlier period of time. Beneficiary , at its option, may waive any of the foregoing conditions to the payment of rent and/or business interruption insurance proceeds. If Grantor does not fulfill the foregoing conditions entitling Grantor to monthly disbursements of rent and/or business interruption insurance proceeds, then such rent and/or business interruption insurance proceeds may be applied by Beneficiary, at Beneficiary’s option, to the payment of the Indebtedness in whatever order Beneficiary may elect. As used in this Section 12, “ Income Loss ” shall mean (i) loss of base rent, minimum rent, percentage rent, additional rent and all other sums that tenants may owe to Grantor as landlord under space leases affecting the Real Property, as applicable (ii) the loss of Gross Revenues (as defined in the Management Agreement, but excluding the rent related items previously listed), and (iii) all other sums owed to Grantor in connection with the Improvements or Land.

13. Repair; Alterations; Waste; Environmental . Grantor shall keep all of the Security in good and substantial repair subject to normal wear and tear, and expressly agrees that it will neither permit nor commit any waste upon the Security, nor do any other act or suffer or permit any act to be done, whereby the Security will become less valuable or the lien hereof may be impaired and shall comply in all material respects with all zoning laws (including, without limitation, preservation of any rights as to any non-conforming use), building codes, subdivision laws, environmental laws, and other laws, ordinances, rules and regulations made or promulgated by any government or municipality, or by any agency thereof or by any other