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HomeMy WebLinkAboutReso 30-22 87-88 Consent to Encumber-Deed of TrustRESOLUTION NO. 30-22 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MORRO BAY, CALIFORNIA CONDITIONALLY AUTHORIZING THE MAYOR TO EXECUTE DOCUMENTS NECESSARY FOR A NEW LOAN AND ACCEPTING A DEED OF TRUST RELATED THERETO WITH TLC FAMILY ENTERPRISES FOR LEASE SITE 87-88/87W-88W, LOCATED AT 833 EMBARCADERO ROAD, MORRO BAY THE CITY COUNCIL City of Morro Bay, California WHEREAS, the City of Morro Bay is the lessor of certain properties on the Morro Bay Waterfront described as City Tidelands leases and properties; and WHEREAS, since December, 2018 TLC Family Enterprises has been the lessee of Lease Site 87-88/87W-88W, located at 833 Embarcadero Road and is a tenant in good standing; and WHEREAS, TLC Family enterprises is requesting approval of loan documents and a deed of trust with Artes Capital REIT 1, LLC to secure the financing necessary for the complete redevelopment of the lease site using the lease agreement and project improvements as security; and WHEREAS, lease site lending can only be used to purchase a lease site, to refinance existing lending on the lease site and/or for leasehold improvements. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California, the Mayor is hereby directed to execute, as necessary, any and all documents, as approved by the City Attorney, necessary to consummate the loan and deed of trust desired by TLC Family Enterprises. PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 12th day of April, 2022 on the following vote: AYES. Headding, Addis, Barton, Ford, Heller NOES. None ABSENT: None ATTEST: (it AM Skg______ na Swanson, City Clerk Loan No. 22-000055A ESTOPPEL CERTIFICATE 833 Embarcadero, Morro Bay, California PROPERTY: 833 Embarcadero, City of Morro Bay, County of San Luis Obispo, California LEASE• Lease dated December 11, 2018, amended by Amendment # 1 dated January 12, 2021 and Amendment # 2 dated December 16 2021 LANDLORD* The City of Morro Bay, a municipal corporation TENANT/BORROWER; T.L.C. Family Enterprises, Inc., a California corporation LENDER* ARTES CAPITAL REIT I, LLC, a Delaware limited liability company LOAN* $ 3,050,000.00 Construction Loan LEASEHOLD MORTGAGE• Construction Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing from Tenant as Borrower to the Lender as Beneficiary LEASEHOLD ESTATE• Tenant s interest in the Property as the tenant under the Lease In order to induce Lender to make the Loan to Tenant, Landlord and Tenant hereby warrant, represent and certify to Lender, as follows: A. Lease Matters 1. The Lease, together with all amendments, modifications, renewals and extensions indicated above, as well as all land use entitlement approved by Landlord in is governmental capacity contain all of the agreements and understandings between Landlord and Tenant as to the Property and, as of the date hereof, is in full force and effect. 2. The initial term of the Lease commenced on December 11, 2018 and expires on November 30, 2068. Tenant has no options to renew the Lease. 3. Tenant is currently obligated to pay the following amounts to Landlord pursuant to the Lease: (i) Base Semi -Annual Rent in the amount of $15,000.00; (ii) Additional Rent in the amount of the CPI Adjustments, pursuant to the terms of the Lease; (iii) Additional Rent foi Taxes Maintenance and Utilities pursuant to the terms of the Lease; and (iv) Percentage Rent calculated pursuant to the terms of the Lease. Tenant is current with, and has paid all of the above monthly rent charges through and including the month of April, 2022. No such charges have been pre -paid more than thirty (30) days m advance of their respective due date under the Lease Tenant's obligation to pay rents under the Lease has commenced and no rents have been paid by Tenant more than one month in advance. As of the date hereof, Tenant is not entitled to any credits, reductions, offsets, defenses, free rent, rent concessions or lent abatements under the Lease or otherwise against the payment of rent or other charges under the Lease. In the event Lender notifies Tenant of a default under the Loan and directs Tenant pay its rent and all other sums due under the Lease to Lender Tenant hereby agrees to honor such direction without inquiry and pay its rent and all other sums due under the Lease in accordance with such notice. 4. There are no defaults or events that with the passage of time or notice would constitute a default by Artes Capital Loan Documents: Pstoppel Certificate 1 Loan No. 22-000055A Landlord or Tenant under the Lease and Landlord is in full compliance with all of the terms, conditions and covenants of the Lease. Tenant has no actual knowledge of any claims by others against Landlord relating to the Property or its use. No event has occurred giving Tenant the right to cease operations at the Property (i e., "go dark"), terminate the Lease or pay reduced or alternative rent to Landlord under any oftheterms ofthe Lease, such as a co -tenancy provision. 5. Tenant is in full and complete possession of its leased premises in the Property, is in actual, physical occupancy of said leased premises. All of the obligations of Landlord under the Lease have been completed to Tenant's satisfaction, including but not limited to, any obligations of the Landlord to make or pay Tenant for any improvements, alterations or work done on the Property. 