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2015 One Eleven La Quinta LLC - CC & R's, Hobby LobbyRECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of La Quinta 78-495 Calle Tampico DOC # 2016-0016184 01/14/2015 02:18 PM Fees: $0.00 Page 1 of 24 Recorded in Official Records County of Riverside Peter Aldana Assessor, County Clerk & Recorder "*This document was electronically submitted to the County of Riverside for recording— Receipted by: CMORRIS La Quinta, CA 92253 Attention: City Manager [Space above for recorder.] (Exempt from Recordation Fee per Gov. Code § 27383) COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING INTERESTS IN REAL PROPERTY This COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING INTERESTS IN REAL PROPERTY (the "Covenant") is entered into as of this 13 day ofJANMt y , 2015, by and between the CITY OF LA QUINTA, a California charter city and municipal corporation ("City"), and ONE ELEVEN LA QUINTA, LLC, a California limited liability company ("Owner" or "Owner/Developer") (individually a "Party" and collectively the "Parties"). RECITALS A. The III La Quinta Center is a large commercial/retail site that consists of approximately 60 acres bounded by Washington Street, Highway 1-11, Adams Street and the Whitewater Channel (the "Center"). The Specific Plan for the Center provides that there will be approximately 617,000 square feet of retail space when built out. As of the date of this Agreement, approximately 485,000 square feet of retail space currently exists. Several prominent businesses are located at the Center, such as Stater Bros., Staples, Big 5, AAA, Petco, Ross, and Kohl's. Though the majority of the Center is built out, a few building pad locations remain undeveloped. B. Owner/Developer is the owner in fee of a majority of the Center, including certain developable pad of raw land generally located north of Highway I I I and west of Adams Street, more particularly identified as Parcel 4 of Parcel Map 36531 attached hereto as Exhibit "A and incorporated herein by reference (the "Site"). Based on communications received by the City, Owner/D6veloper has arranged for the development and use of the Site by Hobby Lobby, an arts and craft supply retailer that generates Sales Tax, provided Owner/Developer (or a permitted assignee or successor in interest) obtains the necessary governmental permits and approvals from all governmental agencies with jurisdiction, including the City. 6991015610.0002 7287969.1 a09/04/14 DOC #2015-0016184 Page 2 of 24 01/14/2015 02:18 PM C. On or about September 9, 2014, the City and Owner/Developer entered into that certain unrecorded agreement captioned "Agreement to Enter Into Covenant to Operate and Pay Compensation Based on Sales Tax Revenue (One Eleven La Quinta, LLC)" (the "Agreement") authorizing the recordation of this Covenant against the Site upon the timely satisfaction of the "Covenant Conditions" identified therein. D. As set forth in the Agreement, the Owner/Developer requested $400,000 in economic development assistance from the City. This funding would be used to make certain improvements to the Center that will assist in the ability to attract new and maintain existing retail businesses, that will assist the Owner/Developer with the construction or facilitating the construction of the remaining undeveloped pads, and that will assist the Owner/Developer to improve and use currently vacant commercial space at the Center, all as more particularly set forth in this Covenant and the Agreement. E. Subject to the terms and conditions hereof and of the Entitlements (defined below), Owner/Developer has agreed to develop the Site for the Hobby Lobby Facility and use and operate the Site for the Hobby Lobby Retail Use, as more particularly set forth in this Covenant . F. In consideration for Owner/Developer's encumbrance of the Site by this Covenant and Owner/Developer's performance of its obligations hereunder, the City has agreed to make certain payments to Owner/Developer, the amount of which is measured by the Sales Tax generated by the Hobby Lobby Retail Use on the Site. The City and Owner/Developer have agreed that the amounts required to be paid by the City to Owner/Developer hereunder during each Quarter of the Operating Period provided for herein is a fair exchange for the consideration to be furnished by Owner/Developer to City in that Quarter. G. Owner/Developer represents and warrants that (i) Owner/Developer has entered into an agreement for the construction and use of the Site by Hobby Lobby, and, to the best of Owner/Developer's knowledge, such agreement is valid and binding, (ii) the Hobby Lobby Facility to be constructed and used on the Site is a new store and is not a store relocated from another city or unincorporated territory, (iii) Owner/Developer is not relocating, and shall not relocate, a big box retailer to the Site, within the meaning of California Government Code section 53084, (iv) Owner/Developer shall identify the Site as the point -of -sale for any and all Sales Tax generated from the Site in compliance with all applicable state laws, including Government Code section 53084.5; and (v) the individual executing this Covenant on behalf of Owner/Developer has the authority to enter into this Covenant and create a binding and enforceable obligation of Owner/Developer, and said individual has obtained any and all necessary authorizations and approvals from the company's governing board for the Owner/Developer to be bound under the terms and conditions in this Covenant. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference and . are acknowledged by the Parties as true and correct, and for other good and valuable 698/015610-0002 7287969.1 a09/04/14 -2- DOC #2015-0016184 Page 3 of 24 01/14/2015 02:18 PM consideration, the receipt and sufficiency of which is acknowledged by both Parties, the City and Owner/Developer hereby agree as follows: 1. DEFINED TERMS. The following terms when used in this Covenant shall have the meanings set forth below: The term "Agreement" shall have the meaning ascribed in Recital C of this Covenant. The term "Center" shall mean the 111 La Quinta Center, a large commercial/retail site that consists of approximately 60 acres bounded by Washington Street, Highway 111, Adams Street and the.Whitewater Channel in the City. The term "Commencement Date" shall have the meaning ascribed in Section 2 of this Covenant. The term "Corporate Successor" shall mean any single purpose entity (such as limited liability company or corporation authorized to conduct business in the State of California) that is wholly owned by, controlled by, or under common control with Owner/Developer or Michael Shovlin, or both. The term "Covenant Payments" shall mean the amounts to be paid by the City to Owner/Developer with respect to each Quarter of the Operating Period. The term "Covenant Payments Cap Amount" shall have the meaning ascribed in Section 4.1.1(b) of this Covenant. The term "Default" shall have the meaning ascribed in Section 5.1 of this Covenant. The term "Effective Date" shall mean the date this Covenant is executed by the latter of the two Parties to sign, which date shall be inserted in the preamble to this Covenant. The term "Entitlements" shall mean those discretionary City land use permits and approvals (including all conditions of approval therein) required to authorize construction, use, and operation of the Hobby Lobby Facility on the Site, as the same may be amended from time to time. The term "Fiscal Year" shall mean City's fiscal year, which commences on July 1 and ends on the next succeeding June 30. The term "Force Majeure" is defined in Section 6.6 below. The term "Holder" shall have the meaning ascribed in Section 5.1(b) of this Covenant. The term "Hobby Lobby" shall mean that certain arts and crafts retailer and company doing business as and generally known and marketed to the general public as "Hobby Lobby," which engages in retail sales and operations open to the general public that produce Sales Tax 698/015610-0002 7287969.1 a09/04/14 -3- DOC #2015-0016184 Page 4 of 24 01/14/2015 02:18 PM revenues, whether the company is in the form of a closely held corporation, publicly traded corporation, limited liability company, or other entity. The term "Hobby Lobby Facility" shall mean a facility for retail sales for Hobby Lobby located on the Site, containing not less than 50,000 square feet of building area and operating under the Hobby Lobby name. The term "Hobby Lobby Retail Use" shall mean the use and operation of the Hobby Lobby Facility for the marketing and sale of arts and crafts (and all other merchandise and taxable goods and services) to the general public. The term "operate" shall mean for not less than 50,000 square feet of building area on the Site to be open to the public and Hobby Lobby's and Owner/Developer's members during its business hours except for such reasonable interruptions as may be incidental to the conduct of Hobby Lobby's business. The term "Operating Period" refers to the period between the Commencement Date and the Termination Date. The term "Permitted Assigns" shall mean a "Corporate Successor" to Owner. The term "Permitted Closure" shall mean periods of "Force Majeure" (as such term is defined in Section 6.6) and such period or periods aggregating up to, not more than one (1) year associated with any renovation of the Site. The term "Quarter" shall mean (i) any of the three (3) month periods during a Fiscal Year commencing July 1, October 1, January 1, or April 1, or (ii) the quarterly or other periods used by the State Board of Equalization (SBE) in calculating or making Sales Tax payments to City, if such periods differ from City's fiscal quarters described in clause (i) hereinabove. The term "Request for Notice" shall have the meaning ascribed in Section 5.1(b) of this Covenant. The term "Sales Tax" shall mean, for a given Quarter, or part thereof, during the Operating Period, that portion of sales and use taxes allocated, paid to, and received by City from the imposition of the Bradley -Burns Uniform Sales and Use Tax Law (commencing with Section 7200 of the California Revenue and Taxation Code) and the Sales and Use Tax Law (commencing with Section 6000 of the California Revenue and Taxation Code), or any successor law or amendments thereto, that arises from taxable sales and lease transactions generated by the Hobby Lobby Facility on the Site. Notwithstanding the foregoing, the term "Sales Tax" shall not include (i) the portion of sales or use taxes attributable to the Hobby Lobby Facility on the Site that are retained by the State Board of Equalization as an administrative, processing, or handling charge (calculated at the same percentage of gross revenues as is applicable City-wide); (ii) the portion of such revenues which in future years may be allocated and paid to City but which is restricted by law (but not contract) by an entity other than City (and binding upon City) to be used for specific uses (other than the uses provided for in this Covenant including without limitation disaster relief, transportation improvements, or otherwise); or (iii) any Sales Tax that may be generated from other retail sources at the Center other than a sale generated from the 698/015610-0002 7287969.1 a09/04/14 -4- DOC #2015-0016184 Page 5 of 24 01/14/2015 02:18 PM Hobby Lobby Facility. In addition, the term "Sales Tax" for a given quarter shall also include any sums allocated, paid to and received by the City in substitution for Sales Taxes or otherwise by reference to taxable sales generated by the Hobby Lobby Facility (and not excluded under classes (i) through (iii) above) including without limitation other funds actually received by the City pursuant to legislation such as, but not limited to, Revenue and Taxation Code section 97.68, enacted expressly as a substitute for sales tax revenues in order to reimburse the City for'sales tax revenues losses resulting from decreases in the 1% rate of sales tax. The term "Sales Tax Statement" refers to each quarterly statement to be .prepared by Owner/Developer or caused to be prepared at the direction of Owner/Developer and submitted to the SBE and City identifying the portion of Sales Tax generated by the Hobby Lobby Facility on the Site during the previous Quarter as a result of taxable sales transactions, as provided in Section 4.3 of this Covenant. The term "SBE" shall mean the California State Board of Equalization or successor agency with the responsibility of collecting and administering the distribution and payment to the City of Sales Tax. The term "Site" shall have the meaning ascribed in Recital B of this Covenant. The term "Termination Date" shall mean the date that is the earliest of (i) the date that is seven and one-half (7 1/2) years following the Commencement Date, unless continued pursuant to Section 4.1.1(d), in which case such date may be up to but not more than eight (8) years following the Commencement Date; (ii) the date that the Covenant Payments Cap Amount is paid in full; or (iii) the date on which this Covenant is terminated pursuant to Sections 5.2 or 5.3, as applicable. 2. CONDITION TO OWNER/DEVELOPER'S RIGHT TO RECEIVE PAYMENTS. 2.1 Opening Date; Commencement Date. As a condition precedent to Owner/Developer's right to receive the Covenant Payments, Owner/Developer shall open or cause and allow to be opened the Hobby Lobby Facility to be opened for business to the public (excluding any special "pre -opening" periods) for the Hobby Lobby Retail Use, all in compliance with the Entitlements. The term "the public" includes, in addition to all members of the general public, Hobby Lobby's and Owner/Developer's members (if any). The day on which the aforesaid condition is satisfied shall constitute the "Commencement Date," at which time Owner/Developer's obligations pursuant to Section 3 of this Covenant and City's obligations pursuant to Section 4 of this Covenant shall commence. 2:2 Outside Date. Notwithstanding any other provision set forth in this Covenant to the contrary, and subject to extension for events of force majeure as provided in Section 6.6, if the condition set forth in the first sentence of the preceding paragraph is not satisfied on or before the date that is eighteen (18) months after the issuance of the first building permit for the Hobby Lobby Facility project, either Owner/Developer or City may terminate this Covenant by delivery of written notice of termination to the other Party and, in such event, neither Party shall have any further rights against or obligations to the other Party arising out of this Covenant. 698/015610-0002 7287969.1 a09/04/14 -5- DOC #2015-0016184 Page 6 of 24 01/14/2015 02:18 PM 2.3 Operatiniz Condition. 'If Owner/Developer, or Permitted Assigns, ceases to own the Site and/or ceases to allow for the use and operation of the Site for the Hobby Lobby Facility in furtherance of the Hobby Lobby Retail Use, other than by reason of a Permitted Closure, then this Covenant shall terminate as of the date such event occurs (other than by reason of 'a Permitted Closure), and no further payments shall be due under Section 4.1 below by reference to Sales Tax generated in any Quarters after such date. 3. OWNER/DEVELOPER'S OBLIGATIONS. 3.1 Continuous Operation; Site As Point of Sale. If the Hobby Lobby Facility opens pursuant to Sections 2.1 and 2.2 of this Covenant, then, from and after the Commencement Date, Owner/Developer shall continuously use and operate, or shall cause and allow for the continuous use and operation of, the Hobby Lobby Facility on the Site for the Hobby Lobby Retail Uses during normal business hours (except for Permitted Closures) during the entire Operating Period. Owner/Developer shall cause and allow for the Hobby Lobby Facility to operate with inventory and sales personnel sufficient to satisfy and respond to customer demand. To the maximum extent permitted by law, and in compliance with Government Code section 53084.5, Owner/Developer shall designate or shall cause Hobby Lobby to designate the Site on its Sales Tax Statements as the point -of -sale for all sales transactions arising out of or generated from the business conducted on the Site. In addition, Owner shall exercise commercially reasonable diligence in an effort to cause financing companies to designate the Site (and the City of La Quinta) on reports they are required to file with the SBE as the situs of the financing of any goods where the transaction is generated from the Site. 3.2 Use Restriction. During the entire Operating Period, the Site shall be the Hobby Lobby Facility for the Hobby Lobby Retail Use and for no other purpose, in compliance with the Entitlements and applicable provisions of the City's Municipal Code. Owner/Developer shall ensure that the Site shall not be put to any use other than the intended and approved use and operation as the Hobby Lobby Facility in furtherance of the Hobby Lobby Retail Use. 3.3 Maintenance and Repair of Site; Landscaping. During the entire Operating Period, Owner/Developer at its sole cost and expense shall maintain, or shall cause the maintenance of, the Site and the improvements thereon and all facilities appurtenant thereto in first class condition (as judged by other developments of similar quality located in Palm Desert, Palm Springs, Rancho Mirage, Indian Wells or La Quinta) and repair and free from accumulations of debris, weeds, graffiti, and waste materials, with landscaping in a healthy condition, and shall otherwise fully comply with the Site's maintenance standards established in the Entitlements and applicable provisions in the City's Municipal Code. During such period, Owner/Developer shall not abandon, or allow for the abandonment of, any portion of the Site or leave the Site unguarded or unprotected, and shall not otherwise act or fail to act in such a way as to unreasonably increase the risk of any damage to the Site or of any other impairment of City's interest set forth in this Covenant. During the entire Operating Period, Owner/Developer at its sole cost and expense shall maintain, or cause the maintenance of, the landscaping on the Site in compliance with the approved landscape plans and applicable provisions in the City's Municipal Code. 698/015610-0002 7287969.1 a09/04/14 -6- DOC #2015-0016184 Page 7 of 24 01/14/2015 02:18 PM 3.4 Compliance with Laws. During the entire Operating Period, Owner/Developer shall construct, use and operate, or shall cause and allow for the construction, use, and operation of, the Hobby Lobby Facility ,,on the Site in conformity with all applicable federal, state (including without limitation the California Civil Code, the California Government Code, the California. Health and Safety Code, the California Labor Code, the California Public Resources Code, and the California Revenue and Taxation Code), and local laws, ordinances, and regulations (including without limitation City standards relating to the placement of storage containers); provided, however, that Owner/Developer does not waive its right to challenge the validity or applicability thereof to Owner/Developer or the Site; provided further, however, that nothing in the preceding clause (sentence) does or shall be deemed to relieve or release Owner/Developer of its obligations set forth in this Covenant by Owner/Developer delegating any obligation to Hobby Lobby or any other third party, by written or oral agreement or otherwise, to which the City is not a party or to which the City has not expressly agreed to such assignment of Owner/Developer's obligation pursuant to the terms and conditions in this Covenant. 3.5 Non -Discrimination. Owner/Developer agrees not to violate applicable laws that prohibit discrimination against any person or class of persons by reason of gender, marital status, race, color, creed, mental or physical disability, religion, age, ancestry, or national origin. 3.6 Indemnification of City. Owner/Developer shall defend, indemnify, assume all responsibility for, and hold the City, and the City's representatives, volunteers, officers, employees and agents, harmless from any and all claims, demands, damages, defense costs or liability of any kind (including attorney's fees and costs), that arise from Owner/Developer's ownership of the Site, or from the allowance for the use and operation of the Site, or which may be caused by any acts or omissions of the Owner/Developer under this Covenant, whether such activities or performance thereof be by Owner/Developer or by anyone directly or indirectly employed or contracted with by Owner/Developer, including Hobby Lobby, and whether such damage shall accrue or be discovered before or after termination of this Covenant, including, but not limited to, Owner/Developer's failure to pay, if required, prevailing wages on the construction and development of the Hobby Lobby Facility. Owner/Developer shall be solely responsible for determining and effectuating compliance with prevailing wage laws, and the City makes no representation as to the applicability or non -applicability of any of such laws to the development and construction of the Hobby Lobby Facility or any part thereof. Owner hereby expressly acknowledges and agrees that the City has not previously affirmatively represented to Owner/Developer or its contractor(s), in writing or otherwise, in a call for bids or otherwise, that the development or construction of the Hobby Lobby Facility or the Site is not a "public work," as defined in Section 1720 of the Labor Code. 3.7 Use of Covenant Payments. 3.7.1 Amounts for Specific Improvements at the Center. For any and all Covenant Payments received by the Owner/Developer pursuant to Section 4.1.1 of this Covenant, Owner/Developer shall use the received Covenant Payments according to the following: 698/015610-0002 7287969.1 a09/04/14 -7- DOC #2015-0016184 Page 8 of 24 01/14/2015 02:18 PM (a) One Hundred Fifty Thousand Dollars ($150,000) shall be used for pedestrian walkway improvements associated with the construction of the Hobby Lobby Facility and adjacent developable pad sites to improve pedestrian connectivity and flow at the Center. (b) One Hundred Twenty Thousand Dollars ($120,000) shall be used for the acquisition by Owner/Developer of an easement or other appropriate interest in real property necessary or appropriate for the installation and use of a traffic signal and access to the Center from the intersection of Adams Street and Corporate Center Drive in the City. (c) Fifty Thousand Dollars ($50,000) shall be used for on -site improvements at the Center associated with the installation and use of a traffic signal at the intersection of Adams Street and Corporate Center Drive in the City. (d) Fifty Five Thousand Dollars ($55,000) shall be used for future signage and aesthetic improvements for the benefit of the Center and its economic development. (e) Twenty Five Thousand Dollars ($25,000) shall be used for remaining landscaping improvements at the Center. 3.7.2 Owner/Developer Obligation to Keep Records for Covenant Payments. Owner/Developer shall keep and maintain, commencing on the Commencement Date and ending on the date that is one year after the Termination Date, '.,financial books and records of all Covenant Payments received'by Owner/Developer under this Covenant, and the use set forth in Section 3.7.1 of this Covenant to which the received Covenant Payments were used. The City shall have the right to request review of Owner/Developer's books and records pursuant to Section 4.1.4 of this Covenant. If the City has evidence and, based thereon, the City reasonably suspects that there has been an improper use by Owner/Developer of received Covenant Payments, the City may, in its reasonable discretion, require Owner/Developer to undergo an audit of it books and records to verify the receipt and use of the received Covenant Payments. Any audit performed pursuant to this section shall be completed by an independent auditor or accountant licensed to conduct such an audit in the State of California, and the costs of any such audit shall be split equally (50%/50%) by Owner/Developer and City unless, after the completion of the audit, the evidence shows willful misconduct or gross negligence by Owner/Developer with the ultimate use of the received Covenant Payments, in which case Owner/Developer shall pay all costs (100%) of any such audit. 3.7.3 Allocation of Covenant Payments if Cap- Amount Not Reached. If the Covenant Payments Cap Amount is not reached pursuant to subdivision (b), (c), or (d) of Section 4.1.1 of this Covenant, Owner/Developer shall use its best efforts to use the received Covenant Payments on a pro -rated, proportionate amount based on the amounts and uses identified in subdivisions (a)-(e) of Section 3.7.1 above; provided, however, that Owner/Developer shall not be in default of this Covenant for failure to use the received Covenant Payments on such a pro- rated, proportionate amount as set forth in this section as long as Owner/Developer has not exceeded the amount identified for the corresponding use set forth in subdivisions (a)-(e) of Section 3.7.1 above. 698/015610-0002 7287969.1 a09/04/14 -8- DOG#2015-0016184 Page 9 of 24 01/14/2015 02:18 PM 4. ' OBLIGATIONS OF CITY. 4.1 Covenant Payments to Owner/Developer. 