6. Tenant has no termination options (other than if the Property is taken by condemnation), rights of first refusal options to purchase or other interest in or claim to the Property, or any part thereof. 7. Tenant has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in the Lease and/or the Property or any part thereof, except in connection with the Loan. 8. Tenant has not at any time since the commencement of the Lease, and does not presently use any portion of the Property for the generation, manufacture, refining, transportation, treatment, storage, or disposal of any hazardous substance or waste or for any purpose that poses a substantial risk of imminent damage to public health or safety or to the environment. B. Financing Matters. So long as the obligations of Tenant as Borrower under the Loan remain outstanding, the following provisions shall be deemed to modify and amend the terms of the Lease. If there is a conflict between the original terms of the Lease and the following provisions then the following provisions shall control. Upon the payment in full or other satisfaction of the Loan, the provisions of this Section B shall automatically terminate and Lender agrees to provide confirmation of such termination. 1. Loan and Lender's Rights (a) Landlord does hereby consent to the Loan and an assignment of Tenant's rights in and to the Lease in connection with the Leasehold Mortgage, and to any subsequent sale or transfer of the Leasehold Estate as permitted in such Leasehold Mortgage, subject to the Lease. (b) Until all obligations of Tenant to Lender under the Leasehold Mortgage (the "Loan Obligations") shall have been completely paid and performed and the Leasehold Mortgage shall have been discharged, Landlord shall not take any action to terminate this Lease for default in the obligations of Tenant hereunder without first complying with the requirements of this Section 1. (c) Until the Loan Obligations shall have been completely paid and performed, and the Leasehold Mortgage shall have been discharged, neither Landlord nor Tenant shall amend or modify this Lease without Lender's prior written consent if the amendment of modification negatively affects the rights of Lender under the Loan Obligations Any such amendment, modification or exclusion without Lender' s prior written consent shall not be binding upon Landlord, Tenant, or its or their successors or assigns. (d) In the event the ownership of the fee and leasehold interests in the Property become vested in the same person or entity, then as long as the Leasehold Mortgage shall remain outstanding such occurrence shall not result in a merger of title. Rather, the Lease and the Leasehold Mortgage thereon shall remain in full force and Artes Capital Loan Documents: Estoppel Certificate 2 Loan No. 22-000055A effect. (e) Landlord shall send to Lender, in the manner provided in the Lease, a true, correct and complete copy of any notice to Tenant of a default by Tenant under the Lease at the same time as and whenever any such notice of default shall be given by Landlord to Tenant, addressed to Lender at the address last furnished to Landlord by such Lender. No notice by Landlord shall be deemed to have been given to Tenant unless and until a copy thereof shall have been so sent to the Lender. Tenant irrevocably directs Landlord accept, and Landlord agrees to accept, performance and compliance by Lender of and with any term, covenant, agreement, provision, condition or limitation on Tenant's part to be kept, observed or performed under the Lease with the same force and effect as though kept, observed or performed by Tenant. (0 Notwithstanding anything provided to the contrary in the Lease, the Lease shall not be terminated because of a default or breach thereunder on the part of Tenant until and unless: (i) Notice of any such default or breach shall have been delivered to Lender in accordance with the provisions of Section 1. (e) above; (ii) With respect to a default or breach that is curable solely by the payment of money, Lender has not cured such default or breach within sixty (60) days following the expiration of any of Tenant' s notice and cure periods set forth in the Lease and (iii) With respect to a default or breach that is not curable solely by the payment of money, Lender has not cured such default or breach within ninety (90) days following the expiration of any of Tenant' s notice and cure periods set forth in the Lease, or, if such default or breach is curable but cannot be cured within such time period, (aa) Lender has not notified Landlord within such time period that it intends to cure such default or breach (bb) Lender has not diligently commenced to cure such default or breach, and (cc) Lender does not complete such cure within one hundred eighty days after Lender s commencement of such cure. (iv) Furthermore, notwithstanding anything to the contrary contained herein, if Lender determines to foreclose or cause its designee to foreclose the Leasehold Mortgage or to acquire or cause its designee to acquire the Leasehold Estate or to succeed or cause its designee to succeed to Tenant's possessory rights with respect