4.1.1 Amount of Covenant Payments; Cap. In consideration for Owner/Developer's undertakings pursuant to this Covenant and the encumbrance of Owner/Developer's interest in the Site pursuant to this Covenant, City shall make the following Covenant Payments to Owner after the end of each Quarter (or part thereof) during the Operating Period: (a) Subject to Section 4.1.3 and subparagraphs (b)-(d) of this section below, the Covenant Payments with respect to each Quarter shall be in an amount equal to fifty percent (50%) of the Sales Tax for that Quarter generated by the Hobby Lobby Retail Use in the Hobby Lobby Facility on the Site, except that in the Quarter during which the Termination Date occurs, the Covenant Payments shall be prorated such that City shall only pay to Owner 50% of Sales Tax for the period between the first day of such Quarter and the Termination Date. (b) Notwithstanding any other provision set forth in this Covenant to the contrary, in no event shall the total amount of Covenant Payments made by City to Owner/Developer exceed the sum of Four Hundred Thousand Dollars ($400,000) (the "Covenant Payments Cap Amount"). In this regard, it is understood and agreed that the Covenant Payments are in consideration of Owner/Developer's performance during each Quarter of the Operating Period and are not repayments of a loan. Upon payment of the Covenant Payments Cap Amount by the City to Owner/Developer, the City shall have no further obligation to make any Covenant Payments pursuant to Section 4.1.1(a) above. (c) Notwithstanding any other provision set forth in this Covenant to the contrary, even in the event the Covenant Payments Cap Amount has not been reached at the end of the Operating Period, City shall have no further obligation after that time to make additional Covenant Payments. (d) In the event that the Covenant Payments Cap Amount is not reached by the date that is seven and one-half (7 %) years following the Commencement Date and provided that this Covenant has not been otherwise terminated and provided further that the Owner/Developer is not in default under this Covenant, then this Covenant (and the Parties obligations hereunder) shall continue for an additional six (6) month .period until the Covenant Payments Cap Amount is reached, but in no event shall the total duration of this Covenant exceed eight (8) years from the Commencement Date. 4.1.2 Source of Payments. The Covenant Payments shall be payable from any source of funds legally available to City, including City's general fund. In this regard, it is .understood and agreed that the Sales Tax that is generated from the Hobby Lobby Facility on the Site is being used merely as a measure of the amount of the Covenant Payments that are periodically owing by City to Owner/Developer, and that City is not pledging any portion of the Sales Tax generated from the Site to Owner/Developer. 4.1.3 Payment Procedure. Subject to the terms and conditions of this Covenant, not later than thirty (30) days after the Sales Tax for the Hobby Lobby Facility on the Site is 698/015610-0002 7287969.1 a09/04/14 -9- DOC #2015-0016184 Page 10 of 24 01/14/2015 02:18 PM remitted to the City by the SBE for a Quarter during the Operating Period, the City shall pay the Covenant Payment for said Quarter, or portion thereof, to Owner/Developer. Each such payment shall be accompanied by a statement identifying (i) the amount of Sales Tax upon which the Covenant Payment amount was calculated, and (ii) a cumulative total comparing the amount of a Covenant Payment being paid, together with all prior Covenant Payments, with the Covenant Payment Cap Amount. The amount of the City's quarterly Covenant Payments to Owner shall be based upon the amount .of Sales Tax that the City actually received from the SBE within fifteen (15) days prior to the applicable payment date. If the City cannot confirm receipt of Sales Tax revenues from the Hobby Lobby Facility prior to that date, after and despite its exercise of reasonable diligence to confirm such receipt, the City shall have no obligation to make a payment to Owner/Developer for that Quarter unless and until the City confirms that it did receive Sales Tax revenues from the Hobby Lobby Facility. If and to the extent the City. is able to. confirm the receipt of such Sales Tax revenue, the City shall pay Owner/Developer its share of that Sales Tax revenue for that Quarter in the next succeeding payment cycle required to be made by the City to Owner/Developer pursuant to this Section 4.1.3. If, after any such quarterly, payment is made, either the City or Owner/Developer obtains information that the amount of City's payment was in error, the Party obtaining such information shall promptly notify the other Party and shall provide such detailed information as may be necessary to explain the discrepancy. The discrepancy shall be accounted for by means of an adjustment to the next quarterly payment to be made by the City (either an additional payment in the event City has underpaid a prior Covenant Payment that is due, or a credit against the subsequent Covenant Payment in the event City has overpaid); .provided, however, that in the event an adjustment needs to be made in excess of Ten Thousand Dollars ($10,000), the Party entitled'to said sum shall be entitled to deliver a written notice to the other Party requesting an immediate adjustment and in such event the other Party shall make an appropriate payment within fifteen (15) days from receipt of said'notice. 4.1.4 Books and, Records. Upon the written request of either Party, the other Party shall make available for inspection (at City Hall in.the event of a review of City records and at Owner's place of business in La Quinta in the event of a review of Owner's records) its books and records as the requesting Party may reasonably determine must be reviewed in order determine whether the correct amount of Covenant Payments have. been made or are being made hereunder. Notwithstanding the foregoing, the City shall not be required to. produce any books or records that, by applicable law, the City is permitted to withhold from disclosure or prohibited from producing, and Owner shall not be required to produce information that violates the statutorily prescribed privacy rights of individual customers. 4.1.5 No Acceleration; Prepayment Permitted. It is acknowledged by the Parties that any payments by City provided for in this Covenant are in consideration for the performance by Owner during the time period(s) for which payments are due. Therefore, City's failure to timely make any payments or City's failure to perform any of its other obligations hereunder shall not cause the acceleration of any anticipated future Covenant Payments by City to Owner. The City shall be ,permitted to prepay any of the Covenant Payments at any time without penalty; provided, however, that such prepayment shall be refunded by 698/015610-0002 7287969.1 a09/04/14 -10- DOC #2015-0016184 Page 11 of 24 01/14/2015 02:18 PM Owner/Developer to the City if Owner/Developer fails to continue to perform or Defaults under this Covenant during the period for which the City's prepayment was intended to cover. . 4.2 Additional Condition Precedent to City's Obligations. In addition to the provisions set forth in Section 2 ' of this Covenant, City's obligation to make the Covenant Payments pursuant to Section 4.1 of this Covenant for any Quarter during the Operating Period shall be contingent and conditional upon Owner's performance of its obligations set forth in Section 3 of this Covenant during such Quarter. 4.3 Provision of Sales Tax Statements to City. Upon the written request of City, Owner/Developer shall deliver to City, and shall cause Hobby Lobby to deliver to the City, true and correct copies of all reports that Owner/Developer and Hobby Lobby files with the SBE with regard to taxable sales transactions occurring on, generated from and with respect to the Hobby Lobby Retail Use, Hobby Lobby Facility, and the Site (the "Sales Tax Statements"). Such reports shall be delivered to City within ten (10) days of the City's request. In the event that there is any private business or customer information on the Sales Tax Statement that is not reasonably necessary to enable City to verify the accuracy thereof for purposes of performing its obligations and enforcing its rights set forth in this Covenant, Owner shall be permitted to redact such information from the copy of the document provided to City. 5. DEFAULTS AND REMEDIES. 5.1 Defaults. (a) Subject to Force Majeure (Section 6.6), the occurrence of any of the following shall constitute a Default: (i) Subject to permitted delays for nonpayment set forth in this Covenant, the failure by either Party to perform any obligation of such Party for the payment of money under this Covenant if such failure is not cured within fifteen (15) calendar days after the nonperforming Party's receipt of written notice from the other Party that such obligation was not performed when due; or (ii) The failure by either Party to perform any of its obligations (other than obligations described in clause (i) of this Section 5.1) set forth in this Covenant, if such failure is not cured within thirty (30) days after the nonperforming Party's receipt of written notice from the other Party or, if such failure is of a nature that cannot reasonably be cured within thirty (30) days, the failure by such Party to commence such cure within thirty (30) days and thereafter diligently and continuously prosecutes such cure to completion, with said completion of cure not to exceed ninety (90) days after the commencement date for the cure of the Default; or (iii) Any representation or warranty by a Party set forth in this Covenant proves to have been incorrect in any material respect when made; or (iv) The destroyed by fire or other casualty durin g 698/015610-0002 7287969.1 a09/04/14 DOC #2015-0016184 Page 12 of 24 01/14/2015 02:18 PM Hobby Lobby, of the improvements on the Site within a six (6) months or thereafter fails to _diligently and continuously proceed to complete such restoration in accordance with this Covenant; or (v) Owner/Developer or Hobby Lobby is enjoined or otherwise prohibited by any governmental agency from occupying the Site during the Operating Period and such injunction or prohibition continues without stay for ninety (90) days or more for any reason; or (vi) Owner/Developer or Hobby Lobby defaults on, and fails to timely cure, any mortgage, deed of trust, or other security interest recorded against the Site; or (vii) The voluntary or involuntary suspension or termination of the Hobby Lobby Retail Use on the Site that is not a Permitted Closure.; or (viii) A court having jurisdiction shall have made or entered any decree or order (A) adjudging Owner/Developer or Hobby Lobby to be bankrupt or insolvent, (B) approving as properly filed a petition seeking reorganization of either Owner/Developer or Hobby Lobby, or seeking any arrangement for either Owner/Developer or Hobby Lobby under the bankruptcy law or any other applicable debtor's relief law or statute of the United States or any state or other jurisdiction, (C) appointing a receiver, trustee, liquidator, or assignee of either Owner/Developer or Hobby Lobby in bankruptcy or insolvency. or for any of their properties or business operations, or (D) directing the winding up or liquidation of Owner/Developer or Hobby Lobby, if any such decree or order described in subclauses (A) to (D), inclusive, shall have continued without stay or without being discharged for a period of sixty (60) days, unless a lesser time period is permitted for cure under any other mortgage or deed of trust held by any Holder and recorded against the Site, in which event such lesser time period will apply under this clause (viii) as well; or either Owner/Developer or Hobby Lobby shall have admitted in writing its inability to pay its debts as they fall due or shall have voluntarily submitted to or filed a petition seeking any decree or order of the nature described in clauses (A) to (D), inclusive. (b) For each mortgage, deed of trust, or other security interest recorded against the Site, Owner/Developer shall record, and Owner/Developer shall cause Hobby Lobby to record, for the benefit of the City, a Request for Notice under Civil Code Section 2924b in a form substantially similar to Exhibit "B" attached hereto and incorporated by reference (the "Request for Notice"), with Owner/Developer to cause each recorded Request for Notice to be delivered to the, City by the Holder of any mortgage, deed of trust, or other security interest recorded against . the Site to secure any payment and/or performance obligation of either Owner/Developer.or Hobby Lobby. In the event Owner/Developer fails to perform any of its obligations under this Covenant and City sends a notice of such failure to Owner/Developer, concurrently therewith City shall send a copy of such notice to any mortgagee or deed of trust holder with respect to the Site .(herein the "Holder") (the name and address of which Holder shall be furnished by Owner/Developer or such Holder to City) and the Holder shall have the same period of time as is available to Owner/Developer to remedy such breach or failure under this Covenant. City shall accept any proper cure of a breach or failure tendered by the Holder. In the event the Site is subject to foreclosure or a deed in lieu of foreclosure, this Covenant shall automatically terminate, if not previously terminated pursuant to Section 5.1(a)(vi), and shall be 698/015610-0002 7287969.1 a09/04/14 -12- DOC #2015-0016184 Page 13 of 24 01/14/2015 02:18 PM of no further force and effect immediately upon the commencement of any proceeding to foreclose on the Site or process a deed in lieu thereof, and Owner/Developer shall not be entitled to any unpaid Covenant Payments from and after the date of commencement of any proceeding to foreclose or process a deed in lieu thereof. 5.2 City's Remedies Upon Default by Owner. Upon the occurrence of any Default by Owner/Developer, and after Owner/Developer's receipt of written notice of default and expiration of the time for Owner/Developer to cure such Default as provided in Section 5.1, City may at its option: (i) Suspend the payment of Covenant Payments otherwise due and payable to Owner/Developer under this Covenant for the period that Owner/Developer remains in Default. If City has so suspended its payments in accordance with the terms of this clause (i), then upon Owner/Developer's cure of such Default, City shall resume its payment obligations, but shall have no obligation to make payments for any Quarter or portion thereof during which City's obligation to make payments was so suspended; or (ii) if the Default continues uninterrupted for a period of six (6) months, City may terminate this Covenant, in which case City's obligation to make payments to Owner/Developer for any period of time after the occurrence of the Default shall be finally terminated and discharged. In no event, however, shall City have the right (A) to specifically enforce Owner/Developer's covenants set forth in Section 3 of this Covenant, (B) to seek damages other than by offset of future Covenant Payments otherwise due hereunder, (C) to prevent Owner/Developer's conversion of the Site to another lawful use (even if such use would be inconsistent with this Covenant), or (D) to sue Owner/Developer or to recover from Owner/Developer any amount that is actually or allegedly attributable to loss of anticipated Sales Tax or other revenues, whether because the amount of Sales Tax generated from the Site is less than projected by Owner/Developer, Hobby Lobby, or City, or because Owner Developer does not allow for the operation of, or Hobby Lobby does not operate, the Hobby Lobby Facility on the Site for the entire Operating Period. 5.3 Owner/Developer's Remedies Upon Default by City. Upon the occurrence of any Default by City, and after City's receipt of written notice of Default from Owner/Developer and expiration of the time for City to cure such Default as provided in Section 5.1, Owner/Developer may initiate a judicial proceeding seeking an order for the City to continue to perform under this Covenant, or the Owner/Developer may terminate this Covenant by written notice to City and may seek unpaid Covenant Payments due and owing to Owner/Developer up until the date of the Default, subject to the provisions of Section 4.1.5. Notwithstanding any provisions in this Covenant to the contrary, Owner/Developer's exclusive remedies in equity and at law, including all monetary damages and compensation, are set forth in this Section 5.3, and Owner/Developer shall have no right to claim or receive any other compensatory, punitive, incidental, or other monetary damages. 5.4 Cumulative Remedies, No Waiver. Except as expressly provided herein, the nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights 698/015610-0002 -13 - 7287969.1 a09/04/14 DOC #2015-0016184 Page 14 of 24 01/14/2015 02:18 PM and remedies provided by law from time to time and the exercise by the nondefaulting Party of any right or remedy shall not prejudice such Party in the exercise of any other right or remedy. None of the provisions of this Covenant shall be considered waived by either Party except when such waiver is delivered in writing. No waiver of any Default shall be implied from any omission by City to take action on account of such Default if such Default persists or is repeated. No waiver of any Default shall affect any Default other than the Default expressly waived, and any such waiver shall be operative only for the time and to the extent stated. No waiver of any provision of this Covenant shall be construed as a waiver of any subsequent breach of the same provision. A Party's consent to or approval of any .act by the other Party requiring further consent or approval shall not be deemed to waive or render unnecessary the consenting Party's consent to or approval of any subsequent act. A Party's acceptance of the late performance of any obligation shall not constitute a waiver by such Party of the right to require prompt performance of all further obligations. A Party's acceptance of any performance following the sending or filing of any notice of Default- shall not constitute a waiver of that Party's right to proceed with the exercise of its remedies for any unfulfilled obligations. A Party's acceptance of any partial performance shall not constitute a waiver by that Party of any rights relating to the unfulfilled portion of the applicable obligation. 5.5 Limitations on City's Liability. Owner/Developer acknowledges and agrees that: (i) this Covenant shall not be deemed or construed as creating a partnership, joint venture, or similar association between Owner/Developer and City, the relationship between Owner/Developer and City pursuant to this Covenant is and shall remain solely that of contracting Parties, that the development and operation of the Hobby Lobby Facility is a private undertaking, and City neither undertakes nor assumes any responsibility, other than as expressly provided for in this Covenant or as may be granted the City pursuant to its police power under state and City law, to review, inspect, supervise, approve, or inform Owner/Developer or Hobby Lobby of any matter in connection with the development or operation of the Hobby Lobby Facility on the Site, including matters. relating to architects, designers, suppliers, or the materials used by any of them; and Owner/Developer shall rely entirely on its own judgment or that of Hobby Lobby with respect to such matters; (ii) by virtue of this Covenant, City shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Site, whether arising from: (A) any defect in any building, grading, landscaping, or other onsite or offsite improvement; (B) any act or omission of Owner/Developer or Hobby Lobby, and any of their respective agents, employees, independent contractors, licensees, lessees, or invitees; or (C) any accident on the Site or any fire or other casualty or hazard thereon; and (iii) by accepting or approving anything required to be performed or given to City under this Covenant, including any certificate, survey, appraisal, or insurance policy, City shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by City to anyone. 6. GENERAL PROVISIONS. 6.1 Integration and Amendment. This Covenant and the Agreement constitute the entire agreement by and between the Parties pertaining to the subject matter hereof, and supersede all prior agreements and understandings of the Parties with respect thereto. This 698/015610-0002 7287969.1 a09/04/14 -14- DOC #2015-0016184 Page 15 of 24 01/14/2015 02:18 PM Covenant may not be modified, amended, supplemented, or otherwise changed except by a writing executed by both Parties. 6.2 Captions. Section headings used in this Covenant are for convenience of reference only and shall not affect the construction of any provisions of this Covenant. 6.3 Binding Effect; Successors and Assigns; Assignments. This Covenant shall run with the land and shall be binding upon and inure to the benefit of, the Parties and their respective successors and assigns, as limited by this Section 6.3. Except as such assignment relates to Permitted Assigns or a Holder, the Owner/Developer shall not assign, hypothecate, encumber or otherwise transfer, either voluntarily, involuntarily or by operation of law, its rights or obligations as set forth in this Covenant without first obtaining the City's prior written consent, which may be given or denied or conditioned in the City's sole and absolute discretion. For any Permitted Assign, Owner/Developer shall delivento the City no later than ten (10) days after the execution of an assignment and assumption or other similar agreement notice of such assignment, copy of the agreement memorializing the assignment, the name and address(es) for notices to be delivered to the Permitted Assign by the City pursuant to this Covenant, and any documents or other evidence that the City may request, in its reasonable discretion, to verify that the assignee of the Owner/Developer's rights and obligations under this Covenant is to a Permitted Assign(s). In the event of any assignment that is consented to in writing by the City or that is to a Permitted Assign(s), the references in this Covenant to "Owner/Developer" shall be deemed to refer to the assignee: 6.4 Counterparts. This Covenant may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. 6.5 Governing Law. This Covenant shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflict of law principles. 6.6 Force Maieure. Notwithstanding any other provision set forth in this Covenant to the contrary, in no event shall a Party be deemed to be in Default of its obligations set forth herein where delays or failures to perform are caused by circumstances without the fault and beyond the reasonable control of such Party, which circumstances shall include, without limitation, fire/casualty losses; strikes; litigation not related to the performance of the Parties under this Covenant; unusually severe weather; inability to secure necessary labor, materials, or tools; delays of any, contractor, subcontractor, or .supplier; litigation by third parties challenging the validity or enforceability of the Agreement or this Covenant or the Entitlements; and acts of God (collectively, "force majeure"). Adverse market conditions or Owner/Developer's and/or Hobby Lobby's inability to obtain financing or approval to operate the Hobby Lobby Facility shall not constitute events of force majeure. In the event of an event of force majeure, the Party so delayed shall notify the other Party of the circumstances and cause of the delay within a reasonable time period after commencement of the delay, it shall keep the other Party informed at reasonable intervals upon request regarding the status of its efforts to overcome said delay, and it shall exercise commercially reasonable diligence to perform as soon as practicable thereafter. 698/015610-0002 7287969.1 a09/04/14 -15- DOC #2015-0016184 Page 16 of 24 01/14/2015 02:18 PM 6.7 Notices. Notices to be given by City or Owner/Developer hereunder may be delivered personally or may be delivered by certified mail or by reputable overnight delivery service providing a delivery confirmation receipt, with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such other address(es) that a Party may hereafter designate by written notice. If served by overnight delivery service or certified mail, service will be considered completed and binding on the Party served on the date set forth in the confirmation or certification receipt. If notice is to City: City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, CA 92253 Attention: City Manager with a copy to: Rutan & Tucker, LLP 611 Anton Blvd., Suite 1400 Costa Mesa, CA 92626 Attention: William H. Ihrke, Esq. If to Owner/Developer: One Eleven La Quinta, LLC 71084 Tamarisk Lane Rancho Mirage, CA 92270 ,Attention: Mr. Michael Shovlin 6.8 Further Acts. Each Party agrees to take such further actions and to execute such other documents as may be reasonable and necessary in the performance of its obligations hereunder; reserving to City, however, its lawful discretionary and police power authority. Without limiting the generality of the foregoing, upon the expiration or termination of the Operating Period, City shall execute and deliver such instruments as may be prepared by Owner/Developer at Owner/Developer's expense to release the cloud upon title to the Site created by this Covenant; provided, however, that any such document shall be in a form reasonably acceptable to the City Attorney of City. 6.9 Third Party Beneficiaries. With the exception of the specific provisions set forth in this Covenant for the benefit of Holder, there are no intended third party beneficiaries under this Covenant and no such other third parties shall have any rights or obligations hereunder. 6.10 Attorney's Fees. The prevailing party shall be entitled to recover its reasonable attorneys fees and costs, including any fees and costs incurred in any appeal and administrative proceeding, in connection with any breach or Default by the other Party under this Covenant. [Signatures contained on next page.] 698/015610-0002 7287969.1 a09/04/14 -16- IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of the Effective Date. SIGNED IN COUNTERPART City Clerk APPROVED AS TO FORM: SIGNED IN COUNTERPART City Attorney "City" CITY OF LA QUINTA, a California municipal corporation SIGNED IN COUNTERPART By: Frank Spevacek City Manager "Owner/Developer" ONE ELEVEN LA QUINTA, LLC, a California limited liability company By: MichaetShovlin Manager 698/015610-0002 7287969.1 a08/19/14 -1 T IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of the Effective Date. «City„ CITY OF LA QUINTA, ATTEST: Susan Maysels, City Clerk, City of La Quinta APPROVED AS TO FORM: WILLIAM H. IHRKE, City Attorney "Owner/Developer" ONE ELEVEN LA QUINTA, LLC, ' a California limited liability company Micha ovlin Manager CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California CIVIL CODE § 1189 I1 County of Lv2yEu� aok On eel �J' before me, Date Here Insert Name and Title of the Officer personally appeared m k-c`` \G&,P—.\ �. ISK®y ✓N Name(s) of Signer(s) L. SORBSON-SIMS Commission # 1995489 IL a .-o Notary Public - California i z Riverside County My Comm. Expires Oct 26, 2016 who proved to me on the basis of satisfactory evidence to be the person(Wwhose name(s)-is/�wd subscribed to the within instrument and acknowledged to me that he/ /t0ey executed the same in his/ior/tY,efr authorized capacityW, and that by his/lktbe r signature* on the instrument the person(4, or the entity upon behalf of which the person(gr—acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of ther State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature: Place Notary Seal Above Signature of Notary Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on.the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Document Title or Type of Document: Document Date: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: ❑ Corporate Officer — Title(s): ❑ Individual ❑ Partner — ❑ Limited ❑ General Top of thumb here ❑ Attorney in Fact El Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: Number of Pages: Signer's Name: ❑ Corporate Officer — Title(s): ❑ Individual ❑ Partner — ❑ Limited ❑ General Top of thumb here ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: © 2010 National Notary Association - NationalNotary.org • 1-800-US NOTARY (1-800-876-6827) Item #5907 State of California ) County of Riverside ) A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document, to which this certificate is attached, and not the truthfulness,. accuracy, or validity of that document On Janvoiy .2015 before me, TERESA THOMPSON, Notary Public, personally appeared FRANK J. SPEVACEK who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that he.executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity- upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is'true and correct. WITNESS my hand and official seal. Signature (seal) .. TERESA THOMPSON _ Commission # 2030796 Notary Public - California a Riverside County My Comm. Expires Jun 24, 2017 EXHIBIT "A" DESCRIPTION OF SITE Parcel 4 of Parcel Map 36531 recorded as Instrument No. 2013-0463009, Map Book 236, Pages 5-7, in the Riverside County Recorder's office. APN: 643-080-049 EXHIBIT "B" TO COVENANT FORM OF "REQUEST FOR NOTICE" [Attached] 698/015610-0002 7287969.1 a09/04/14 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of La Quinta 78-495 Calle Tampico La Quinta, CA 92253 Attention: City Manager [Space above for recorder.] (Exempt from Recordation Fee per Gov. Code § 27383) Request for Notice Under Civil Code Section 2924b In accordance with Section 2924b of the California Civil Code, request is hereby made that a copy of any Notice of Default and a copy of any Notice of Sale under the Deed of Trust recorded as instrument No. on , 20_, [in Book Page j Official Records of County, California, and describing land therein as R I J & kS f (5e See Attachment "1" attached hereto executed by , as Trustor, in which is named as Beneficiary, and , as Trustee, be mailed to the CITY OF LA QUINTA, 78-495 Calle Tampico, La Quinta, California 92253, Attention: City Manager NOTICE: A COPY OF ANY NOTICE OF DEFAULT AND OF ANY NOTICE OF SALE WILL BE SENT ONLY TO THE ADDRESS CONTAINED THIS RECORDED REQUEST. IF YOUR ADDRESS CHANGES; A NEW REQUEST MUST BE RECORDED. CITY OF LA QUINTA, Frank J. Spevacek, City Manager City of La Quinta, California 698/015610-0002 7287969.1 a09/O4/14 ATTACHMENT 1 DESCRIPTION OF SITE Parcel 4 of Parcel Map 36531 recorded as Instrument No. 2013-0463009, Map Book 236, Pages 5-7, in the Riverside County Recorder's office. APN: 643-080-049 DOC # 2015-0037731 01/29/2015 01:06 PM Fees: $0.00 Page 1 of 3 Recorded in Official Records County of Riverside Peter Aldana Assessor, County Clerk & Recorder RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: "This document was electronically submitted to the County of Riverside for recording"" City of La Quinta Receipted by: AGONZALEZ 78-495 Calle Tampico La Quinta, CA 92253 Attention: City Manager [Space above for recorder.] (Exempt from Recordation Fee per Gov. Code § 27383) Request for Notice Under Civil Code Section 2924b In accordance with Section 2924b of the California Civil Code, request is hereby made that a copy of any Notice of Default and a copy of any Notice of Sale under the Deed of Trust recorded as instrument No. 2014-484801 on December 18 , 20 14, [in Book 236 , Page 5 7 j Official Records of County, California, and describing land therein as R 14 F, 21; r t56 See Attachment "1" attached hereto executed by MCS HHG LLC, a California limited liability company , as Trustor, in Michael J. Shovlin, Manager which Protective Life Insurance Co, a Tennessee corporation is named as Beneficiary, and First American Title Company as Trustee, be mailed to the CITY OF LA QUINTA, 78-495 Calle Tampico, La Quinta, California 92253, Attention: City Manager NOTICE: A COPY OF ANY NOTICE OF DEFAULT AND OF ANY NOTICE OF SALE WILL BE SENT ONLY TO THE ADDRESS CONTAINED THIS RECORDED REQUEST. IF YOUR ADDRESS CHANGES, A NEW REQUEST MUST BE RECORDED. CITY OF LA QUINTA, a F Frank J. Spevacek, City Manager City of La Quinta, California 698/015610-0002 7287969.1 a09/04/14 DOC #2015-0037731 Page 2 of 3 01/29/2015 01:06 PM ATTACHMENT 1 DESCRIPTION OF SITE Parcel 4 of Parcel Map 36531 recorded as Instrument No. 2013-0463009, Map Book 236, Pages 5-7, in the Riverside County Recorder's office. APN: 643-080-049 DOC #2015-0037731 Page 3 of 3 01/29/2015 01:06 PM A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document, to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document State of California County of Riverside On January 13, 2015 before me, TERESA THOMPSON Notary Public, personally appeared FRANK J. SPEVACEK who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) T E R E S A THOMPSON " Commission # 2030796 Notary Public - California i Riverside County D My Comm. Expires Jun 24, 2017 DOCUMENT: REQUEST FOR NOTICE UNDER CIVIL CODE SECTION 2924b re: APN 643- 080-049, owner: MCS HHG LLC (Michael Shovlin, Manager) RECORDING REQUESTED BY.• First American Title Insurance Company National Commercial Services NCS 673347-ONT1 WHEN RECORDED J"L TO. YARBRO LAW OFFICES, LLC 3451 BROOKWOOD ROAD BIRMINGHAM, ALABAMA 35223 ATTN: R. MIKE YARBRO DOC # 2014-0484801 12/18/2014 03:06 PM Fees: $200.00 Page 1 of 41 Recorded in Official Records County of Riverside Larry W. Ward Assessor, County Clerk & Recorder "This document was electronically submitted to the County of Riverside for recording" Receipted by: CARAGON THIS SPACE FOR RECORDER'S USE ONLY DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING THIS PAGE ADDED TO PROVIDE ADEQUATE SPACE FOR RECORDING INFORMATION (ADDITIONAL RECORDING FEEAPPLIES) DOC #2014-0484801 Page 2 of 41 12/18/2014 03:06 PM DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING Cover Sheet Date: December 19, 2014 Borrower: MCS HHG LLC, a California limited liability company Borrower's Notice Address: 71-084 Tamarisk Lane Rancho Mirage, CA 92270 with a copy to: 1770 North Buffalo Drive #101 Las Vegas, NV 89127 Trustee: FIRST AMERICAN TITLE COMPANY, and all other successors and assigns for the benefit of Beneficiary (as defined below). Trustees Notice Address: 18500 Von Karman Ave, Suite 600 Irvine, CA 92612 Beneficiary/Lender PROTECTIVE LIFE INSURANCE COMPANY, a Tennessee corporation, together with other holders from time to time of the Note (as defined herein). Beneficiary's 2801 Highway 280 South Notice Address: Birmingham, Alabama 35223 Attention: Investment Department Note Amount: $7,200,000.00 Maturity Date: January 1, 2030 State: California Record Owner of Land Borrower Exhibit A: Attached hereto and incorporated herein by reference. Additional Borrower Information/ Borrower is a: Type of Organization — limited liability company Jurisdiction of Organization - California Organizational Identification No. - 201403510542 This document prepared by: R. Mike Yarbro Yarbro Law Offices, LLC 3451 Brookwood Road Birmingham. Alabama 35223 1 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 3 of 41 12/18/2014 03:06 PM 1. DEFINITION OF TERMS. As used herein, the terms defined in the cover sheet hereof shall have. the meanings given on such sheet, and the following terms shall have the meanings set forth below. Any other term or phrase not defined in`this Paragraph 1, but shown in quotes within parentheses in another provision of this Indenture, shall have the meaning set forth in such provision. 1.1 After -Maturity Rate: The default interest rate as defined and set forth in the Note. 1.2 Commitment: that certain Permanent Loan Commitment dated June 16, 2014, as amended by letter amendments dated July 22, 2014 and November 18, 2014, each issued by the Lender and accepted by the Borrower and the Principals. 1.3 Borrower's Notice Address: as defined on cover hereof. 1.4 Casualty: as defined in Paragraph 5.L 1.5 Contested Sum: as defined in clause (e) of Paragraph 4.1. 1.6 Environmental Law: Any federal, state, or local law, ordinance, regulation or governmental policy relating to the environment, health, and safety, any Hazardous Substance (including, without limitation, the use, handling, transportation, production, disposal, discharge, or storage of the substance), industrial hygiene, soil, groundwater, and indoor and ambient air conditions or the environmental conditions on the Property, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 [42 USCS §§ 9601 et seq.], as amended from time to time; the Hazardous Substances Transportation Act [49 USCS §§ 1801 et seq.], as amended from time to time; the Resource Conservation and Recovery Act [42 USCS §§ 6901 et seq.], as amended from time to time; the Federal Water Pollution Control Act (33 USCS §§ 1251 et seq.], as amended from time to time; the Hazardous Substance Account Act [California Health and Safety Code §§ 25300 et seq.], as amended from time to time; the Hazardous Waste Control Law [California Health and Safety Code §§ 25100 et seq.], as amended from time to time; the Medical Waste Management Act [California Health and Safety Code §§ 25015 et seq.], as amended from time to time; and the Porter - Cologne Water Quality Control Act [California Water Code §§ 13000 et seq.], as amended from time to time. 1.7 Events of Default: as defined in Paragraph 8. L 1.8 Fixtures: All fixtures owned by Borrower and located on the Improvements or now or later installed in, or used in connection with, any of the Improvements, including, but not limited to, all partitions, screens, awnings, motors, engines, boilers, furnaces, pipes, plumbing, elevators, cleaning and sprinkler systems, fire -extinguishing equipment, water tanks, heating, ventilating, air-conditioning equipment, and gas and electric machinery, appurtenances, and equipment, whether or not permanently affixed to the Land or the Improvements. 1.9 Hazardous Substance: (i) any oil, flammable substance, explosive, radioactive material, hazardous waste or substance, toxic waste or substance, or any other waste, material, or pollutant that: poses a hazard to the Property or to persons on the Property, or causes the Property to be in violation of any Environmental Law; (ii) asbestos in any form; (iii) urea formaldehyde foam insulation; (iv) transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls; (v) radon gas; (vi) any chemical, material, or substance defined as or included in the definition of "hazardous substance," "hazardous substances," "hazardous wastes," "hazardous materials," "extremely + + hazardous waste," "restricted hazardous waste," or "toxic substances" or words of similar import under any applicable local, state, or federal Iaw or under the regulations adopted or government publications 2 MCS HHG LLC La Quints CA DOC #2014-0484801 Page 4 of 41 12/18/2014 03:06 PM promulgated pursuant to those laws, including, but not limited to, any Environmental Law, California Code of Civil Procedure § 564, California Code of Civil Procedure § 726.5, as amended from time to time, California Code of Civil Procedure § 736, and California Civil Code § 2929.5, as such may be amended :Crain time to time; (vii) any other chemical, material, or substance, exposure to which is prq iibited, limited .or, regulated by any governmental authority or which may pose a hazard to the health and safety .of the occupauts of the Property or the: owners or occupants of property adjacent to or surrounding the Property, or any other person coming on the Property or any adjacent property; and (viii) any other chemical, material, or substance that may pose a hazard to the environment. 1.10 Hazardous Substance Claim: Any enforcement, cleanup, removal, remedial, or other governmental, regulatory, or private actions, agreements, or orders threatened, instituted, or completed pursuant to any Environmental Law, together with -all claims made or threatened by any - third party against Borrower or the Property relating to damage, contribution, cost -recovery compensation, loss, or injury resulting from the presence, release, or discharge of any Hazardous Substance in, on, under or from the Property. 1.11 improvements: All buildings, structures, appurtenances and other improvements now or hereafter existing, erected or placed on the Land, or in any way used in ctiriiiection with theuse, enjoyment, occupancy or operation of the Land or any portion thereof; all fixtures and other articles of every kind and nature whatsoever now or hereafter owned by Borrower and used'or procured foie use in connection with the operation and maintenance of the Realty or Personalty. Filing. 1.12 In its sole unfettered discretion: as defined in Paragraph 13.8. 1.13 Indenture: This Deed of Trust, Assignment of Rents, Security Agreement and Fixture 1.14 Insurance Premiums: as defined in clause (b) of Paragraph 4.3. 1.1.5 Insurance Proceeds: as defined in paragraph 5. L 1.16 Laws: as defined in clause (c) of Paragraph 4.2. 1.17 Land: The real property described in Exhibit A attached hereto. 1.18 Leases: The Property Lease and any other leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to all or any portion of the Property, together with all options therefor, amendments thereto and renewals, modifications and guarantees thereof. 1.19 Lease Assignment: That certain Assignment of Rents and Leases between Borrower and Beneficiary of even date herewith and all modifications or amendments thereto or extensions thereof. 1.20 Loan Documents: This Indenture, the Note, the Lease Assignment, and any and all other documents or instruments related thereto or to the Secured Debt now or hereafter given by or on behalf of Borrower to Beneficiary, except any separate environmental indemnification agreement. 1.21 Note: That certain Promissory Note of even date herewith made by Borrower in favor of Beneficiary in the Note Amount and all modifications, renewals and extensions thereof, which Note is payable in monthly installments until the Maturity Date (as defined in the Note and on the Cover Sheet), subject to the option of Beneficiary to accelerate the principal due as may be set forth in the Note. 3 MCS HHG LLC La Quinta, CA DOG #2014-0484801 Page 5 of 41 12/18/2014 03:06 PM 1.22 Parties in Interest. as defined in clause (d) of Paragraph 8.1. 1.23 Personalty: all of Borrower's interest in the personal property of any kind or nature whatsoever, whether tangible or intangible, whether or not any of such personal property is now or becomes a "fixture" or attached to the Realty, which is used or will be used in the construction of, or is or will be placed upon, or is derived from or used in connection with, the maintenance, use, occupancy or enjoyment of the Realty, including, without limitation, all accounts, documents, instruments, chattel paper (including electronic chattel paper and tangible chattel paper), general intangibles (including payment intangibles and software), goods (including consumer goods, inventory, equipment and farm products), letter -of -credit rights and deposit accounts (as those terms are defined in the Uniform Commercial Code as now adopted or amended from time to time in the State), all plans and specifications, contracts and subcontracts for the construction, reconsfricttan oi;:relitiir. of Ehe' Improvements, bonds, ;permEts,. licenses;. guarantees, warranties, causes of acts : judgrtients, claiiris profits, rents, security deposits,, utility deposits, refunds of fees or deposits paid to any governmental authority, letters of credit, policies anti proceeds of insurance, motor vehicles and aircraft, together. with all present and future attachments, accretions, accessions, replacements and additions thereto and products and proceeds thereof. 1,24 Principals: MICHAEL J. SHOVLIN, individually, and HANK GORDON, individually. 1.25 Pro e : The Realty, the Fixtures and Personalty, together with all estate, title, interests, title reversion rights, rents, increases, issues, profits, rights of way or uses, additions, accretions, servitudes, gaps, gores, liberties, privileges, water rights, water courses, alleys, streets, passages, ways, vaults, adjoining strips of ground, licenses, tenements, franchises, hereditaments, rights, appurtenances and easements, now or hereafter owned by Borrower and existing, belonging or appertaining to the Realty, all claims or demands whatsoever of Borrower therein or thereto, either in law or in equity, in possession or in expectancy and all estate, right, title and interest of Borrower in and to all streets, roads and public places opened or proposed, now or appertaining to, the Land, or any portion thereof or interest therein except as the context otherwise requires. 1.26 Property Lease: that certain Lease Agreement dated August 18, 2013 executed between One Eleven La Quinta, LLC, as landlord and predecessor in interest to the Borrower, and the Tenant, as tenant, as such Lease Agreement was amended by that certain First Amendment to Lease Agreement dated February 27, 2014 and may hereinafter be amended subject to the provisions of this Indenture and the Lease Assignment; and any subsequent lease hereafter consented to and approved by Beneficiary in its sole unfettered discretion, if applicable. 1.27 Property Liabilities: as defined in clause (d) of Paragraph 4.1. 1.28 Property Taxes and Charges: All real estate taxes and personal property taxes, betterments, assessments (general and special), imposts, levies, water, utility and sewer charges, and any and all income, franchise, withholding, profits and gross receipts taxes, other taxes and charges, all other public charges whether of a like or different nature, imposed upon or assessed against Borrower or the Property or upon the revenues, rents, issues, income and profits or use or possession thereof, and any stamp or other taxes which may be required to be paid with respect to any of the Loan Documents, any of which.might, if unpaid, result in a lien on the Property, regardless to whom paid or assessed, and any form of assessment, license fee, license tax, business license fee, business license tax, commercial rental tax, levy, charge, penalty, tax or similar imposition, imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district thereof, against any legal or equitable interest in the Property. 4 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 6 of 41 12/18/2014 03:06 PM 1.29 Real : the Land, Improvements and Fixtures, together with the Personalty owned by Borrower located on the Land, or any portion thereof or interest therein, as the context requires. 1.30 Release: Any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment, including continuing migration, of Hazardous Substances that goes into the soil, surface water, or groundwater of the Property, whether or not caused by, contributed to, permitted by, acquiesced to, or known to Borrower, in violation of applicable Environmental Law. 1.31 Rents: All rents, royalties, issues, profits, revenue, income, receipts and other benefits of the Property arising from the use or enjoyment thereof or from the Leases, including, without limitation, cash or securities deposited thereunder to secure performance by the tenants of their obligations thereunder, whether said cash or securities are to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due; except any of the foregoing arising from any subleases, licenses or concessions entered into by and payable solely to the Tenant in accordance with the Property Lease. 1.32 Secured Debt: To the extent not prohibited by Law, all principal, interest, additional interest, interest at the After -Maturity Rate on all sums applicable thereto, late charges and other sums, charges, premiums or amounts due or to become due under the Loan Documents, together with any other sums expended or advanced by Beneficiary under the Loan Documents or otherwise with respect to the care or preservation of the Property or the enforcement of the Loan Documents. 1.33 State: as defined on cover hereof. 1.34 Taking: as defined in Paragraph 5.1. 1,35 Taking Proceeds: as defined in Paragraph 5.1. 1.36 Tenant: Hobby Lobby Stores, Inc., an Oklahoma corporation, its permitted successors and assigns in accordance with the Property Lease, and any tenant under any subsequent Property Lease consented to and approved by Beneficiary in its sole unfettered discretion, if applicable. 1.37 User: Any person other than Borrower, who occupies, uses or comes on to or has occupied, used or come onto the Property or any part of it and any agent or contractor of that person. 2. GRANTING CLAUSES. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower has executed and delivered the Loan Documents and hereby irrevocably and absolutely grants, transfers, assigns, mortgages, bargains, sells and conveys to Trustee, IN TRUST, with POWER OF SALE AND STATUTORY RIGHTS in the State, all of Borrower's estate, right, title and interest in, to and under, and grants to Beneficiary a first and prior security interest in, the Property and any and all of the following, whether now owned or held or hereafter acquired or owned by Borrower: (a) All Leases and Rents; (b) All profits and sales proceeds, including, without limitation, earnest money and other deposits, now or hereafter becoming due by virtue of any contract or contracts for the sale of Borrower's interest in the Property; MC5 HHG LLC La Quinta, CA DOC #2014-0484801 Page 7 of 41 12/18/2014 03:06 PM (c) All proceeds (including claims thereto or demands therefor) of the conversion, voluntary or involuntary, permitted or otherwise, of any of the foregoing into cash or liquidated claims; and (d) All Insurance Proceeds and all Taking Proceeds. All of the foregoing is hereinafter referred to as the "Encumbered Property." FOR THE PURPOSE OF SECURING THE FOLLOWING OBLIGATIONS OF BORROWER TO BENEFICIARY, in such order of priority as Beneficiary may elect: (1) Payment of the Secured Debt; (2) Payment of such additional sums with interest thereon which may hereafter be loaAed to Borrower by Beneficiary or advanced under the Loan Documents (at the After -Maturity Rate), even if the sum of the amounts outstanding at any time exceeds the Note Amount; and (3) Due, prompt and complete observance, performance, fulfillment and discharge of each and every obligation, covenant, condition, warranty, agreement and representation contained in the Loan Documents. This Indenture is also intended to be a Security Agreement under the Uniform Commercial Code as now adopted and amended from time to time in the State. Time is of the essence. TO HAVE AND TO HOLD the Property and all parts thereof unto Beneficiary and its successors and assigns forever, subject, however, to the terms and conditions herein. 3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to Trustee and Beneficiary that the following warranties and representations in this Paragraph are and will be true, correct and complete at all times: 3.1 Due Organization, Authority. If Borrower is an entity, Borrower is duly organized and validly existing, and in good standing under the laws of the state of its organization and has power adequate to carry on its business as presently conducted in such state and in the State, to own the Property, to make and enter into the Loan Documents and to carry out the transactions contemplated therein. 3.2 Executibfi , Di livtiru and Effect oklt-6nii Documents. The Loan Documents have each been duly authonked, executed urirl dclivirrcd .lid' Borrower; at d each is a legal, valid and binding obligation of Borrower, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights generally and subject to the exercise of judicial discretion in accordance with general principles of equity (regardless whether enforcement is sought in a proceeding in equity or at law). 3.3 Other Obligations. Borrower is novin violation of any term or provision of any document governing its organization or existence or in default under any instruments or obligations relating to Borrower's business, Borrower's assets or the Property. No party has asserted any claim or default relating to any of Borrower's assets or the Property. The execution and performance of the Loan Documents and the consummation of the transactions contemplated thereby will not result in any breach of, or constitute a default under, any contract, agreement, document or .other instrument to which Borrower is a party or by which Borrower may be bound or affected; and do not and will not violate or MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 8 of 41 12/18/2014 03:06 PM contravene any Law to which Borrower is subject; nor do any such instruments impose or contemplate any obligations which are or will be inconsistent with the Loan Documents. Borrower has filed all federal, state, county and municipal in . cometax_rchiros required to have been filed by Borrower and has paid all taxes which have become due jiursuant to such returns or pursuant to any assessments received by Borrower. Borrower does not know: of auy basis for additional assessment with regard to any such tax. No approval by, authorization of, or filing with any federal, state or municipal or other governmental commission, board or agency or other governmental authority is necessary in connection with the authorization, execution and delivery of the Loan Documents. 3.4 Coiistrui tion and.