to the Leasehold Estate or to appoint a receiver before it effectuates the cure of any non -monetary breach or default by Tenant hereunder, then the cure periods set forth above shall be tolled for any period during which foreclosure proceedings, or legal proceedings to succeed to Tenant's possessory lights, or proceedings to appoint the receiver are conducted, as the case may be. Any such proceedings shall be commenced promptly after the notice of default is delivered to Lender and shall be diligently prosecuted. Promptly after Lender or a designee of Lender acquires the Leasehold Estate pursuant to foreclosure proceedings or otherwise or succeeds to Tenant's possessory rights or promptly after a receiver is appointed, as the case may be, Lender or its designee shall cure said breach or default in accordance with the time to cure requhements set forth above. (g) Without the written consent of Leasehold Mortgagee Landlord agrees not to accept a cancellation or voluntary surrender of this Lease at any time while the Leasehold Mortgage shall remain a lien on the Leasehold Estate; and any such attempted cancellation or sun ender of this Lease without the written consent of Lender shall be null and void and of no force or effect. Landlord and Tenant further agree for the benefit of Lender, so long as any such Leasehold Mortgage shall remam a hen on said Leasehold Estate, Landlord and Tenant will not subordinate this Lease, or any New Lease entered into pursuant to Section 1.0) below, to any mortgage or deed of trust that may hereafter be placed on Landlord's Reversionary Estate unless the Fee Mortgagee shall have entered into a Subordination and Non -Disturbance Agreement reasonably satisfactory to Lender or consent to any prepayment of any rent, without securing the prior written consent of such Lender. Artes Capital Loan Documents: Estoppel Certificate 3 Loan No. 22-000055A (h) Subject to the Lease, it is acknowledged the Leasehold Mortgage may be assigned by Lender in accordance with its terms. Notwithstanding anythmg stated to the contrary in the Lease, the following transfers shall be permitted and shall not require the approval or consent of Landlord: (i) A transfer of the Leasehold Estate at foreclosure sale under the Leasehold Mortgage, whether pursuant to the power of sale contained therem or a judicial foreclosure decree, or by an assignment in lieu of foreclosure, or (ii) Any subsequent transfer by Lender or its nominee or designee if Lender, or such nominee or designee, is the purchaser at such foreclosure sale or under such assignment in lieu of foreclosure; or (iii) Any such transferee shall be liable to perform the obligations of Tenant under the Lease only so long as such transferee holds title to the Leasehold Estate, provided that upon any conveyance of title, such transferee 's transferee expressly assumes and agrees to perform all of the obligations under the Lease; provided further, that the liability of any Leasehold Mortgagee that obtains title to the Leasehold Estate shall be limited to Lender's mterest in the Leasehold Estate or (iv) Any transfer described in this Section 1. (h) shall not serve to relieve Tenant or any guarantor of its obligations or liabilities under this Lease or any guarantee. (i) If the Lease is terminated because of Tenant' s default thereunder or for any other reason or is extinguished for any reason (including, without limitation, rejection of the Lease by a trustee in bankruptcy), then Lender may elect to demand a new lease of the Leasehold Estate (the ' New Lease") by notice to Landlord within thirty (30) days after such termination, subject to the following obligations and provisions: (i) The New Lease shall be for the remainder of the Term of the Lease, effective on the date of termination, at the same Rent and shall contain the same covenants, agreements, conditions, provisions, restrictions and limitations as are then contained in the Lease. Such New Lease shall be subject to all then -existing subleases demising space within the Property. (ii) Subject to the New Lease being approved by Landlord's City Council the New Lease shall be executed by Landlord within thirty (30) days after receipt by Landlord of notice of Lendei s or such other acquiring person's election to enter mto a New Lease. The New Lease shall contain substantially the same business terms as the origmal Lease, and any new terms in the New Lease shall not negatively affect or impair in any manner the use or operational rights of the "tenant" as set forth in the origmal Lease. (A) Simultaneously with the execution of the New Lease, all existing monetary defaults of Tenant shall be cured; and (B) Within thirty (30) days after the execution of the New Lease, Lender shall cure all existing non -monetary defaults which are curable, or if any non -monetary default is curable but cannot be cured within such time period, (aa) Lender shall notify Landlord within such time period that it intends to cure such default or breach, (bb) Lender shall diligently commence to cure such default, and (cc) Lender shall diligently complete such cure within one hundred eighty days after Lender's commencement of such cure. (iii) Any New Lease and the leasehold estate created thereby shall subject to the same conditions contained in