`Gon pletion of _Lnprouenterits. The presently existing Improvements have been completed ak installed in a good and workmanlike manner, in compliance with Laws and in material and substantial compliance with the plans and specifications previously delivered to Beneficiary. Any unoccupied space in the Improvements has been completed as provided above except for floor and wall coverings. The Improvements are served by electric, gas, sewer or septic system, water, telephone and other utilities required for the present and contemplated uses and operation thereof. Any and all streets, other off -site improvements, access to the Property necessary for its present and contemplated uses and operation and service by utilities have been completed, are serviceable and have been accepted or approved by appropriate governmental bodies. Borrower understands that Borrower's rights and interest in any septic system or sewage treatment facility or sewer line on the Property or to be constructed from the Property to a public sewer line and all personal property and rights therein are conveyed to Beneficiary hereunder as part of the Property, whether located on the Property as described in Exhibit A or adjacent to or connected with the same. To the extent Borrower's consent is required or requested in connection therewith, Borrower covenants not to consent to any tie-ons or connections to any sewer facility or sewer line located on or under the Realty or to allow any person to make any modifications to any such sewer facility or sewer line without the written consent of Beneficiary. 3.5 Legal Actions. There are. no (i) actions, suits or proceedings including, without limitation, any condemnation, insolvency or bankruptcy proceedings, pending or, to the best of Borrower's knowledge and belief, threatened against or affecting Borrower, its business or the Property, or (ii) investigations, at law or in equity, before or by any court or governmental authority, pending or, to the best of Borrower's knowledge and belief, threatened against or affecting Borrower, Borrower's business or the Property, except actions, suits and proceedings fully covered by insurance and heretofore fully disclosed in writing to Beneficiary. Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority affecting Borrower or the Property. Furthermore, to the best knowledge and belief of Borrower, there is no basis for any unfavorable decision, ruling or finding by any court or governmental authority which would in any material respect adversely affect: (i) the validity or enforceability of the Loan Documents; or (ii) the condition (financial or otherwise) or ability of Borrower to meet Borrower's obligations under the Loan Documents. 3.6 Financial Statements. All statements of the Borrower and the Principals, financial or otherwise, submitted to Beneficiary in connection with the transaction evidenced by the Loan Documents are true, correct and complete in all respects, and all such financial statements have been prepared in accordance with federal income tax basis accounting principles, consistently applied, and fairly present the financial condition of the parties or entities covered by such statements as of the date thereof and no additional borrowings have been made by such parties or entities or any of them, since the last date thereof, nor has Borrower, or any such party or entity experienced a material, adverse change in its finances, business, operations, affairs or prospects since the last date thereof. Borrower and each such party or entity is now solvent. MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 9 of 41 12/18/2014 03:06 PM 3.7 Solvency of Tenants. To the best of Borrower's knowledge and belief, the Tenant has not suffered or incurred any material, adverse change in its finances, business, operations, affairs or prospects since the date of the Commitment. 3.8 .Adverse..Chan g to .Proper .No event or series of events has or have intervened or occurred since the date of Borrower's submission of the Commitment which would, either individually or collectively, have a material adverse affect on the Property. 3.9 Title to Property. Subject to the exceptions set forth in the title insurance commitment issued by First American Title Company and approved in writing by the Beneficiary, Borrower has good and clear record and marketable title to the Land and Improvements and good and merchantable title to the Fixtures and Personalty owned by Borrower. Borrower warrants and shall forever defend the title thereto and Beneficiary's frst'and prior lien thereto unto Beneficiary, its successors and assigns, against the claims of all persons whomsoever. 3.10 Compliance with Laws and Private Covenants. The Property complies with all applicable Laws. The real property described in Exhibit A attached hereto is a separate and distinct parcel for tax purposes and shall not become subject to Property Taxes and Charges against any other land. Borrower has examined and is familiar with any applicable agreements affecting the Land and there now exists no violation of any such agreements. Borrower has no notice that any of the Improvements encroaches upon any easement over the Land 'or upon adjacent property. 3.11 Independence of the Property. Borrower has not by actor omission permitted any building or other improvements on property not covered by this Indenture to rely on the Property or any part thereof or any interest therein to fulfill any municipal or governmental requirement for the existence of such property, building or improvements; and no Improvement on the Property shall rely on any property not covered by this Indenture or any interest therein to fulfill any governmental or municipal requirement. Borrower has not by act or omission impaired the integrity of the Property as a single, separate, subdivided zoning lot separate and apart from all other property. Without the prior written consent of Beneficiary, Borrower will not seek, make or consent to any change in the zoning or conditions of use of the Property. Borrower will comply with and make all payments required under the provisions of any covenants, conditions or restrictions affecting the Property, and shall not without Beneficiary's prior written consent (a) file any declaration and constituent documents of any condominium, townhome, cooperative or planned community development project for the Property, or (b) join in the amendment or rescission of any covenants, conditions, restrictions, rules or regulations now or hereafter affecting the Property. Borrower will comply with all existing and future requirements of all governmental authorities having jurisdiction over the Property, 4. BORROWER'S COVENANTS. Until the Secured Debt has been paid in full, Borrower covenants and agrees with Beneficiary as follows: 4.1 Payments. (a) Secured Debt. Borrower shall pay promptly to Beneficiary, when due, the Secured Debt at the times and in the manner provided in the Loan Documents. (b) Property Taxes and Charges. Subject to the right to contest same as provided in Paragraph 4.I(e), Borrower shall pay or cause the Tenant to pay, prior to delinquency, all Property Taxes and Charges. Borrower shall furnish Beneficiary with satisfactory evidence that the Property Taxes and 8. MCS RHO LLC La Quinta, CA DOC #2014-0484801 Page 10 of 41 12/18/2014 03:06 PM Charges have been paid not later than fifteen (15) days after the applicable delinquency date thereof. If requested by Beneficiary, Borrower shall pay the costs of a tax reporting service covering the Property of the type and duration and with a company satisfactory to Beneficiary. For the purpose of securing separate taxation and assessment on account of Property Taxes and Charges, Borrower has obtained a separation of the.Property from all other adjacent lands, and the same has been evidenced in the appropriate public records. In any event, if such separation is not accomplished and evidenced on the completed assessment roll of the Riverside County Assessor for the fiscal year 2015-2016 as and when such assessment roll is submitted by the Assessor to the auditor, then Beneficiary may at its option, with or without notice, declare all sums secured by this Indenture to be immediately due and payable and avail itself of any and all remedies provided for herein upon the occurrence of an Event of Default hereunder; and further, Beneficiary may at its option, in addition or in the alternative to the above, should Borrower fail to pay the same before they become delinquent, advance the necessary moneys to pay all Property Taxes and Charges levied or assessed on or against the Property and any other parcel or parcels adjacent thereto, whether or not such other adjacent parcels be otherwise part of or subject to the terms and conditions of this Indenture and all such moneys so advanced shall be secured by and subject to the same other terms and conditions as provided herein. (c) Taxes on Trustee or Beneficiary. If any Law of the State or the United States or any other governmental authority imposes upon Trustee or Beneficiary the obligation to pay the whole or any part of the Property Taxes and Charges or changes in any way the Laws relating to taxation so as to adversely affect the Loan Documents or Trustee or Beneficiary, then Borrower shall pay Property Taxes and Charges or reimburse Trustee and Beneficiary immediately therefor, unless in the opinion of counsel to Trustee or Beneficiary, it might be unlawful to require Borrower to pay the same or such payment might result in the imposition of interest prohibited by Law. In such case, an Event of Default shall exist unless Borrower pays the Secured Debt in full within 90 days after the date Beneficiary gives Borrower written notice of such opinion of counsel. (d) Property Liabilities. Borrower shall pay or cause the Tenant to pay, prior to delinquency, all debts and liabilities incurred in the construction, operation, development, use, enjoyment, repair, maintenance, replacement, restoration and management of the Property and any utility charges, sums -due mechanics and materialmen and other sums secured or which might be secured, if not paid, by liens on the Property ("Property Liabilities"). (e) Right to Contest. Borrower may, in good faith and diligently, by appropriate proceedings, contest the validity, applicability or amount of any asserted Property Taxes and Charges or Property Liabilities ("Contested Sum"), after written notice of the same to Beneficiary. During such contest, Borrower shall not be deemed in default hereunder if (i) prior to delinquency of the Contested Sum, .Borrower deposits (aa) with Beneficiary cash or other security to protect the Property against any lien arising out of such Property Taxes and Charges, in form satisfactory to Beneficiary in its sole unfettered discretion, adequate to cover the payment of such Contested Sum and any obligation, .whether matured or contingent, of Borrower, Trustee. or Beneficiary therefor, together with interest, costs and penalties thereon; or (bb) with the applicable court or other depositary, a bond, cash deposit or other collateral that operates by applicable Laws to free the Property from any lien that exists or might arise from non-payment of the Contested Sum; and (ii) Borrower promptly causes to be paid any amounts ultimately determined to be due by a final, non -appealable judgment, together with all costs, penalties and interest thereon. Each such contest shall be concluded and the Contested Sum, interest, costs and penalties thereon shall be paid prior to the date any writ or order is issued under which the Property could be sold pursuant to -any such judgment. MCS HHa LLC La Quinta, CA DOC #2014-0484801 Page 11 of 41 12/18/2014 03:06 PM (f) Expenses. Borrower shall, to the extent allowed by Law, pay, on demand but without counterclaim, setoff, deduction, defense, abatement, suspension, deferment, discrimination or reduction, all fees (including, without limitation, reasonable attorneys' fees and disbursements), taxes, recording fees, commissions and other liabilities, costs and expenses incurred in connection with (i) the making or enforcement of the Loan Documents, (H) Trustee or Beneficiary's exercise and enforcement of its rights and remedies under Paragraphs 7, 8, and elsewhere hereof, and (iii) Trustee or Beneficiary's protection of the Property and its interest therein, unless the applicable court issues a final determination that Beneficiary or trustee is liable for payment of attorneys fees or court courts. (g) Servicing Fees. Borrower shall be solely responsible for any reasonable legal and/or processing fees and costs incurred or charged by Beneficiary or its third -party loan servicer for any servicing -related matter arising during the term of the Loan. Borrower agrees to immediately reimburse Beneficiary or such servicer upon Beneficiary's request for any such legal and/or processing fees and costs. Borrower shall not be entitled to any credit on the principal, interest or late charges included in the Secured Debt by reason of the payment of any sums required to be paid under subparagraph 4.1(b) through (g). 4.2 Operation of the Property. (a) Maintenance: Alterations. Borrower shall maintain and preserve or cause the Tenant to maintain and preserve the Property in good repair and condition and shall correct or cause the Tenant to correct any defects or faults in the Property. Borrower shall not commit, permit or suffer any demolition or waste of the Property or any use or occupancy which constitutes a public or private nuisance. Borrower shall not do, permit or suffer to be done any act whereby the value of any part of the Property may be decreased, ordinary wear and tear excepted. Borrower shall not make any material alterations, improvements, additions, utility installations or the like to the Property without the prior written consent of Beneficiary in each instance; provided, however, Borrower may make replacements or substitution of any items of the Personalty or Fixtures if the replacement or substitution is of a quality, utility, value, condition and character similar to or better than the replaced or substituted item and is free and clear of any lien, charge, security interest or encumbrance, except as created or permitted by this Indenture. (b) Liens_ Borrower shall promptly discharge by payment or in any other manner permitted by applicable law and reasonably approved in writing by the Beneficiary, any mechanics', laborers', materialmen's or similar lien, charge, attachment, or lis pendens filed or recorded which encumbers Borrower or the Property. (c) Compliance with Laws and Private Covenants. Borrower shall truly keep, observe and satisfy all, and not suffer violations of any Federal, regional, state and local laws, ordinances, rules, regulations, statutes, decisions, orders, judgments, directives or decrees of any governmental or regulatory authority, court or arbitrator, including, but not limited to, the Americans with Disabilities Act and Environmental Law (herein. collectively "Laws") and private covenants affecting the Property. Borrower shall use its diligent efforts to give Beneficiary telephonic notice within one (1) business day, and shall give Beneficiary written notice (which shall include a copy of any notice received by Borrower) within three (3) business days, of Borrower's receipt of any notice received by or on behalf of Borrower with respect to Borrower's noncompliance with any of the provisions of any covenants, conditions or restrictions now or hereafter affecting the Property. If Borrower fails to correct the conditions specified in the notice to it, Beneficiary may do so at the sole cost and expense of Borrower, and Borrower shall reimburse Beneficiary for such cost and expense upon demand. Any amounts so expended by 10 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 12 of 41 12/18/2014 03:06 PM Beneficiary shall bear ' interest at the After -Maturity Rate specified in the Note from the date of expenditure until repaid to Beneficiary, and shall be secured by this Indenture. (d) Use and Management. The Property shall at all times be used for the commercial purposes as provided in and permitted by the Property Lease. The Property shall at all times be managed by Borrower (so long as no default exists under any of the Loan Documents) or a leasing and management agent which has been approved by the Beneficiary prior to execution of any management agreement with the same. Any change in the use of the Property to a use not permitted by the Property Lease, or any change in the management agent, shall be subject to the prior written approval of Beneficiary. (e) Inspection; Right of Entry. Subject to the Property Lease and the rights of Tenant thereunder, Borrower grants to Beneficiary and its agents, employees, consultants, and contractors the right to enter on the Property without delay, hindrance or restriction for the purpose of making any inspections, reports, tests (including, without limitation, soils borings, groundwater testing, wells, or soils analysis), inquiries, and reviews that Beneficiary, in its sole unfettered discretion, deems necessary to assess the then current condition of the Property. Beneficiary will provide Borrower with one (1) business day's notice of the entry. However, Borrower's consent will not be required for such entry or for the performance of tests. To the extent conducted not more often than annually or during the existence of an Event of Default, all costs, fees and expenses incurred by Beneficiary with respect to the inspections, reports, tests, inquiries, and reviews will be paid by Borrower to Beneficiary on demand, will accrue interest at the After Maturity Rate until paid, and will be secured by this Indenture, prior to any right, title, or interest in or claim on the Property attaching subsequent to the lien of this Indenture. 4.3 Insurance Requirements. Borrower shall obtain and keep in force, with one or more insurers acceptable to Beneficiary, such insurance as Beneficiary may from time to time specify by notice to Borrower, including, without limitation, insurance providing (i) commercial general public liability and property damage coverage with a combined single unit limit of at Ieast $1,000,000 per occurrence, $2,000,000 aggregate (naming Beneficiary as an additional insured thereunder), (ii) "causes of loss — special form" or "all -perils" property insurance with no terrorism exclusion, including, where required, flood, to the full replacement value of the Property (except with respect to flood, which shall provide coverage in the maximum available amount) with a waiver of subrogation, replacement cost, and difference in conditions endorsements, and (iii) rent loss insurance in an amount of not less than a sum equal to twelve (12) months' rental income from all Leases. All property insurance policies shall include the standard mortgage clause in the State naming Beneficiary as the first mortgagee with loss payable to Beneficiary as such mortgagee, shall not be cancelable or modifiable without thirty (30) days' prior written notice to Beneficiary and shall not have more than a $10,000 deductible for any single casualty. Borrower shall provide Beneficiary with evidence of compliance with this Paragraph 4.3 in such forms as reasonably required from time to time by Beneficiary upon notice from Beneficiary and in any event prior to the expiration date of any policy required hereunder, together with evidence satisfactory to Beneficiary that all premiums ("Insurance Premiums") due thereunder have been paid in full. Borrower, to the full extent permitted by Law and to the full extent permitted without invalidating the insurance policies required above, hereby waives the right of subrogation against Beneficiary. Borrower will inform its insurers of the waiver and obtain a waiver of subrogation endorsement if applicable. Beneficiary shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (i) the existence, nonexistence, form or legal sufficiency thereof, (ii) the solvency of any insurer, or (iii) the payment of losses. 11 MCS HUG LLC La Quinta, CA DOC #2014-0484801 Page 13 of 41 12/18/2014 03:06 PM Borrower shall keep, observe and satisfy, and not suffer violations of, the requirements of insurance companies and any bureau or agency which establishes standards of insurability affecting the Property, and pertaining to acts committed or conditions existing thereon. Upon foreclosure of this Indenture or other transfer of title or assignment of the Property in discharge, in whole or part, of the Secured Debt, all right, title and interest. of Borrower in and to all policies of insurance required by this Paragraph 4.3 shall inure to the benefit of and pass to Beneficiary, and Beneficiary is hereby irrevocably authorized, said power being coupled with an interest, to assign in Borrower's name to Beneficiary all such policies, which may be amended or rewritten to show the interest of the Beneficiary. Notwithstanding the foregoing, as long as (1) the Tenant under the Property Lease maintains during the term of the Note and this Indenture (1) the insurance as required by Section 14 of the Property Lease as in effect on the date of this indenture (the "Lease Insurance Provision"), or (H) self-insurance to the extent permitted by, and subject to the conditions set forth in, the Lease Insurance Provision, and (2) the Tenant and/or Borrower provides satisfactory evidence of such insurance or self-insurance coverage to the Beneficiary as required above, then the Insurance requirements of this Paragraph 4.3 shall be deemed satisfied. The Borrower will be required to furnish the insurance described in this Paragraph 43 only if and when the Property Lease expires or is terminated, or if for any reason the Tenant does not provide the insurance or self-insurance coverage required by the Lease Insurance Provision. 4.4 Escrow. Subject to the following paragraph, Borrower shall pay to Beneficiary monthly, on each date on which a payment is due under the Note, one -twelfth (1/12th) of such amount as Beneficiary from time to time .estimates will be required to pay all Property Taxes and Charges and Insurance Premiums before becoming past due. Beneficiary's estimates shall be based on the amounts actually payable or, if unknown, on the amounts actually paid for the year preceding that for which such payments are being made adjusted to reflect for any anticipated or known increases for the coming year. Beneficiary may require Borrower to pay one -sixth (1/6th) of said estimate as escrow overage, which may be retained by Beneficiary in escrow from year to year. Any deficiencies shall be promptly paid by Borrower to Beneficiary on demand. Borrower shall transmit bills for the Property Taxes and Charges and Insurance Premiums as soon as received. When Beneficiary has received from Borrower or on its account funds sufficient to pay the same, Beneficiary shall, except as provided in Paragraph 8.2, pay such bills. If the amount paid by Borrower in any year exceeds the aggregate required, such excess shall be applied to escrow payments for the succeeding year. Pyririrnts'froitt said :iecourlt t`or such purposes�:may be made by Beneficiary at its discrctton even though subsequent: o vneirs of the Property may benefit thereby. Beneficiary shall not be a irustee..of (un,ds�ut Rid.aceountand may:cominingle:sueh.fttiids with its general assets without any obligation to pay interest thereon or account for any earnings, income or interest on such funds. Upon the occurrence of an Event of Default hereunder, Beneficiary may apply, at any time and in such order as Beneficiary may determine, the balance then remaining in the account accumulated under this Paragraph against the amounts due and payable under the Note, tbis Indenture or any other Loan Document. Beneficiary agrees to waive the requirements under the foregoing paragraph that Borrower pay to Beneficiary monthly escrow installments for Property Taxes and Charges and Insurance Premiums subject to the following conditions ("Conditions") and further reservation set forth below: (a) no default after any applicable period of notice and cure shall exist under the Mote or the Loan Documents; (b) no change shall occur in the ownership or management of the Property; and 12 MCS HHO LLC La Quinta, CA DOC #2014-0484801 Page 14 of 41 12/18/2014 03:06 PM (c) Property Taxes and Charges and Insurance Premiums shall be paid promptly when due and without accrual of interest or penalty, and Borrower shall promptly furnish to Beneficiary satisfactory evidence of such payment. Notwithstanding the foregoing, Beneficiary reserves the right to revoke its waiver (x) if any one or more of the Conditions are at anytime not satisfied or (y) at such time as Beneficiary, in its sole unfettered discretion, deems such revocation necessary to protect the security granted by this Indenture or any of the other Loan Documents. 4.5 Sales and Encumbrances. (a) Borrower shall not, without the prior written consent of Beneficiary, which consent, if given by Beneficiary in its sole unfettered discretion, may be conditioned upon a change in the interest rate under the Note, payment of a fee or change in the term of the Note, -delivery of a management contract approved by Beneficiary with a management company approved by Beneficiary, and/or the satisfaction of other conditions required by Beneficiary or one or more of the foregoing or other requirements of Beneficiary: (i) convey, assign, sell, mortgage, encumber, pledge, dispose of, hypothecate, grant a security interest in, grant options with respect to, or otherwise dispose of (directly or indirectly or by operation of law or otherwise, of record or not), all or any part of any legal or beneficial interest in any part or all of the Property or the Leases, or any interest therein, or any or all of the Rents; or (ii) sell, assign or otherwise dispose of (whether or not of record or for consideration or not), or permit the sale, assignment or other disposition of any legal or beneficial interest in the stock of Borrower, if Borrower is a corporation, or in any general or limited partnership interest in Borrower, if a general or limited partnership or joint venture: (b) Notwithstanding the provisions of Paragraph 4.5(a) above, provided that no Event of Default then exists and no event has occurred which, with the passage of time, could lead to an Event of Default, a transfer of ownership interests held by the Principals in the Borrower or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in the Borrower, shall be allowed subject to the following conditions: (i) the transferee is (1) one of the Principals, (2) adult immediate family members of one of the Principals, or (3) trusts established for the benefit of one of the Principals and/or immediate family members of one of the Principals; (ii) such transfer of ownership interests will not cause a change in the management and control of Borrower (or such other intermediate entity, as applicable) and after the proposed transfer the Principals shall maintain the same right and ability to manage and control the Borrower (or such intermediate entity, as applicable) as existed prior to the transfer. For purposes of the Loan Documents, no change in the management or control of Borrower shall be deemed to have occurred so long as either of the Principals or Richard Gordon is the manager of the Borrower and has the right and ability to manage and control the Borrower; and (iii) Beneficiary is provided with written notice of any such transfer no later than fifteen (15) days after the date of the transfer. 13 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 15 of 41 12/18/2014 03:06 PM Any transfer permitted by this Paragraph 4.5(b) shall not relieve the Borrower or any of the Principals from its or his obligations under the Loan Documents including, without limitation, under the Environmental Indemnification and the Limited Guaranty dated of even date herewith. (c) Notwithstanding the provisions of Paragraph 4.5(a) above, Beneficiary shall permit a one-time sale of the Property by the Borrower and the assumption of the obligations of Borrower and the Principal(s) under the Loan Documents by the purchaser and by one or more substitute principals, provided that the following conditions are satisfied: (i) at least thirty (30) days prior to the date of the proposed transfer, Borrower must have provided Beneficiary with written notice and a detailed explanation of the proposed transaction and such financial information and other documentation regarding the prospective purchaser and prospective substitute principal(s) as Beneficiary may request; (ii) Beneficiary, in its sole and unfettered discretion, must have approved the prospective purchaser and prospective substitute principal(s) to assume the obligations under the Loan Documents; (iii) Borrower shall have provided Beneficiary with documentation acceptable to Beneficiary that the Property is producing and will continue to produce annual net operating income equal to not less than one hundred twenty percent (120%) of the total annual debt service payable under the Loan Documents; (iv) Beneficiary must have approved the management agreement to be executed by the proposed purchaser; (v) Beneficiary must be paid an assumption fee of one percent (1%) of the principal balance of the Note, such payment to be made at the time such assumption is approved or closed, at Beneficiary's option; (vi) the purchaser and any new principal(s) must execute Beneficiary's assumption documents by which the purchaser and such principal(s) assume the obligations under the Loan Documents, and purchaser and such principal(s) must execute an environmental indemnity agreement and such other documents as Beneficiary shall require to accomplish the assumption of the obligations under the Loan Documents; and (vii) Borrower and/or the purchaser must pay Beneficiary's expenses incurred in connection with the proposed assumption transaction (including, without limitation, attorney's fees, recording fees, etc.). Nothing contained in this Paragraph 4.5(c) or in any assumption document shall be construed to require Beneficiary to approve any proposed purchaser or proposed substitute principal(s) or to release the Borrower, or any of the Principals from its or his obligations under the Loan Documents including, without limitation, under the Environmental Indemnification and the Limited Guaranty dated of even date herewith. (d) Any breach of the foregoing by a holder of any interest (legal or beneficial) or stock" in Borrower shall constitute an Event of Default under Paragraph 8.1(a) below. 4.6 Financial Records and Statements. Borrower shall keep accurate books and records in accordance with federal income tax basis accounting principles, consistently applied, in which full, true and correct entries shall be promptly made as to all items of Borrower's income and expense of the -14 MCS HHG LLC La Quints, CA DOC #2014-0484801 Page 16 of 41 12/18/2014 03:06 PM Property and shall permit all such books and records to be inspected and copied by Beneficiary, its designee or its representatives during customary business hours. Borrower shall 4eliver or cause to be delivered to Beneficiary within sixty (60) days after the end of each calendar year, an annual operating statement showing in detail reasonably satisfactory to Adhdficinry all iii6ome and expenses of Borrower with respect to the .Property, certified as -:to recur."ae�r ley Bormvicr, anta cotnpilecl by Sri independent certified public accountant acceptable to; Bc31cfctaty (BcneCiciary Hereby :approves_ Jonathan & Associates, Inc. as such independent ccrtifed public accountant);. and a'.ciirruril'list of all tenants, the rentals payable by the tenants and the unexpired .1ermm of their. Leases;. certified a5.:to. accuracy by `a, representative of Borrower acceptable to Beric�ciary, -and in. 'form and substauc `satisfacttory. to: Beneficiary. On Beneficiary's request at all least ri ble times aiid;.oti reasonable notico,.Bem:ficiiuy shall` have the right to audit Borrower's books of account and i'iiiancial rcco, ds, all. of Ihich will be rnado available to Beneficiary and/or Beneficiary's representatives for that purpose. In addition, the Principals shall deliver or cause to be delivered to Beneficiary, their respective personal financial statements under original signature within sixty (60) days after the end of each calendar year. 4.7 Further Assurances. Borrower shall promptly upon request of Beneficiary. (i) correct any defect, error or omission which may be discovered in the contents of any Loan Document or in the execution or acknowledgment thereof, or (ii) execute, acknowledge, deliver and record or file such further instruments (including, without limitation, mortgages, ddeds cif, mist; :security ,ti$icetnents, fiitanciri& statements and specific assignments of rents or leases),. or (itr),toirri-ith-t_h .Beriefictary.in notifyirng any third party, who is in possession of any Personalty, of Beneficiiary's security interest in, such .Personalty' and obtaining the acknowledgment from such third party that it is holding such Personalty for the benefit of Beneficiary; or (iv) cooperate with Beneficiary in obtaining control (as defined in the Uniform Commercial Code as now adopted and amended from time to time in the State) with respect to Personalty consisting of deposit accounts, letter -of -credit rights and electronic chattel paper and do such further acts, in any case as may be necessary, desirable or proper in Beneficiary's reasonable opinion to (a) carry out more:ef%ctively tile',purposes ofthc;Loali Docuincrits, (b) protecfxnd preserve'die first>and valid licn aild security, interest of dins Indenture owtlie Encumbered Wopeity.or to subject tiaer.'eto any properiya.ntendeci'. Uy tltc.'terttls dicretaf to _bc covcrcd ,tlicreby, itictiid h vittiout ,I in ztYy xene�valc, additions,. sisbstitutiois or, replacements;.thccefo oX (c) protcet the interesst and security interest. of Teneficiaty in the; Encumbered Property against the rights or interests of third parties. By signing this Indenture, Borrower authorizes Beneficiary to file such financing statements, with or without the signature of Borrower, as Beneficiary may elect, as may be necessary or desirable to perfect the lien of Beneficiary's security interest in the Fixtures and Personalty. Borrower further authorizes Beneficiary to file, with or without any additional signature from Borrower, as Beneficiary may elect, such amendments and continuation statements as Beneficiary may deem necessary or desirable from time to time to perfect or continue the lien of Beneficiary's security interest in the Fixtures and Personalty. Borrower hereby expressly ratifies any friancing statements that may have been filed by Beneficiary in advance of the date hereof to perfect Beneficiary's security interest in the Fixtures and Personalty. Borrower hereby appoints Beneficiary as its attorney -in -fact, coupled with an interest, to take ;the above actions and to perform such obligations on behalf of Borrower, at Borrower's sole expense, if Borrower fails to comply fully with Borrower's obligations under this Paragraph 4.7. 4.8 Indemnity. Borrower shall indemnify, defend and hold harmless Trustee or Beneficiary from and against, and, upon demand, reimburse Trustee or Beneficiary for, all claims, demands, liabilities, losses, damages, judgments, penalties, costs and expenses, including, without limitation, attorneys' fees and disbursements, which may be imposed upon, asserted against or incurred or paid by either Trustee or Beneficiary by reason of, on account of or in connection with any bodily injury or death or property damage occurring in, upon or in the vicinity of the Property through any cause whatsoever, or 15 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 17 of 41 12/18/2014 03:06 PM asserted against Beneficiary on account of any act performed or omitted to be performed under the Loan Documents or on account of any transaction arising out of or in any way connected with the Property or the Loan Documents, except claims, demands, liabilities, losses, damages, judgments, penalties, costs and expenses, including, without limitation, attomeys' ,fees and disbuisements:resulting solely from the act or omission of the Trustee or Beneficiary which is deteriuinec by s bburt of competent jurisdiction to have resulted solely from the willful misconduct or gross ligence of Tti stet *gor Beneficiary, whereupon the exception shall apply only against Trustee or Beneficiary as the case may be. 4.9 No Preferences. Borrower shall not repay any sums borrowed from anyone other than Beneficiary, if, as a result of, or concurrently with the making of, such payments, Borrower would then be in default under the Loan Documents or in the payment of obligations incurred in the ordinary operation of the Property., 4.10 Notices. Borrower shall deliver to Beneficiary at Beneficiary's Notice Address promptly upon receipt of the same, copies of all notices, certificates, documents and instruments received by Borrower which materially and adversely affect Borrower, the Property or the Leases. Borrower shall promptly give written notice of any litigation commenced or threatened affecting Borrower or the Property. 4.11 Loan Estoppel Certificates. Borrower shall promptly furnish to Beneficiary from time to time, on the request of Beneficiary, written statements signed and, if so requested, acknowledged, setting forth the then unpaid principal and interest on the Note and specifying any claims, offsets or defenses which Borrower asserts against the Secured Debt, or any obligations to be paid or performed by Borrower under the Loan Documents, together with any other information reasonably requested by Beneficiary. 4.12 Legal Existence and Place of Business. If Borrower as an entity is executing this instrument: (a) Authorization; Organization. Borrower warrants that Borrower (i) is duly organized and validly existing, in good standing under the laws of the state of its organization, (H) is duly qualified to do business and is in good standing in tiro state of its°organtzatton>arid in tlie: siate:where the, Property is located, (iii) has the power; authority: and 'legal ri lit to carry .on the business now being conducted by it and'to engage in the transactions contemplated byfihe Loan Doctfnerits;:and (iY)has dtrl}r authorized by all necessary action the execution and delivery of the Loan Documents and the performance and observance of the provisions thereof. (b) Dissolution-, Disposition of Assets; State of Organization. Borrower agrees that so long as any of its obligations hereunder, or under the Loan Documents remain unsatisfied, it will not change, dissolve or liquidate (in whole or in part) its existence, that it will maintain its existence, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another entity, and will not change the state of its organization, without the prior express written consent of Beneficiary except as may be otherwise provided herein. (e) Place of Business. Borrower agrees that so long as any of its obligations hereunder, or under the Loan Documents, remain unsatisfied it will not change its place of business, or if it has more than one place of business, it will not change its chief executive office (i.e. the place from where the Borrower manages the main part of its business operations or affairs), unless Borrower shall have delivered to Beneficiary written notice of such proposed change not less than thirty (30) days before the effective date of such change and shall have taken all action which Beneficiary detennines to be reasonably necessary or desirable to file or amend any Uniform Commercial Code financing statement or continuation statement regarding the loan evidenced and secured by the Note and the Loan Documents. 16 MCS HHG LLC La Quinta, CA DOC 42014-0484801 Page 18 of 41 12/18/2014 03:08 PM 4.13 Place of Residence. If Borrower as an individual is executing this instrument, Borrower agrees that so long as any of its obligations hereunder, or under the Loan Documents, remain unsatisfied, Borrower will not change his/her place of residence, unless Borrower shall have delivered to Beneficiary written notice of such proposed change not less than thirty (30) days before the effective date of such change, and shall have taken all action which Beneficiary determines to be reasonably necessary or desirable to file or amend any Uniform Commercial Code financing statement or continuation statement regarding the loan evidenced and secured by the Note and the Loan Documents. ]` 4.14 Borrower Name or Ident�. Borrower shall not change its name or identity unless Borrower shall have delivered to Beneficiary written notice of such proposed change not less than thirty (30) days before the effective date of such change and shall have taken all action which Beneficiary determines to be reasonably necessary or desirable to file or amend any Uniform Commercial Code financing statement or continuation statement regarding the loan evidenced and secured by the Note and the Loan Documents. 4.15 Defense and Notice of Actions. Borrower shall, without liability, cost or expense to Trustee or Beneficiary, protect, preserve and defend title to the Property, the security hereof and the rights or powers of Trustee or Beneficiary; against all adverse claimants to title or any possessory or non - possessory interests therein, whether or not such claimants or encumbrancers assert title paramount to that of Borrower or Trustee or Beneficiary or claim their interest on the basis of events or conditions arising subsequent to the date hereof. 4.16 Lost Note. Borrower shall, if the Note is mutilated, destroyed, lost or stolen, deliver to Beneficiary, in substitution therefor, a new'promissory note containing the same terms and conditions as the Note with a notation thereon of the unpaid principal and accrued and unpaid interest, and that it is in substitution for the Note; provided Borrower is furnished with an affidavit confirming the mutilation, destruction, loss or theft and an indemnity from Beneficiary against all losses, liabilities, damages, costs and expenses, including reasonable attorneys fees, arising out of any claim made by or through any person with respect to the mutilated, lost or stolen original Note. 4.17 Personalty and Fixtures. Borrower shall use the Personalty and Fixtures primarily for business purposes and keep the Personalty at the Land. Borrower shall immediately notify Beneficiary in writing of any change in its place of business and, as of the execution hereof and hereafter from time to time when requested by Beneficiary, upon Borrower's acquisition of items of property constituting tangible Personalty or Fixtures, Borrower shall provide Beneficiary with a current, accurate inventory of the tangible Personalty and Fixtures. Borrower will not permit any of the Fixtures or tangible Personalty owned by Borrower, to be removed at any time from the Realty without the prior written consent of Beneficiary unless actually replaced by articles of equal suitability and value owned by Borrower free and clear of any lien or security interest except those held by Beneficiary and as may be approved in writing by Beneficiary. 4.18 Obligations. Borrower will timely perform all covenants, agreements, terms and conditions to be performed by Borrower under this Indenture and as required of Borrower under the Loan Documents. 4.19 SDN List. An Event of Default shall exist, without notice or cure rights, if the following appear on the list of Specially Designated Nationals and Blocked Persons that is maintained by the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") or on any other similar list maintained by any U.S. governmental entity or agency (collectively, the "SDN List"): (a) any Borrower; (b) any 17. MC5 HHG LLC La Quinta, CA DOC #2014-0484801 Page 19 of 41 12/18/2014 03:06 PM Principal (as defined in the Commitment or any Loan Document); (c) any guarantor or indemnitor; or (d) any person or entity related to any Borrower, any Principal, any guarantor or any indemnitor. 4.20 Single Pgoose Entity. At all times during the term of this Indenture and until the Secured Debt is fully and indefeasibly paid in full, the Borrower must be a "single purpose entity", which means that it satisfies each of the following conditions: W the `borrower does not engage in any bustnes"s. or activity, othc[ than the ownership, operatioha .aad .maintbitanco .of the Property and activttie.5. ,incidental xhereto; and -the Borrower has not acquired, dWhed, }field, leases, operated, managed, developed 9'r`improvcd any assets other than the Property; (b) the Borrower preserves its existence as an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation or organization and observes all organizational formalities that are required to maintain its existence as a legal entity separate and apart from its owners; and (c) the Borrower has not and will not merge or consolidate with any other entity. S. CASUALTIES AND TAKINGS. 5.1 Notice to Beneficiary. In the case of any act or occurrence of any kind or nature which results in damage, loss or destruction to the Property (a "Casualty"), or commencement of any proceedings or actions which might result in a condemnation or other taking for public or private use of the Property or which relates to injury, damage, benefit or betterment thereto (a "Taking"), Borrower shall promptly notify Beneficiary describing the nature and the extent of the Taking or the Casualty, as the case may be. Borrower shall promptly fiunish to Beneficiary copies of all notices, pleadings, judicial or 'governmental determinations and other papers served on or by Borrower in any such proceedings or negotiations. Borrower shall use diligent efforts to collect the maximum amount of insurance proceeds payable on account of any Casualty ("Insurance Proceeds"), and the maximum award of payment or compensation payable on account of any Taking ("Taking Proceeds"). In the case of a Casualty, Beneficiary may, at its sole option, make proof of loss to the insurer, if not made promptly by Borrower. Borrower shall notsettle or otherwise compromise any claim for Insurance Proceeds or Taking Proceeds without Beneficiary's prior written consent. Borrower hereby assigns, sets over and transfers to Beneficiary all Insurance Proceeds and Taking Proceeds and authorizes payments of such Proceeds to be made directly to Beneficiary. Such Proceeds shall be applied in accordance with the terms and provisions of this Paragraph 5. 5.2 Repair and Replacement. In case of a Casualty, the Borrower will promptly restore the Property to the substantial equivalent of its original condition, regardless of whether Insurance Proceeds (defined below) exist, are made available, or are sufficient. In case of a Taking, the Borrower will promptly restore, repair or alter the remaining property in a manner reasonably satisfactory to the Beneficiary. Provided, however, upon a Casualty or Taking, if Beneficiary applies all of the Insurance Proceeds or the Taking Proceeds (defined below) to the reduction of the Secured Debt, Borrower shall be obligated only to remove any debris from the Property and take such actions as are necessary to make the undamaged or non -taken portion of the Property into a functional economic unit, insofar as is practicable under the circumstances. 18 MCS HHG LLC La Quints, CA DOC #2014-0484801 Page 20 of 41 12/18/2014 03:06 PM 5.3 Proceeds. (a) Collection. Borrower shall use commercially reasonable efforts to collect the maximum amount of insurance proceeds payable on account of any Casualty ("Insurance Proceeds"), and the maximum award of payment or compensation payable on account of any Taking ("Taking Proceeds"). In the case of a Casualty, Beneficiary may, at its sole option, make proof of loss to the insurer, if not made promptly. by Borrower. Borrower shall not settle or otherwise compromise any claim for Insurance Proceeds or Taking Proceeds without Beneficiary's prior written consent. (b) Assignment to Beneficiary. Borrower hereby assigns, sets over and transfers to Beneficiary all Insurance Proceeds and Taking Proceeds and authorizes payments of such Proceeds to be made directly to Beneficiary. Beneficiary may, at its sole option, apply such Proceeds to either of the following, or any combination thereof- (i) payment of the Secured Debt, either in whole or in part, in any order determined by Beneficiary in its sole unfettered discretion; or (ii) repair or replacement, either partly or entirely, of any part of the Property so destroyed, damaged or taken, in which case Beneficiary may impose such terms, conditions and requirements for the disbursement of proceeds for such purposes as it, in its sole unfettered discretion, deems advisable. Beneficiary shall not be a trustee with respect to any Insurance Proceeds or Taking Proceeds, and may commingle Insurance Proceeds or Taking Proceeds with other funds and may hold such fiords without obligation to pay interest thereon. If any portion of the Secured Debt shall thereafter be unpaid, Borrower shall not be excused from the payment thereof in accordance with the terms of the Loan Documents. Beneficiary shall not, in any event or circumstances, be liable or responsible for failure to collect or exercise diligence in the collection of any Insurance Proceeds or Taking Proceeds. 5.4 Use of Insurance Proceeds to Repair Improvements. Notwithstanding Paragraphs 5.1 and 5.3 above, but subject to the provisions of this Paragraph 5.4, Insurance Proceeds payable as a result of a Casualty to the Improvements may be utilized to pay the costs of repairing, rebuilding and/or restoring the Improvements provided that the Property Lease requires that the Borrower or the Tenant repair, rebuild and/or restore the Improvements affected by such Casualty. Borrower acknowledges and agrees that use of the Insurance Proceeds to repair and/or restore the Improvements is subject to satisfaction of the following conditions: (a) All expenses incurred by Beneficiary in connection with the Casualty including, without limitation, reasonable attorneys' fees and expenses, shall be paid by the Borrower on demand. (b) Beneficiary must receive evidence reasonably satisfactory to Beneficiary confirming that: (i) Tenant or Borrower is holding a fund comprised of the Insurance Proceeds and, if necessary, additional funds paid by Borrower or the Tenant which, in the reasonable judgment of Beneficiary, is sufficient to repair, rebuild and restore the Improvements on the Property to their condition existing immediately prior to the Casualty; (ii) Borrower has sufficient funds (comprised of rental interruption insurance proceeds and other funds of Borrower) to pay operating expenses, taxes, debt service on the Note and other.so-called "carrying costs" of the Property during the period of repair; 19 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 21 of 41 12/18/2014 03:06 PM (iii) after the repairs are completed, the Property will produce sufficient income to pay operating expenses, taxes, debt service on the Note and other so-called "carrying costs" of the Property; (iv) the Property, after the repairs are completed, will be in compliance with all applicable laws, ordinances, regulations and the like; (v) the Property Lease will continue in full force and effect during the performance of repairs and after the repairs to the Improvements are completed, without credit or offset against the rent payable thereunder unless the amount of such credit or offset is paid from the proceeds of rent loss insurance or rent loss self insurance; and (vi) no Event of Default, or occurrence which with the passage of time or the giving of notice would be an Event of Default, exists under any of the terms, covenants and conditions of this Indenture or any of the other Loan Documents. (c) Borrower will deliver to Beneficiary, promptly after Beneficiary's request: (i) evidence reasonably satisfactory to Beneficiary that all claims for labor, services and materials enforceable by lien upon the Property and incurred in connection with the repair, rebuild and/or restore the Improvements have been paid in full or provision acceptable to Beneficiary has been made therefor, and that no liens or other matters not approved in advance by Beneficiary have been filed of record against the Property; (ii) a certificate of an architect, engineer or general contractor reasonably acceptable to Beneficiary confirming that the repairs and restoration to the Improvements have been completed in a good and workmanlike manner and in accordance with all laws, rules, regulations, orders, codes and ordinances then applicable to such restoration; and (iii) an estoppel certificate executed by the Tenant under the Property Lease in form and content reasonably satisfactory to Beneficiary and which confirms that the Property Lease remains in full force and effect. (d) Any Insurance Proceeds in excess of the amount used to repair, rebuild and/or restore the Improvements shall be delivered to the Beneficiary and applied to the outstanding balance of the Secured Debt. (e) If any of the foregoing conditions are not or cannot be satisfied, the provisions of Paragraph 5.3 of this Indenture relating to disposition of Insurance Proceeds shall again become applicable. (f) Beneficiary shall in no event be liable -for the performance or observance of any covenant or condition arising under the Property Lease in connection with the Property nor be obligated to take any action to repair, rebuild or restore the Improvements. (g) The foregoing is always subject to the right and option of Beneficiary to require that all or any portion of the Insurance Proceeds received by the Borrower or the Beneficiary be applied to cure any Event of Default existing or arising at any time or times under the Note, this Indenture or the other Loan Documents. 20 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 22 of 41 12/18/2014 03:06 PM 6. CONCERNING TRUSTEE. 6.1 Trustee's Covenants. Trustee, by ' Truskeo,s.acceptance.11creof, covenants faitlifiiily to, perform and fulfill the trusts herein created, being'liable,,howevei,;:6nly fear gross, negligence gr.'4illful . misconduct, and hereby waives any statutory fee and agrees to ace ept reasonable coanpertsatzon,;-ui li6u thereof, for any services rendered by it in accordance with the terms hereof. 6.2 Resignation of Trustee. Trustee may resign at any time upon giving thirty (30) days' notice in writing to Borrower and to Beneficiary. 6.3 Substitution of Trustee. In the event of the death, removal, resignation, refusal to act, or the inability to act of Trustee or in Beneficiary's sole unfettered discretion for any reason whatsoever, Beneficiary may, at any time or from time to time without notice and without specifying any reason therefor and without applying to any court, ;select and appoint a;successor."Trustec;.anci a.11 powers ngtits;, duties and authority of Trustee, as aforesaid, shall; titereupnri :becdine vested tn:: such successor w ll t; conveyance from the predecessor Trustee. Ncitlicr`Trustee nor ariy'Sabstitute Tri stee,shalt be reg4irgo to give bond for the faithful performance of its duties unless required by Beneficiary. Such substitute Trustee shall be appointed by written instrument duly recorded in the county where the Realty is located, which appointment may be executed by an authorized agent of Beneficiary and such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the Board of Directors and any superior officer of Beneficiary. :Borrower"hereby rate(1es< and confirms any and all acts which the herein -named Trustee, or its successors.or assigns in this trust, shall do lawfully by virtue hereof. Borrower hereby agrees, on behalf of itself and, of it's ,hLrs,<cx..00utars;;. administrators and assigns, that the recitals contained in any deed or deeds executed in due form by Trustee or any substitute Trustee, acting under the provisions of this Indenture, shall be prima facie evidence of the facts recited, and that it shall not be necessary to prove in any court, otherwise than by such recitals, the existence of the facts essential to authorize the execution and delivery of such deed or deeds and the passing of title thereby. 6.4 Reconveyance and Agreements. At any time, or from time to time, without liability therefor and without notice upon written request of Beneficiary and presentation of this Indenture and the Note or notes secured hereby for endorsement, and without affecting the personal liability of any person for the payment of the Secured Debt or the effect of this Indenture upon the remainder of the Property, Trustee may reconvey any part of the Property, consent in writing to the making of any map or plat thereof, join in granting any easement thereon, or join in any extension agreement or any agreement subordinating the lien or charge hereof. 6.5 Release of Lien. Upon written request of Beneficiary stating that the Secured Debt has been paid and upon surrender to Trustee of this Indenture and the Note or notes secured hereby for cancellation and retention and payment of Trustee's fees, Trustee shall reconvey, without warranty, the Property then held hereunder. The recitals in such reconveyanee of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as "the person or persons legally entitled thereto." 6.6 Exculpation and Indemnification of Trustee. Trustee shall not be liable for any error of judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever, except for Trustee's gross negligence or willful misconduct. Trustee shall have the right to rely on any instrument,,dociii i tit�or sigiiatui'e.'authorizing or supporting any action taken or proposed to be taken by it hereunder, believcd:.by Trustee: in good faith to be genuine. All monies received by Trustee shall, until used or dpplic c is' liereiti.provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other monies (except to the 21 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 23 of 41 12/18/2014 03:06 PM extent required by law), and Trustee shall be under no liability for interest on any monies received by it hereunder (except to the extent required by Law). Except to the extent arising solely from an act or omission that a court of competent jurisdiction determines constitutes the Trustee's gross negligence or willful misconduct, Borrower will reimburse Trustee for, and indemnify, save harmless and defend Trustee against, any and all liability and expense (including, without limitation, attorneys' fees and expenses) which Trustee may incur in performance of its duties under the Loan Documents. 7. LEGAL PROCEEDINGS. Whether or not an Event of Default (as defined in Paragraph 8.1) has occurred and exists, Beneficiary shall have the right, but not the duty or obligation, to intervene or otherwise participate in, prosecute or defend at any time any legal or equitable proceedings (including, without limitation, any eminent domain proceedings) which, in Beneficiary's sole unfettered discretion, affect the Property, the Leases, the Rents or any of the rights created by the Loan Documents. 8. DEFAULTS,• REMEDIES OF BENEFICIARY. 8.1 Defaults; Events of Default. Any of the following shall constitute an "Event of Default" hereunder: ^ (a) Breach of Named Covenant. Any breach by Borrower of the covenants set forth in Paragraphs 4.1 (Payments), 4.3 (Insurance) and/or 4.5 (Sales and Encumbrances), which breach shall immediately thereupon, without notice or opportunity to cure, constitute an Event of Default hereunder, (b) Breach of Indemnity Covenant. Any breach by Borrower of a covenant set forth in Paragraph 4.8 (Indemnity) of this Indenture shall constitute an Event of Default hereunder if Borrower does not cure such'breach within ten (10) days after written demand from or on behalf of the Beneficiary to the Borrower; or (c) Misrepresentations. Any representation or warranty made by Borrower or any person(s) or entity(ies) comprising Borrower or any guarantor(s) under the Loan Documents or any certificate or side letter delivered in connection with the Loan Documents proves to be untrue, misleading or is not fulfilled; or (d) Breach of Covenant. Any breach by Borrower of any other covenant in the Loan Documents or failure to observe or perform any other covenant, agreement, condition, term or provision of any of the Loan Documents or any certificate or side letter delivered in connection with the Loan Documents, which breach or failure is not cured within thirty (30) days after written notice thereof from or on behalf of the Beneficiary or, if sdch` bici clt-or failure is not reasonably susceptible to cure within such initial thirty (30) day period, is not:cured-within die: inu ediately succeeding thirty (30) day period (provided that the Borrower has commenced actions t6ture' such breach or failure within such initial thirty (30) day period and diligently and continuously pursues cure thereafter); or (e) Bankruptcy. Immediately upon the occurrence of any of the following without the doing of any act or the giving of any notice by Beneficiary: (i) any one or more of the then legal or beneficial owners of the Property, or any individual or entity then personally liable on the Secured Debt (including, without limitation, any guarantor) or, if Borrower is a partnership, any general partner or joint venturer, or if a limited liability company, any managing member or majority (or other controlling) member (collectively the "Parties in Interest") becomes insolvent, makes a transfer in fraud of, or assignment for the benefit of, creditors or admits in writing its inability, or is unable,_to'pay debts as they become due, or (ii) a receiver or trustee is appointed for all or substantially all of the assets of a Party in Interest or for the Property in any proceeding brought by a Patty in Interest, or any such receiver or trustee is appointed in any proceeding brought against a Party in Interest or the Property and not 22 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 24 of 41 12/18/2014 03:06 PM discharged within sixty (60) days after such appointment, or a Party in Interest consents or acquiesces in such appointment, or (iii) a Party in Interest files a petition under the Bankruptcy Code, as amended, or under any similar law or statute of the. United States or any state thereof, is adjudged a debtor under the Bankruptcy Code or insolvent, or (iv) a petition or answer proposing the adjudication of a Party in Interest as a bankrupt or its reorganization under any present or future federal or state bankruptcy or similar law is filed in any court and such petition or answer is not discharged or denied within sixty (60) days after the filing thereof, or (v) any composition, rearrangement, liquidation, extension, reorganization or other relief of debtors now or hereafter existing is requested by a Party in Interest; or Adverse Court Action. A court of competent jurisdiction enters a stay order with j' respect to, assumes custody of or sequesters all or a part of the Property, or the Property is taken on execution or by other process of law; or (g) Suspension. Borrower or any person(s) or entity(ies) comprising Borrower or either of the Principals dies, terminates or suspends its business; provided that Beneficiary acknowledges and agrees that the death or legal incompetency of a Principal will not constitute an Event of Default hereunder if, within ninety (90) days from the date of death or declaration of legal incompetency of the (; applicable Principal, the following conditions are satisfied: (i) Richard Gordon or another substitute guarantor satisfactory to the Beneficiary assumes the obligations of the deceased or incompetent Principal under the Loan Documents (and Borrower acknowledges that Richard Gordon's financial condition must not have materially and adversely changed from the financial condition disclosed by the information provided to the Beneficiary prior to the date of this Indenture, and any other proposed assumptor of the deceased or incompetent Principal's obligations must satisfy Beneficiary's then -current credit, management and other criteria, in Beneficiary's sole. discretion), and such substitute guarantor has executed such documents as may be required by Beneficiary to evidence such assumption (including, without limitation, a limited guaranty and environmental indemnification in the form executed by the deceased, bankrupt, insolvent or incompetent Principal), and (ii) if such Principal's death or incompetency results in a transfer of the Property or ownership interests in the Borrower, the terms and conditions of Paragraph 4.5(b) of this Indenture are satisfied with respect to such transfer; or (h) Other Events. Any other event occurs which, under the Loan Documents, constitutes a default by the Borrower or gives the Beneficiary the right to accelerate the indebtedness secured by this Indenture, subject to any notice and/or cure period expressly provided therein; or (i) Default under Property Lease. Borrower acknowledges and agrees that the occurrence of an event of default under the Property Lease on the part of Borrower, which is not cured within applicable grace or curative periods set forth therein, if any, shall constitute an immediate Event of Default (without need of additional notice or the expiration of any additional cure period) under this Indenture. All amounts payable by the Borrower to the Beneficiary under this Indenture or any of the other Loan Documents for which a payment date is'expressly set forth herein or therein shall be payable on the specified due date without notice or demand by the Beneficiary. All amounts payable by the Borrower to the Beneficiary under this Indenture or the other Loan Documents for which no payment date is expressly set forth herein or therein shall be payable ten (10) ten days after written demand by the Beneficiary to the Borrower. The Beneficiary may, at its option, send written notice or demand to the Borrower of amounts payable on a specified due date pursuant to this Indenture or the other .Loan Documents, but the failure to send such notice shall not affect or excuse the Borrower's obligation to make payment of the amounts due on the specified due date. 23 MCS 1MG LLC La Quinta, CA DOC #2014-0484801 Page 25 of 41 12/18/2014 03:06 PM 8.2 Remedies. In case of an Event of Default, Beneficiary may, at any time thereafter, at its option and without notice, exercise any or all of the following remedies: (a) Acceleration. Declare the entire Secured Debt due and payable, and it shall thereupon be immediately due and payable. (b) Foreclosure. Foreclose this Indenture by instituting a foreclosure suit in any court having jurisdiction.. Borrower hereby waives all right to appraisal allowed under any Laws, which appraisal may be obtained at the option of Beneficiary. (c) Offset Rights. Apply in satisfaction.of the Secured Debt or an amount at any. Y time to become due or payable in eonricction viitii the wheiship; t ceuPancy, tl e , resiorafion or repaur of the Properly, any deposits or other,_surris credited by "or Clue froth Beneficiary to Borrower, including; without limitation, Insurance Proceeits, Taking Pra ceds:aiid:fitncls licld"ri the :cscw account rcfer;cd to in Paragraph 4.4. (d) Cure of Default. Without releasing Borrower from any obligation hereunder or under the Loan Documents, cure any Event of Default. In connection therewith, subject to the rights of the Tenant under the Property Lease, Beneficiary may enter upon the Property and do such acts and things as Beneficiary deems necessary or desirable to protect the Property or the Leases, including, without limitation: (i) paying, purchasing, contesting or compromising any encumbrance, charge, lien, or claim, Property Taxes and Charges or Property Liabilities, as defined in Paragraph 4.1(d); (ii) paying any Insurance Premiums, and (iii) employing counsel, accountants, contractors and other appropriate persons to assist Beneficiary in the foregoing. Should Beneficiary make any such payments, the amount thereof shall be secured hereby and Borrower shall reimburse Beneficiary therefor immediately upon demand, and said amount shall bear interest at the After -Maturity Rate until repaid. (e) Possession of Property. Subject to the. rights of Tenant under the Property Lease, take physical possession of the Property and of all of Borrower's books, records, documents and accounts relating thereto and exercise, without interference from Borrower, any and all rights which Borrower has with respect to the Property, including, without limitation, the right at Borrower's expense to rent and lease the same, to hire a professional property manager for the Property and to apply any rents, royalties, income or profits collected to the reduction of the Secured Debt without in any way curing any default. If necessary to obtain possession as provided for above, Beneficiary may, without exposure to liability from Borrower or other persons, invoke any and all legal remedies to dispossess Borrower, including, without limitation, one or more actions for forcible entry and detainer, trespass and restitution. In connection with . any action taken by Beneficiary pursuant to this subparagraph (e), Beneficiary shall not be liable for any loss sustained by Borrower resulting from any failure; to let the Property or from any other act or omission of Beneficiary in managing the Property unless caused by the willful misconduct or gross negligence of Beneficiary, nor shall Beneficiary be obligated to perform or discharge any obligation, duty or Iiability under any Lease or by reason of any Loan Document. Borrower hereby agrees to indemnify, hold harmless and defend Beneficiary from and against any liability, loss or damage incurred by Beneficiary under any Lease or under the Loan Documents as.a result of Beneficiary's exercise of rights or remedies under any of the Loan Documents, unless a court of competent jurisdiction determines such liability, loss or damage to have been caused solely by the willful misconduct or gross negligence of Beneficiary. Should Beneficiary incur any such liability for which Borrower is obligated to indemnify Beneficiary, the amount thereof shall be secured hereby and Borrower shall' reimburse Beneficiary therefor. immediately upon demand, and said amount shall bear interest at the After -Maturity Rate until repaid. Beneficiary shall have full power to make from time to time all alterations, renovations, repairs and replacements to the Property as may seem proper to Beneficiary. 24 " MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 26 of 41 12/18/2014 03:06 PM (f) Remedies under State Law. Beneficiary shall have the right to exercise all rights under laws of the State, whether or not herein specified, including without limitation Beneficiary's rights to foreclose by power of sale as provided herein. (g) Power of Sale. (1) Notices of Default and Sale. If Beneficiary elects to foreclose by exercise of the power of sale in this Indenture, Beneficiary will deposit with Trustee this Indenture, the Note, and any receipts and evidence of expenditures made and secured as Trustee may require. If notice of default has been given as then required by law, and after lapse of the time that may then be required by law, after recordation of the notice of default, Trustee, without demand on Borrower, will, after notice of sale having been given as required by law, sell the Property at the time and place of sale fixed by it in the notice of sale, either as a whole or in separate parcels as Trustee determines, and in any order that it may determine, at public auction to the highest bidder. Trustee may postpone sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time after that may postpone the sale by public announcement at the time fixed by the preceding postponement, and without further notice make the sale lit°the time;fixdd by the. last postponement; or Trustee. may; iri its discretion, give a new notice of sale. Beneficiary may rescind auy notice of default 4any time before Trustee's sale by executing a notice of rese�ssiin anii recordiii' it The reeor<iatiiin . of the natic,e will constitute a cancellation of any prior declaration of default and demand for sale and of any acceleration of maturity of the Secured Debt affected by any prior declaration or notice of default. The exercise by Beneficiary of the right of rescission will not constitute a waiver of any default then existing or subsequently occurring, or impair the right of Beneficiary to execute other declarations of default and demand for sale, or notices of default and of election to cause the Property to be sold, nor otherwise affect the Note or this Indenture, or any of the rights, obligations, or remedies of Beneficiary or Trustee. After sale, Trustee will deliver to the purchaser its deed conveying the property sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts will be conclusive proof of their truthfulness. Any person, including Borrower, Trustee, or Beneficiary, may purchase at that sale. If allowed by law, Beneficiary, if it is the purchaser, may turn in the Note at the amount owing on it toward payment of the purchase price (or for endorsement of the purchase price as a payment on the Note if the amount owing exceeds the purchase price). Borrower expressly waives any right of redemption after sale that Borrower may have at the time of sale or that may apply to the sale. (2) Trustee's Deed, Proceeds. Trustee, upon the sale, will make (without any covenant or warranty, express or implied), execute and, after due payment made, deliver to a purchaser and its heirs or assigns a deed or other record of interest, as the case may be, to the Property sold, which will convey to the purchaser all the title and interest of Borrower in the Property and will apply the proceeds of the sale in payment: (i) first, of the expenses of the sale together with the expenses of the trust, including, without limitation, attorney fees, that will become due on any default made by Borrower, and also any sums that Trustee or Beneficiary have paid for procuring a search of the title to the Property subsequent to the execution of this Indenture; and (ii) second, in payment of the Secured Debt then remaining unpaid, and the amount of all other monies with interest in this Indenture agreed or provided to be paid by Borrower. Trustee will pay the balance or surplus of the proceeds of sale to Borrower and its successors or assigns as its interests may appear. (h) Receiver. Secure the appointment of a receiver or receivers, as a matter of right for the Property whether such receivership be incident to a proposed sale of such Property or otherwise, and without regard to the value of the Property or the solvency of Borrower. Borrower hereby consents to the appointment of such receiver or receivers, waives any and all defenses to such appointment and agrees not to oppose any application therefor by Beneficiary. The appointment of such receiver, trustee or other 25 NICs Etxc LLC La Quinta, CA DOC #2014-0484801 Page 27 of 41 12/18/2014 03:06 PM appointee by virtue of any court order, or Laws shall not impair or in any manner prejudice the rights of Beneficiary to receive payment of the Rents pursuant to the Lease Assignment. (i) Uniform- C ommcreial Code:Reriiedies: Exercise any and all rights of a secured party with respect to the Personalty or Fixtures undell,the U iifbrm Commercial Code of the State and in conjunction with, in addition to or in substitution for those rights and remedies: (i) take possession of, assemble and collect the Personalty or render it unusable by Borrower; and (ii) require Borrower to assemble the Personalty and make it available at any place Beneficiary may designate so as to allow Beneficiary `to take possession or dispose of the PersonaltyWt�tten;noUce mail to Borroyrez, asi provided herein, 066n (1 S) bays pcidr.to:the date of public 'sale of the Personalty or pczor to the data ulcer which private sale of`the Personalty:will- be made, shall be'deemod to )rave,been. a. pul l,ic sale coiiductect in a commercially.reasonabie manner, if held contcinporaiicously with a sale of Properly as provided: in this adenture: Tit the` event'of a f6re6l6sure'sale, whethee irisde by 3ectefioisry ttitder (lie terms liered. or cinder; laiigtneint of a court; the i'ersanalty=and the other:;parts of :the Property°.may,. at. the.00 n of Beiieficlary be. saki ii guru or as a: evhole . It shall not , jiccessb y:that.<l3eneficaa'ry takk possession of the Personalty prior to the time that any sale pursuant to the provisions of this subparagraph is conducted and it shall not be necessary that the Personalty be present at the location of such sale. 0) Judicial Actions. Commence and maintain an action or actions in any court of competent jurisdiction to foreclose this Indenture pursuant to the Laws of the State or to obtain specific enforcement of the covenants of Borrower hereunder. Borrower agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy. (k) Subro ag tion. Have and exercise all rights and remedies of any person, entity or body politic to whom Beneficiary renders payment or performance in connection with the exercise of its rights and remedies under the.Loan Documents, including, without limitation, any rights or remedies under any mechanics' or vendors' lien or liens, superior titles, mortgages, deeds of trust, liens, encumbrances, rights, equities and charges of all kids heretofore or hereafter existing on the Property to the extent that the same are paid or discharged from the proceeds of the Note whether or not released of record. (1) Other. Take such other actions or commence such other proceedings as Beneficiary deems necessary or advisable to protect its interest in the Property and its ability to collect the Secured Debt as are available under Laws. In the case of the occurrence of an Event of Default under Section 4.1:9 hereof, Beneficiary shall have the right to take any and all action or to make any report or notification required by OFAC or any other applicable governmentalentity or agency or by the Laws relating to the SDN list. (m) Judgment on Environmental Provision. Beneficiary or its agents, representatives, and employees may seek a judgment that Borrower has breached its covenants, representations, or warranties in Paragraph 12 or any other covenants, representations, or warranties that are deemed to be "environmental provisions" pursuant to California Code of Civil Procedure § 736 (each an "Environmental Provision"), by commencing and maintaining an action or actions in any court of competent jurisdiction pursuant to California Code of Civil Procedure § 736, whether commenced prior to or after foreclosure of the lien of this Ind& tuft. ;Beneficiary or its agents, representatives, and employees may also seek an injunction to cause 136riowcr'tti. abate any action in violation of any Environmental Provision and may seek the recovery `of all vbMs,,Aamages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out-of-pocket costs or expenses actually incurred by Beneficiary (collectively, "Environmental Costs") incurred or advanced by Beneficiary relating to the cleanup, remedy, or other* response action required by any Environmental Law, or -any Hazardous Substance Claim, or which Beneficiary believes necessary to protect the Property. It will be conclusively 26 MCS HUG LLC La Quinta, CA DOC 42014-0484801 Page 28 of 41 12/18/2014 03:06 PM presumed between Beneficiary and Borrower that all Environmental 'Costs inC"6rred:•.oc advanced, by Beneficiary relating to the cleanup, remedy, or other response action of or to the Pioperty. were'rtiade by Beneficiary in good faith. All Environmental Coots incurred by geneficiary Andc>!r, this. subsection (including, without limitation, court costs; coiisi le :f s, anti: attoniey fees; whether, incurred in litigation and whether before or after ludgmciit) shall be -payable by the Bp tawerJta Bene ficiary, shall 14a secured by the lien of this Indenture.:and shall licai ultcrest at the Aiiet 1vIatunt}r Rate from the date of expenditure until those sums have been paid in full. Beneficiary shalt be Liititled tot bad, at'any.triistee's or foreclosure sale of the Property, the amount of the E4 ironniantal Costs:and rntbidst itf itddition: to the amount of other Indebtedness. The provisions of this paragraph (m) shall not extend to any Hazardous Substance Claim which a court of competent jurisdiction determines to have resulted from Hazardous Material being placed on, above or under the Property by the act or omission of a party other than the Borrower, a Principal or any agent, employee or contractor of any of them (i) during any period Beneficiary, or any successor in interest to Beneficiary, is in actual and exclusive possession of the Property, or (ii) subsequent to any foreclosure by Beneficiary or acceptance by Beneficiary of a deed in lieu of foreclosure with respect to the Property. (n) Waiver of Security. Beneficiary or its agents, representatives, and employees may waive its lien against the Property or any portion of it, including the Improvements, the Fixtures and the Personal Property, to the extent that the Property is found to be environmentally impaired in accordance with California Code of Civil Procedure § 726.5, and to exercise all rights and remedies of an unsecured creditor against Borrower and all of Borrower's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to, seeking an attachment order under California Code of Civil Procedure § 483.010. As between Beneficiary and Borrower, for purposes of California Code of Civil Procedure § 726.5, Borrower will have the burden of proving that Borrower or any related party (or any affiliate or agent of Borrower or any related party) was not in any way negligent in permitting the Release or threatened Release of the Hazardous Substances. (o) Advances, lsxpeiises by :Betieflniur>r. Any sums advanced or expenses incurred by Beneficiary under this, Paragraph 8.21 anctuditig but;not limited to attorneys fees, costs and other expenses, shall bear interest at the After -Maturity Rate, shall be payable by Borrower on demand and, together with such interest, shall constitute a part of tb& Secured Debt. (p) Amounts Applied to Secured Debt. All sums realized by Beneficiary under this Paragraph 8.2, less all costs and expenses incurred by<Bencfietiiry under this Paragraph 8.2, including, without limitation, attozicys` fees' and' disbursements; .property management -fees; costs of alterations, renovations, repairs .and replacements niade or authorized by he fici ry arid;all expenses incident to Beneficiary taking possession of the .Property, and such sums as Beneficiary deems appropriate as a reserve to meet future expenses of the Property, shall be applied to the Secured Debt in such order as Beneficiary shall determine. Thereafter, any balance shall be paid to the person or persons legally entitled thereto. 8.3 Holding Over. Should Borrower, after an Event of Default, continue in possession of the Property, either lawfully or unlawfully, Borrower shall be a tenant from day to day, terminable at the will of either Borrower or Beneficiary, at a reasonable rental per diem, based upon the value of the Property occupied computed by Beneficiary in its sole unfettered discretion, such rental to be due and payable daily to Beneficiary. 8A General Provisions. (a) Multiple Sales: To the extent permitted by law, several sales may be made pursuant to Paragraph 8.2 without exhausting Beneficiary's right to such remedy for any unsatisfied part 27 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 29 of 41 12/18/2014 03:06 PM of the Secured Debt and without exhausting the power to exercise such remedy for any other part of the Secured Debt, whether matured at the time or subsequently maturing. If a part of the Property is sold pursuant to Paragraph 8.2, and the proceeds thereof do not fully pay and satisfy the Secured Debt, such sale, if so made, shall not in any manner affect the unpaid and unsatisfied part of the Secured Debt, but as to such unpaid and unsatisfied part, the Loan Documents shall remain in full force and effect as though no such sale had been made. (b) Cumulative Remedies. All of the rights, remedies and options set forth in Paragraph 8.2 or otherwise available at law or in equity are cumulative and may be exercised without regard to the adequacy of or exclusion of any other right, remedy, option or security held by Beneficiary. (c) Right to Purchase. At any sale or sales of the Property pursuant to Paragraph 8.2, Beneficiary shall have the right to purchase the Property being sold, and in such cases the right to credit against the amount of the bid made therefor (to the extent necessary to satisfy such bid), the amount of the Secured Debt then due. (d) Right ta:Terminate.Procc`ediiigs Beneficiary may, at any time before conclusion of any proceeding or other action brought in connection with its exercise of the remedies provided for -in Paragraph 8.2, terminate, without prejudice to Beneficiary, such proceedings or actions. (e) No Waiver or Release. Beneficiary may resort to any remedies and the security given by the Loan Documents in whole or in part, and in such portions and in :such -order as may seeml best to Beneficiary in its sole unfettered discretion, and any such action .shall not in z any '�vay hti . considered as a waiver of any of the rights, benefits or remedies evidenced by the odn Documents_ Ttic, failure of Beneficiary to exercise any right, remedy or option provided for in the Loan Documents shall not be deemed to be a waiver of any of the covenants or obligations secured by the Loan Documents. No sale of all or any of the Property, no forbearance on the part of Beneficiary and no extension of the time for the payment of the whole or any part of the Secured Debt or any other indulgence given by Beneficiary to Borrower or any other person or entity, shall operate to release or in any manner affect Beneficiary's interest in the Property or the liability of Borrower to pay the Secured Debt. (f) Waivers and Agreements Regarding Remedies. To the full extent permitted under applicable law, Borrower hereby: (1) Redemption; Valuation. Agrees that Borrower will not at any time insist upon, plead, claim or take the benefit or advantage of any Laws now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and waives and releases all rights of redemption, valuation, appraisement, stay of execution, extension and notice of election to mature or declare due the whole of the Secured Debt; (2) Marshalling of Assets. Waives all rights to a marshalling of the assets of Borrower, including the Property, or to a sale in inverse order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of the Loan Documents to a sale of the Property for the collection of the Secured Debt without any prior or different resort for collection, or the right of Beneficiary to the payment of the Secured Debt out of proceeds of sale of the Property in preference to every other claimant whatsoever; 28 MCS HHG LLC La Quints, CA DOC #2014-0484801 Page 30 of 41 12/18/2014 03:06 PM (3) Counterclaims; Setoff. Waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which the action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding sentence, is timely raised in such foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a claim which could be tried in an action for money damages, such claim may be brought in a separate action which shall not thereafter be consolidated with Beneficiary's foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying Beneficiary's action; (4) Suretyship. Waives and relinquishes any and all rights and remedies which Borrower may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties; and (5) Laehes; Statutes of Limitation. Waives the defense of ladies and any applicable statutes of limitation. (g) Beneficiary's Discretion. Beneficiary may exercise its options and remedies under any of the Loan Documents in its sole unfettered discretion. (h) Sales. In the event of a sale or other disposition of the Property pursuant to Section 8.2 and the execution of a deed or other conveyance pursuant thereto, the recitals therein of facts (such as default, the giving of notice of default and notice of sale, demand that such sale should be made, postponement of sale, terms of sale, sale, purchase, payment of purchase money and other facts affecting the regularity or validity of such sale or disposition) shall be conclusive proof of the truth of such facts. Any such deed or conveyance shall be conclusive against all persons as to such facts recited therein. The acknowledgment of the receipt of the purchase money, contained in any deed or conveyance executed as aforesaid, shall be sufficient to discharge the grantee of all obligations to see to the proper application of the consideration therefor as herein provided. The purchaser at any Trustee's or foreclosure sale hereunder may disaffirm any easement granted or rental agreement or Lease made in violation of any provision of the Loan Documents, and may take immediate possession of the Property free from, and despite the terms of, such grant of easement and rental or Lease. 9. POSSESSION AND DEFEASANCE. 9.1 Possession. Until the occurrence of an Event of Default and except as otherwise expressly provided to the contrary, Borrower shall retain full possession of the Property, subject, however, to all of the terms and provisions of the Loan Documents. 9.2 Defeasance. If all of the Secured Debt is paid as the same becomes due and payable and if all of the covenants, warranties, conditions, undertakings and agreements made in the Loan Documents are kept and performed, then in that event only, all rights under the Loan Documents shall terminate and the Property shall become wholly clear of the liens, grants, security interests, conveyances and assignments evidenced hereby, and Beneficiary shall release or cause to be released, such liens, grants, assignments, conveyances and security interests in due form at Borrower's cost, and this Indenture shall be void. Recitals of any matters or facts in any instrument executed under this Section 9.2 shall be conclusive proof of the truthfulness thereof. To the extent permitted by Law, such an instrument may describe the grantee as "the person or persons legally entitled thereto." Beneficiary shall not have any duty to determine the rights of persons claiming to be rightful grantees of any of the Property. When this Indenture has been fully released by the Beneficiary, such release shall automatically operate as a 29 MCS HHG LLC La QWnta, CA j DOC #2014-0484801 Page 31 of 41 12/18/2014 03:06 PM z: reassignment of all future rents, issues and profits of the Property to the person or persons legally entitled thereto, unless such release expressly provides to the contrary. 10. SECURITY AGREEMENT. 10.1 Grant of Security Interest. Borrower also grants to Beneficiary a security interest in all of Borrower's right, title, and interest now owned or later acquired to the following property (collectively, "Collateral") now or later affixed to or located on the Property, or used in connection with the operation of the Property or the Improvements and all the proceeds of that property: the Personalty; the Fixtures; all security and cleaning deposits collected from any tenants or lessees of any part of the Property, all deposits collected from purchasers pursuant to contracts for sale of the Property or any portion of the Property; and, subject to the other provisions of this Indenture, all proceeds of any. fire and builders' risk insurance policy, or of any pohcy:insti6g `the Property (and the contents of the linproyep eats) against any other perils, all awards -made in eminent dornatn'.proceedmgs : r p ircliased.in icu;of tiiat,:;M.ade,with respect to the Property, and any compensation, :award, paytoiit;: c r relief g'ivsti,by any governmental agency or other source because of damage to the Property resulting from earthquake, flood, windstorm, or any emergency or any other event or circumstance. The security interest also includes all additions to, substitutions for, changes in, or replacements of the" whole or any part of these articles of property, together with all contract rights ' of Borrower in construction contracts, bonds, agreements for purchase and sale of the Property, all policies of insurance arising out of the improvement or ownership of the Property, and all accounts, contract rights, chattel paper, instruments, general intangibles, and other obligations of any kind now or later existing, arising out of, or in connection with the operation or development of the Property, and proceeds of the foregoing. 10.2 Security Agreement; Remedies. This Indenture constitutes a security agreement with respect to the Collateral in which Beneficiary is granted a security interest. Beneficiary has all of the rights and remedies of a secured party under the California Uniform Commercial Code as well as all other rights and remedies available at law or in equity. Borrower agrees to execute and deliver on demand, and irrevocably constitutes and appoints Beneficiary the attorney -in -fact of Borrower (such power being coupled with an interest) to execute, deliver, and file, any security agreements, financing statements, continuation statements; or other instruments that Beneficiary may request to impose, perfect, or continue the perfection of the lien or security interest created by this Indenture. 10.3 Fixture Filing. (a) Financing Statement. This Indenture constitutes a financing statement filed as a fixture filing in the Official Records of the County Recorder of the county in which the Property is located with respect to all Fixtures and with respect to any goods, Collateral, or other personal property that may now be or later become Fixtures. (b) New; Relacement Fixtures. It is understood and agreed that, to protect Beneficiary against the effect of California Uniform Commercial Code § 9334, if any Fixture owned by Borrower on the Property, or any part of any Fixture owned by Borrower, is replaced or added to, or any new Fixture owned by Borrower is installed by Borrower, and the Fixture is or may be subject to a security interest held by a seller or any other party, the following will apply: (1) Notice to Beneficiary. Borrower or any owner of all or any part of the Property will, before the replacement; addition, or installation of any such Fixture, obtain the prior written approval of Beneficiary, and give Beneficiary written notice that a security agreement with respect to such Fixture has been or will be consummated, and the notice will contain the following information: (i) a description of the Fixtures to be replaced, added to, installed, or substituted; (ii) a recital of the location at 30 MCS HHG LLC La Qninta, CA DOC #2014-0484801, Page 32 of 41 12/18/2014 03:06 PM which the Fixtures will .be replaced, added to, installed, or substituted; (iii) a statement of the name and address of the holder and amount of the security interest; and (iv) the date of the purchase of such Fixtures. Neither this subsection nor any consent by Beneficiary pursuant to this subsection will constitute an agreement to subordinate any right of Beneficiary in Fixtures or other property covered by this Indenture. (2) Option to Pay. Beneficiary may at any time pay the balance due under the security'aiareetilent and the am011nt paid:tyill bes;(x) 5ecured;by this Indenture and will be a lien on the Property, enjoying the same prior- ies as this.Indcnture (u):added to the amount of the Secured Debt; and (iii) pay;iIble an dem' d with interest of -did After-Maturity'Rato.from the time of the payment; and if Borrower is in default for ten (10) days after demand, this shall be an Event of Default. The provisions of this subsection (2) will not apply if the goods that may become Fixtures are of at least equivalent value and quality as any property being replaced and if the rights of the party holding the security interest have been expressly subordinated, at no cost to Beneficiary, to the lien of this Indenture in a manner satisfactory to Beneficiary. 11. ASSIGNMENT OF LEASES AND RENTS. 11.1 Assignment. Borrower irrevocably assigns to Beneficiary the Leases and the Rents. This is a present and absolute assignment, not an assignment for security purposes only, and Beneficiary's right to the Leases and the Rents is not contingent on, and may be exercised without, possession of the Property. 11.2 License. Beneficiary grants to Borrower a license ("License") to collect and retain the Rents as they become due until the occurrence of an Event of Default. Upon an Event of Default, the License will be automatically revoked and Beneficiary may collect and retain the Rents without notice and without taking possession of the Property. Borrower irrevocably authorizes and directs the lessees under the Leases to rely on and comply with any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums that may at any time become due under the Leases, or for the performance of any of the lessees' undertakings under the Leases. The lessees will have no right or duty to inquire as to whether any default has actually occurred or is then existing. Borrower relieves the lessees from any liability to Borrower by reason of relying on and complying with any notice or demand by Beneficiary. 11.3 Effect of Assignment. The assignment will not impose on Beneficiary any duty to produce the Rents or cause Beneficiary to be: (i) a "mortgagee -in -possession" for any purpose; (ii) responsible for performing any of the obligations of the lessor under any of the Leases; or (iii) responsible for any waste committed by lessees or any other parties, any dangerous or defective condition of the Property, or any negligence in the management, upkeep, repair, or control of the Property. Except to the extent of the Beneficiary's gross negligence or willful misconduct, Beneficiary will not be liable to Borrower or any other party as a consequence of the exercise of the rights granted to Beneficiary under this assignment or the failure of Beneficiary to perform any obligation of Borrower arising under the Leases. 11.4 Leasing Covenants. Borrower covenants and agrees as follows: (a) Borrower Covenants. Borrower, at Borrower's sole cost and expense shall: (i) perform all obligations of the lessor under the Leases and enforce performance by the lessees of their obligations under the Leases; (ii) subject to the provisions of Section 11.4(b)(iv) below, enforce all appropriate remedies that are available to and that are realizable by Borrower in case of material default by the lessees under any of the Leases and prosecute and defend or resolve any action, arbitration, or 31 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 33 of 41 12/1812014 03:06 PM other controversy relating to any of the Leases or to Borrower's interest in any of the Leases; (iii) give Beneficiary prompt notice of any material default that occurs under any of the Leases, whether by the lessees or Borrower; and (iv) promptly upon execution, deliver to Beneficiary fully executed counterpart originals of any future Leases; and (b) Consent Required. Borrower shall not, without Beneficiary's prior written consent: (i) enter into any Leases after the date of this indenture; (ii) execute any other assignment relating to any of the Leases or the Rents; (iii) discount any rent or other sums due under the Leases or collect them in advance; other than to collect rent one (1) month in advance of the time when it becomes due; (iv) terminate, modify, or amend any of the terms of the Leases or release or discharge the lessees from any obligations; (v) consent to any assignment or subletting by any lessee if Borrower's consent is required under the applicable Lease; or (vi) subordinate any of the Leases to any other deed of trust or encumbrance. Any attempted action in violation of the provisions of this Paragraph 11.4(b) will be voidable at Beneficiary's election. 11.5 Lease Estoppel Certificates. Within thirty (30) days after request by Beneficiary, Borrower will deliver to Beneficiary and to any party designated by Beneficiary estoppel certificates executed by Borrower and by each of the lessees, certifying: (i) that the Leases are in full force; (ii) the date of each lessee's most recent payment of rent; and (iii) that there are no known defenses or offsets outstanding, or stating those claimed by Borrower or lessees under the assignment or the Leases; and (iv) as to the Borrower, any other information reasonably requested by Beneficiary and,.as to the lessee, any other information that the lessee is required to provide pursuant to the applicable Lease. 12. ENVIRONMENTAL -PROVISIONS. 12.1 . Environmental Representations and Warranties. Except as disclosed in writing to, and acknowledged in writing by, Beneficiary, Borrower represents and warrants with respect to the Realty that: (a) No Hazardous Substances. Except in compliance with. all applicable Environmental Law, during the period of Borrower's ownership of the Realty; (i) there has been no use, generation, manufacture, storage, treatment, disposal, discharge, Release, or threatened Release of any Hazardous Substance by any person on or around the Realty; and (ii) there have been no Hazardous Substances transported over or through the Realty in violation of Environmental Law; (b) No Prior Use: Litigation. After diligent inquiry, Borrower has no knowledge of, or reason to believe that, there has been: (i) any use, generation, manufacture, storage, treatment, disposal, Release, or threatened Release of any hazardous waste or substance by any prior owners or prior occupants of the Realty or by any third parties onto the Realty in violation of applicable Environmental Law; or (ii) any actual or threatened litigation or claims of any kind by any person relating to these matters; (c) Permitted Levels: Reportable Quantities. The Borrower has no knowledge of, or reason to believe that.there are any Hazardous Substances in excess of permitted levels or reportable quantities under applicable Environmental Laws are present in or about the Realty or any nearby real property that could migrate to the Realty; (d) Releases. The Borrower has no knowledge of or reason to believe that any Release or threatened Release exists or has occurred: 32, MCS HHG LLC La Quinn CA DOC #2014-0484801 Page 34 of 41 12/18/2014 03:06 PM (e) Underground Storage Tanks. No underground storage tanks of any kind are located in or about the Realty, and Borrower has no knowledge of or reason to believe that there has ever been any underground storage tanks of any kind located in, on or under the Realty; (f) Compliance with Environmental Laws. (i) The Realty and all operations and activities at, and the use and occupancy of, the Realty, comply with all applicable Environmental Laws; and (ii) Borrower and every User has, and is now in compliance with, every permit, license, and approval required by all applicable Environmental Laws for all activities and operations at, and the use and occupancy of, the Realty; (g) No Claims. To the best of Borrower's knowledge, after diligent inquiry, there are no Hazardous Substance Claims pending or threatened with regard to Realty or against Borrower or any guarantor; (h) Special Designated Property. The Realty has not been nor is it within 2,000 feet of any other property designated as hazardous waste property or border zone property pursuant to California Health and Safety Code §§ 25220 et seq., and no proceedings for a determination of this designation are pending or threatened; (i) Adjoining Property. To the best of Borrower's knowledge after diligent inquiry, there exists no occurrence or condition on any real property adjoining or within 2,000 feet of the Realty that would cause the Realty or any part of it to be designated as hazardous waste property or border zone property under the provisions of California Health and Safety Code §§ 25220 et seq. and any regulation adopted in accordance with that section; t j) Use of Property. That the current use of the Realty is for commercial purposes; (k) Disclosures. Any written disclosure submitted by or on4behalf of Borrower to Beneficiary concerning any Release or threatened Release, past or present compliance by Borrower, or any User or other person of any Environmental Laws applicable to the Realty, the past and present use and occupancy of the Realty, and any environmental concerns relating to the Realty, was true and complete when submitted and continues to be true and complete as of the date of this Indenture. 12.2 Environmental Covenants. Borrower agrees, except in the ordinary course of business and in strict compliance with all applicable Environmental Laws, as follows: (a) Use of Properly. Except in the ordinary course of business and in compliance with all applicable Environmental Laws, not to cause or permit the Realty to be used as a site for the use, generation, manufacture, storage, treatment, Release, discharge, disposal, transportation, or presence of any Hazardous Substance; (b) Release. Not to cause, contribute to, permit, or acquiesce in any Release or threatened Release; (c) Change of Property Use. Not to change or modify the use of the Realty without the prior written consent of Beneficiary; (d) Compliance with Environmental Laws. To comply with and to cause the Realty and every User of the Realty to comply with all Environmental Laws; 33 MCS HHG LLC La Quinn, CA DOC #2014-0484801 Page 35 of 41 12/18/2014 03:06 PM (e) Notices. To immediately notify Beneficiary in writing after having received notice or otherwise having knowledge of and to provide Beneficiary with a reasonably detailed description of (i) any noncompliance of the Realty with any Environmental Laws; (ii) any Hazardous Substance Claim; (iii) any Release or threatened Release; (iv) the discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Realty that would cause the Realty or any part of it to be designated as hazardous waste property or border zone property under the provisions of California Health and Safety Code §§ 25220 et seq. and any. regulation adopted in accordance with that section; (f) Violation of Environmental Laws. In the event that Borrower discovers a Release or the presence of any Hazardous Substance on or about the Realty in violation of any Environmental Law, to: (i) notify Beneficiary of that discovery together with a reasonably detailed description; (ii) promptly after a request by Beneficiary, engage a qualified environmental engineer or other qualified environmental consultant reasonably satisfactory to Beneficiary to investigate these matters and prepare and submit to Beneficiary a written report containing the findings and conclusions resulting from that investigation, all at,the sole expense of Borrower; and (iii) take, at Borrower's sole expense, all actions necessary under applicable Environmental Law to remedy, repair, clean up, or detoxify any Release or Hazardous Substance, including, but not limited to, any remedial action required by any'Environmental Laws or any judgment, consent, decree, settlement, or compromise in respect of any Hazardous Substance Claims. Such actions shall be performed: (i) in accordance with Environmental Laws; (ii) in a good and proper manner; (iii) under the supervision of a qualified environmental engineer or other qualified environmental consultant approved in writing by Beneficiary; (iv) in accordance with plans and specifications for these actions approved in writing by Beneficiary; and (v) using licensed and insured qualified contractors approved in writing by Beneficiary; (g) Delivery of Material. To immediately furnish to Beneficiary copies of all written communications received by Borrower from any governmental authority or other person or given by Borrower to any person and any other information Beneficiary may reasonably request that is in Borrower's possession or control concerning any Release, threatened Release, Hazardous Substance Claim, or the discovery of any Hazardous Substance on or about the Realty in violation of any Environmental Law; and (h) . Information. Keep Beneficiary generally informed regarding any Release, threatened Release, Hazardous Substance Claim, or the discovery of any Hazardous Substance on or about the Realty in violation of any Environmental Law. 12.3 Inspection and Receivership Rights. Upon Beneficiary's reasonable belief of the existence of a past or present Release or threatened Release not previously disclosed by Borrower in connection with the making of the Loan or the execution of this Indenture or upon Beneficiary's reasonable belief that Borrower has failed to comply -with any environmental provision of this Indenture or any other Loan Document and upon reasonable prior notice (except in the case of an emergency) to Borrower, Beneficiary or its representatives, employees, and agents, may from time to time and at all reasonable times (or at any time in the case of an emergency) subject to the rights of Tenant under the Property Lease, enter and inspect the Property and every part of it (including all samples of building materials, soil, and groundwater, and all books, records, and files of Borrower relating to the Property) and perform those acts and things that Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security of this Indenture, for the purpose of determining: (i) the existence, location, nature, and magnitude of any past or present Release or threatened Release; (ii) the presence of any Hazardous Substances on or about the Property in violation of any Environmental'Law; and (iii) the compliance by Borrower of every environmental provision of this Indenture and every other Loan Document. 34 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 36 of 41 12/18/2014 03:06 PM 12A Rights of Beneficiary. In furtherance of the purposes in Paragraph 12.3, without limitation of any of its other rights, Beneficiary may: (a) Court Order. Obtain a court order to enforce Beneficiary's right to cuter and inspect the Realty under California Civil Code § 2929.5, to which the decision of Beneficiary as to whether there exists a Release, a threatened Release, any Hazardous Substances on or about the Realty in violation of any Environmental Law, or a breach by Borrower of any environmental provision of this Indenture or any other Loan Document, will be deemed reasonable and conclusive as between the parties; and (b) Receiver. Have a receiver appointed under California Code of Civil Procedure § 564 to enforce Beneficiary's right to enter and inspect the Realty for the purpose set forth above. 12.5 Costs and Expenses. All reasonable costs and expenses incurred by Beneficiary with respect to the audits, tests, inspections, and examinations that Beneficiary'or its agents, representatives, or employees may conduct, including the fees of the engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Borrower to Beneficiary within twenty (20) days after demand. All costs or expenses incurred by Trustee and Beneficiary pursuant to this subsection (including without limitation court costs, consultant's fees, and attorney fees, whether incurred in litigation and whether before or after judgment) shall be secured by the lien of this Deed of Trust and shall bear interest at the After Maturity Rate from the date they are incurred until those sums have been paid in full. Except as provided by law, any inspections or tests made by Beneficiary or its representatives, employees, and agents will be for Beneficiary's purposes only and will not be construed to create any responsibility or liability on the part of Beneficiary to Borrower or to any other person. Beneficiary will have the right, but not the obligation, to communicate with any governmental authority regarding any fact or reasonable belief of Beneficiary that constitutes or could constitute a breach of any of. Borrower's obligations under any environmental provision contained in this Indenture or any Loan Document. 12.6 Release and Indemnity. Borrower hereby: (a) Release. Releases and waives any fixture claims against Beneficiary for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any Environmental Law or under any Hazardous Substance Claim; (b) Reimbursement. Agrees to reimburse Beneficiary, on demand, for all reasonable costs and expenses incurred by Beneficiary in connection with any review, approval, consent, or inspection relating to the environmental provisions in this Indenture together with interest, after demand, at the After Maturity Rate; and (c) Indemnity. Agrees to indemnify, defend, and hold Beneficiary and Trustee harmless from all losses, costs, claims, damages, penalties, liabilities, causes of action, judgments, court costs, attorney fees and other legal expenses, costs of evidence of title, cost of evidence of value, and other expenses (collectively, "Expenses"), including, but not limited to, any Expenses incurred or accruing after the foreclosure of the lien of this Indenture, which either may suffer or incur and which directly or indirectly arises out of or is in any way connected with the breach of any environmental provision either in this Indenture or in any Loan Document or as a consequence of any Release or threatened Release on the presence, use, generation, manufacture, storage, disposal, transportation, Release, or threatened Release of any Hazardous Substance on or about the Property, including the soils and groundwaters, caused or permitted by Borrower, any prior owner or operator of the Property, any adjoining landowner or any other party, including, without limitation, the cost of any required or 35 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 37 of 41 12/18/2014 03:06 PM necessary repair, cleanup, remedy, or detoxification of any Hazardous Substance and the preparation of any closure, remedial action, or other requiredplans, whether that action is required or necessary by reason of acts or omissions occurring prior to or following the recordation.of this Indenture. Borrower's obligations will survive the satisfaction, release, or cancellation of the Secured Debt, the release and reconveyance or partial release and reconveyance of this Indenture, and the foreclosure of the lien of this Indenture or deed in lieu of the Indenture. Notwithstanding anything in this Paragraph 12.6(c) to the contrary, Expenses shall not include any damages, claims, costs, expenses, judgments, penalties, fines, liabilities, encumbrances, liens, costs and expenses of investigation and defense or any claim which is determined by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of the Beneficiary or determines to have resulted from Hazardous Material being placed on, above or under the Property by the act or omission of a party. other than the Borrower, a Principal or any agent, employee or contractor of any of them (i) during any period Beneficiary, or any successor in interest to Beneficiary, is in actual and exclusive possession of the Property, or (ii) subsequent to any foreclosure by Beneficiary or acceptance by Beneficiary of a deed in lieu of foreclosure with respect to the Property. 12.7 Request for Information. Borrower and Beneficiary agree that: (a) Environmental Condition. This Paragraph 12.7 is intended as Beneficiary's written request for information and Borrower's written response concerning the environmental condition of the Property as provided by California Code of Civil Procedure § 726.5; and (b) Survival of Representations. Each representation, warranty, covenant, or indemnity made by Borrower in this Paragraph 12 or in any other provision of this Indenture or any Loan Document that relates to the environmental condition of the Property is intended by Borrower and Beneficiary to be an environmental provision for purposes of.California Code of Civil Procedure § 736 and will survive the payment of the Secured Debt and the termination or expiration of this Indenture and will not be affected by Beneficiary's acquisition of any interest in the Property, whether by full credit bid at foreclosure, deed in lieu of that, or otherwise. If there is any transfer of any portion of Borrower's interest in the Property, any successor -in -interest to Borrower agrees by its succession to that interest that the written request made pursuant to this Paragraph 12.7 will be deemed remade to the successor -in - interest without any further or additional action on the part of Beneficiary and that by assuming the Secured Debt or by accepting the interest of Borrower subject to the lien of this Indenture, the successor remakes each of the representations and warranties in this Indenture and agrees to be bound by each covenant in this Indenture, including, but not limited to, any indemnity provision. 12.8 E1.ffect of Site Assessment. Even though Borrower may have provided Beneficiary with an environmental site assessment or other environmental report together with other relevant information regarding the environmental condition of the Property, Borrower acknowledges and agrees that Beneficiary is not accepting the Property as security for the Loan based only on that assessment, report, or information. Rather Beneficiary has also relied on the representations and warranties of Borrower in this Indenture, and Beneficiary is not waiving any of its rights and remedies in the environmental provisions of this Indenture or any other Loan Document. i 1EMER=1Zo4"1 13.1 Beneficiary's Right to Waive. Consent or Release. Beneficiary may at any time and from time to time, in writing: (i) waive compliance by Borrower with any covenant herein made by Borrower to the extent and in the manner specified in such writing, (ii) consent to Borrower doing any act which Borrower is prohibited hereunder from doing, or consent to Borrower's failing to do any act which Borrower is required hereunder to do, to the extent and in the manner specified in such writing, or (iii) 36 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 38 of 41 12/18/2014 03:06 PM release any part of the Property, or any interest therein from this Indenture and the lien of the Loan Documents. No such act shall in any way impair the rights hereunder of Beneficiary, except to the extent specifically agreed to by Beneficiary in such writing. 13.2 No Impairment. The interests and rights of Beneficiary under the Loan Documents shall not be impaired by any indulgence, including, without limitation: (i) any renewal, extension or modification which Beneficiary may grant with respect to any of the Secured Debt; (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Beneficiary may grant in respect of the Property or any interest therein, or (iii) any release or indulgence granted to any maker, endorser, guarantor or surety of any of the Secured Debt. 13.3 Amendments. The Loan Documents may not be waived, changed or discharged orally, but only by an agreement in writing and signed by Beneficiary and Borrower, and any oral waiver, change or discharge of any provision of the Loan Documents shall be without authority and of no force and effect. Such waiver, change or discharge shall be effective only in the specific instances and for the purposes for which given and to the extent therein specified. 13A No Usury. Any provision contained in any of the Loan Documents notwithstanding, Beneficiary shall not be entitled to receive or collect, nor shall Borrower be obligated to pay interest on, any of the Secured Debt in excess of the maximum rate of interest permitted by applicable Laws, and if any provision of the Loan Documents shall ever be construed or held to permit the collection or to require the payment of any amount of interest in excess of that permitted by such Laws, the provisions of this Paragraph 13.4 shall control unless contrary or inconsistent with any provision of the Note, in which case the provision of the Note shall control. Borrower's and Beneficiary's intent is to conform strictly to the usury laws now in force, and the Loan Documents evidencing or relating to any of the Secured Debt shall be held subject to reduction to conform to said Laws as now or hereafter construed. 13.5 Notices. Any notice, request, demand or other communication required or permitted under the Loan Documents (unless otherwise expressly provided therein) shall be given in writing by delivering the same in person to the intended addressee, by overnight courier service with guaranteed next business day delivery or by certified United States Mail return receipt requested, postage prepaid sent to the intended addressee at the applicable Notice Address or to such different address as either Borrower or Beneficiary shall have designated by written notice to the other sent in accordance herewith. Such notices shall be deemed given when received or in the case of delivery by certified United States Mail return receipt requested, three (3) business days after deposit therein. No notice or demand on Borrower in any case shall of itself entitle Borrower to any other or further notice or demand in similar or other circumstances. 13.6 Successors and Assigns. The terms, provisions, covenants and conditions hereof shall be binding upon Borrower, and any permitted successors and assigns of Borrower, and shall inure to the benefit of Beneficiary and its successors, substitutes and assigns, and Trustee and its successors and assigns in trust, and shall constitute covenants running with the Land. All references in this Indenture to Borrower, Beneficiary or Trustee shall be deemed to include all such successors, substitutes and assigns. If, in contravention of the provisions of this Indenture or otherwise, ownership of the Property or any portion thereof becomes vested in a person other than Borrower, Beneficiary may, without notice to the Borrower, whether or not Beneficiary has given written consent to such change in ownership, deal with such successor or successors in interest with reference to the Loan Documents and the Secured Debt in the same manner as with Borrower, without in any way vitiating or discharging Beneficiary's remedies under or Borrower's liability under the Loan Documents or on the Secured Debt. 37 mcs HUG LLC La Quintry CA DOC #2014-0484801 Page 39 of 41 12/18/2014 03:06 PM 1.3.7 Severability. A determination that any provision of the Loan Documents is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of the Loan Documents to any person or circumstances is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances. 13.8 Gender and Construction. Within this Indenture, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. References in this Indenture to "herein", "hereunder" or "hereby" shall refer to this entire Indenture, unless the context otherwise requires. In this Indenture (i) the term "Beneficiary" shall mean the owner and holder of the Note hereby secured, whether or not named as Beneficiary herein; (ii) either of the words 'costs" or "expenses" shall include, but shall not be limited to, the cost of title evidence and reasonable fees of the attorneys of choice for Beneficiary or Trustee; (iii) the enumeration of certain particulars as included within general language shall not restrict the scope or affect the generality of such language; and (iv) the term. 'Borrower" shall meanthe original Borrower named in this Indenture, the permitted successors and assigns thereof and any future owners of the Property described herein or any part thereof, When the phrase "in its sole unfettered discretion" is used in the Loan Documents with respect to Beneficiary, it shall permit Beneficiary to evaluate such criteria as it chooses in approving or disapproving the requested or pending action. 13.9 Joint and Several Liability. If Borrower is more than one party, the obligations, covenants, agreements, representations and warranties contained within the Loan Documents, as well as the obligations arising thereunder, are and shall be joint and several as to each such party. 13.10 Modifications. References to any of the Loan Documents in this Indenture shall be deemed to include all amendments, modifications, extensions and renewals thereof. 13.11 Governing Laws. This Indenture shall be construed according to and governed by the laws of the State. 13.12 Captions. All paragraph and subparagraph captions are for convenience of reference only and shall not affect the construction of any provision herein. 13.13 Acknowledgment of Receipt. Borrower hereby acknowledges receipt, without charge, of a true and complete copy of this Indenture. 13.14 Exhibits. The following are the Exhibits referred to in this Indenture, which are hereby incorporated by reference herein: Exhibit A - Property Description 13.15 Waiver of Jury Trial. To the fullest extent allowed by law, which Is now or hereafter existing, and after consultation with counsel and recognizing that any dispute hereunder will be commercial in nature and complex, and in order to minimize the costs and time involved in any dispute resolution process, the undersigned knowingly, voluntarily, and intentionally waive any right to a trial by jury with respect to any litigation based upon this transaction or this instrument, or arising out of, under, or in connection with any of the other Loan`` Documents executed in connection with this transaction, or respecting any course of conduct, course of dealing, statement (whether verbal or written) or action of any party and acknowledge that this provision is a material Inducement for entering Into this loan transaction by all parties. 38 MCS HHG LLC La Quinta, CA DOC #2014-0484801 Page 40 of 41 12/18/2014 03:06 PM 13.16 .Time of Essence. Time shall be of the essence with respect to all Borrower's obligations in this Indenture 13.17 Charges for Statements. Borrower agrees to pay Beneficiary's reasonable charge, to the maximum amount permitted by law, for any statement regarding the obligations secured by this Indenture requested by Borrower or on Borrower's behalf. IN WITNESS WHEREOF, this Indenture has been executed by the undersigned intending the same to be under seal effective as of December 18, 2014. BORROWER. MCS HHG LLC, a California limited liability company By:` t M, ael J. 'Sh` vlln. Manager ACKNOWLEDGEMENT, STATE OF CALIFORNIA ) ss " COUNTY �A4��7OF�) On December �, 2014, before me, ---' ; Notary Public, personally appeared Michael J. Shovlin, as manager of MCS J17IG LLC, a California limited liability company, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. 'G CAMPA a Commission # 1962527 < t% Notary Public -California Z Riverside County Signature (Seal) '' - f�fy Comm. E';cpt{ns Dec 30, 7.0115 39 MCS HHG LLC La Quints CA DOC #2014-0484801 Page 41 of 41 12/18/2014 03:06 PM :EXHIBIT A (Legal Description) PARCEL 4 OF PARCEL MAP 36531, IN THE CITY OF LA QUINTA; COUNTX OF RIVERSIDE, STATE. OF CALIFORNIA, AS PER MAP RECORDED IN BOOK:.236, PAGES 5, 6 AND 7 OF E PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDEROF SAID. COUNTY. TOGETHER WITH NON-EXCLUSIVE EASEMENTS OVER AND ACROSS THE COMMON AREA ESTABLISHED AND SET FORTH IN THAT CERTAIN DECLARATION RECORDED AUGUST 27, 1991 AS INSTRUMENT NO. 296214 AND IN THAT CERTAIN DECLARATION RECORDED AUGUST 28, 1991 AS INSTRUMENT NO. 298878 OF THE OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA. 40 MCS HBG LLC La Quinta, CA THIS MAP WAS PREPARED FOR ASSESSMENT PURPOSES ONLY. NO LIABILITY SEC. 30, T.5S, R.7E ( TRAo2o-o27 - 643-08 _Og IS ASSUMED FOR THE ACCURACY OF THE DATA SHOWN. ASSESSOR'S PARCEL I 0202 MAY NOT COMPLY WITH LOCAL LOT -SPLIT OR BUILDING SITE ORDINANCES. <y CITY OF LA QU I NTA ', y 617-69 NOV Am, + PAR 541 a T� E% e` 1.06 AC PAR 2 15 55 \�. a PAR A 1.94 AC \ � >o 42 \ PAR 14 �� POR ¢ 39 PAR 4 /' 0 ;� B'•6 y PAR 4. PApR3 57 4.51 AC `V PAR 4 \' PAR 5 4 R 4 PAR2.as06 3y ac a 52 ,,</ S �' +`• PAR 12 v PAR 11 .m �` 09 I `2 0 ASSESSOR'S MAP BK043 PG.08 Riverside County, Calif. PAR 5 a a 4V 03 a 1.90AC B` PAR _ Iz a„ 13.13AC R. al POR r_ -- -- PAR 7 26 s �I PAR 10 "°?y r+e,� 08 POR PAR 7 a rd> �:aJ � °� •,s�° 27 I POR PAR 9 Mea � area ��> g >' POR PAR 9 47 1.32 AC Y� 48 -',a the op ory IV a. ` ( 1�6C wB*s A w Map Reference PM 172@1-27 PARCEL MAP25865 11 PM 23615-7 PARCt3_MAP36531 NOV 12201T Nov 2013 r-• N IN E S 1 "=200' Legend •. — lnlLMta Rladvr-vrdy - — - Old Lot 1.1— Ref—R.O.W • L... Ana r_ S bdt&t-Tk Mk 1�I�� 1/20/2015 Property Detail Report LA QUINTA, CA, 92253- Owner Information: k-IDIGITAL M�kF 13ay"arlippirg Owner Name: MCS HHG LLC Mailing Address: 71084 TAMARISK LN, RANCHO MIRAGE, CA, 92270-2363' Vesting Code: COMPANY/CORPORATION Phone Number: Location Information: Legal Description: 11.22 ACRES M/L IN POR PAR 4 PM 1721021 PM 25865 County: RIVERSIDE FIPS Code: 06065 Census Trct/Blk: 045215 / 3 APN: 643-080-049 Alternative APN: Map Ref: - Twnshp-Rnge-Sect: - - Legal Book/Page: Tract No: Legal Lot:. 4 Legal Block: Subdivison: Last Market Sale Information: Sale Date: 3/7/2014 Sale Price: $237,400 1st Mtg Amount: $ Sale Doc No: 2014-0087513 Price Per SgFt: 1st Mtg IntType: Transfer Doc No: 2014-0087513 Price Per Acre: $21,159 2nd Mtg Amount: $ 1st Mtg Doc No: 2nd Mtg IntType: Sale Type: FULL AMOUNT STATED ON DOCUMENT Deed Type: GRANT DEED/DEED OF TRUST Title Company: CHICAGO TITLE INLAND EMPIRE Lender: Seller Name: ONE ELEVEN LA QUINTA LLC, Property Characteristics: Building Area: Total Rooms: Construction: Living Area: Bedrooms: Heat Type: Garage Area: Baths: 0 Air Cond: Basement Area: Fireplace: Roof Type: Parking Type: No of Stories: Roof Material: Yr Built/Effective: / Quality: Style: Pool Code: Tax and Value Information: Assessed Value: $3,788,880 Assessed Year: Est Market Val: Land Value: $2,553,466 Property Tax: Assessor Appd Val: Improvement Value: $1,235,414 Improvement %: 32.6 Total Taxable Value: Tax Exemption: Site Information: Assessor Acres: 11.22 Zoning: Land Use Code: 200 Assessor Lot SgFt: 488,743 No of Buildings: Land Use Desc: COMMERCIAL Lot W/D: / Res/Comm Units: County Use Code: C22 Calculated Acres: 11.0399 Sewer Type: Calculated Lot SgFt: 480,898 Water Type: http://dcl.parceistream.com/GetByKey.aspx?dataSource=%24°/`28ACCOU NT_NAM E%29%2EPU BLIC%2FPARCELS%2FPROPERTYD ETAIL&keyName=... 1/1 1/20/2015 Transaction History Report DIGITAL MAP e Transaction History. ReportQ € RCOUCTs a... LA QUINTA, CA, 92253- Sale Sale Recording Date: 3/7/2014 Sale Price: $56,650 Sale Date: 3/7/2014 Sale Price Type: 49% Recording Doc No: 2014-0087514 Title Company: CHICAGO TITLE INLAND EMPIRE Document Type: GRANT DEED/DEED OF TRUST Buyer: MCS HHG LLC Seller: MORRIS, TERRI ANN; MORRIS, G MICHAEL Sale Sale Recording Date: 3/7/2014 Sale Price: $237,400 Sale Date: 3/7/2014 Sale Price Type: Recording Doc No: 2014-0087513 Title Company: CHICAGO TITLE INLAND EMPIRE Document Type: GRANT DEED/DEED OF TRUST Buyer: MCS HHG LLC Seller: ONE ELEVEN LA QUINTA LLC Sale Sale Recording Date: 3/7/2014 Sale Price: $56,650 Sale Date: 3/7/2014 Sale Price Type: 49% Recording Doc No: 2014-0087507 Title Company: CHICAGO TITLE INLAND EMPIRE Document Type: GRANT DEED/DEED OF TRUST Buyer: MORRIS, TERRI ANN; MORRIS, G MICHAEL Seller: ONE ELEVEN LA QUINTA LLC Finance Mtg Recording Date: 3/7/2014 Mtg Loan Amount: $2,900,000 Mtg Document No: Mtg Loan Type: UNKNOWN Document Type: DEED OF TRUST Mtg Rate Type: Lender: CURCI INVESTMENTS LLC Sale Sale Recording Date: 12/21/2001 Sale Price: Sale Date: 12/21/2001 Sale Price Type: Recording Doc No: 2001-637411 Title Company: Document Type: GRANT DEED/DEED OF TRUST Buyer: ONE ELEVEN LA QUINTA LLC Seller: WASHINGTON PLAZA ASSOCIATES LLC,; CURCI TURNER COMPANY LLC Sale Sale Recording Date: 9/14/2000 Sale Price: Sale Date: 9/14/2000 Sale Price Type: Recording Doc No: 2000-360767 Title Company: STEWART TITLE Document Type: GRANT DEED/DEED OF TRUST Buyer: WASHINGTON PLAZA ASSOCIATES,; CURCI TURNER COMPANY Seller: WASHINGTON PLAZA ASSOCIATES,; CURCI TURNER COMPANY httpl/dcl.parcelstream.com/GetByKey.aspx?dataSource=SS.Prop.Transactions/Transactions&keyName=TAX_ID&keyValue=US_06 065 643-080-049&outpu... 1/1