the Lease, continue to maintain the same priority as the Lease with regard to any Leasehold Mortgage or any other lien, charge or encumbrance affecting the Property. Concurrently with the execution and delivery of the New Lease and subject to the Lease Landlord shall assign to the tenant named therein all of Landlord's right, title and interest in and to moneys, if any, then held by or payable to Landlord which Tenant would have been entitled to receive but for the termination of the Lease Artes Capital Loan Documents: Estoppel Certificate 4 Loan No. 22-000055A (iv) If Tenant refuses to surrender possession of the Leasehold Estate, then Landlord shall, at the request of Lender or such other acquiring person, institute and pursue diligently to conclusion the appropriate legal remedy or remedies to oust or remove Tenant and all subtenants actually occupying the Leasehold Estate or any part thereof who are not authorized to remain in possession thereunder. Any such action taken by Landlord at the request of Lender or such other acquiring person shall be at Lender 's or such other acquiring person's sole expense. (k) Subject to the Lease, the provisions of this Section 1. shall be binding upon and inure to the benefit of Lender's successors and assigns. (1) The terms of this Section l., and the rights of Lender, and the obligations of Landlord and Tenant arising hereunder shall not be negatively affected or impaired in any manner or to any extent by (a) any renewal, replacement, amendment, extension, substitution, revision, consolidation, modification or termination of any of the Loan Obligations; (b) the validity or enforceability of any document evidencing or securing the Loan Obligations; (c) the release, sale, exchange or surrender, in whole or in part, of any collateral security, now or hereafter existing, for any of the Loan Obligations; (d) any exercise or non exercise of any right, power or remedy under or in respect of the Loan Obligations; or (e) any waiver, consent, release, indulgence, extension, renewal, modification, delay or other action, inaction or omission in respect of the Loan Obligations, all whether or not Landlord shall have had notice or knowledge of any of the foregoing and whether or not it shall have consented thereto. (m) Subject to the Lease, any and all buildings and improvements owned by Tenant prior to any termination of the Lease after a default of Tenant under the Lease shall automatically pass to, vest in and belong to Lender, and shall not become the property of Landlord unless and until the final expiration or sooner termination of the Lease not followed by a New Lease as provided in Section 1. (i) above. Signed by Tenant on April 8, 2022: TENANT: T.L. ' ily Enterprises, Inc., a . liforni . corporatio rise Hansson resident & Chief Financial Officer By: / erleseer, Name: Travis Leage Title: Vice President & Secretary Artes Capital Loan Documents: Estoppel Certificate 5 Loan No. 22-000055A 4 Signed by Landlord an2022: LANDLORD: TY OF MORRO BAY He Y ding, MAYOR ATTEST: a/401M 5ir\------- a Swanson, CITY CLERK APPROVED AS TO FORM: eitp,‘ A;euc, ,- � H Chris Neumeyer, CITY O Y Artes Capital Loan Documents. Estoppel Certificate 6 CONSENT TO ENCUMBRANCE THIS CONSENT TO ENCUMBRANCE ("Consent") is dated for reference purposes and executed as of Li 1" V) t L/ , 2022 by the City of Morro Bay, a municipal corporation ("Landlord"), for the benefit of Artes Capital Reit I, LLC, a Delaware limited liability company ("Lender"), with reference to the following facts: ARTICLE I: RECITALS 1.1 Landlord and TLC Family Enterprises, Inc., ("Tenant") have entered into that certain lease dated December 11, 2018 (the "Lease") covering certain premises located in San Luis Obispo County, California, commonly known as Lease Site 87- 88/87W-88W, as delineated on Parcel Map of the City of Morro Bay No. 68-30, which map was recorded on October 10, 1968, in book 3, Page 10 of Parcel Maps in the office of the County Recorder, San Luis Obispo County, California (the "Premises"). The Premises are further described in the Lease Sites map prepared by Garing, Taylor and Associated, which include detailed survey and dimensional data on said Premises. A copy of the official Lease Site map for Lease Site 87-88/87W-88W adopted by City Council Resolution 77-74 is attached hereto as Exhibit B. 1.2 Lender has made or is about to make a loan to Tenant in the amount of Three Million Fifty Thousand Dollars and No Cents ($3,050,000.00) (the "Loan"). Repayment of the Loan will be secured by a deed of trust ("Deed of Trust") encumbering Tenant's leasehold interest in the Premises created by the Lease (the "Leasehold"). 1.3 Landlord understands the accuracy in all respects of the information set forth herein by it may be and shall be relied upon by Lender. NOW, THEREFORE, TO INDUCE LENDER TO MAKE THE LOAN TO TENANT, LANDLORD HEREBY DECLARES, UNDERSTANDS AND REPRESENTS TO LENDER: • ARTICLE II: CONSENT 2.1 Landlord's Consent. Landlord hereby consents to the encumbrance of the Leasehold, as evidenced by the Deed of Trust to be executed by Tenant in connection with the Loan and attached hereto as Exhibit A; provided, that the proceeds from the Loan are used only (i) to finance acquisition of the Leasehold, (ii) to pay costs directly associated with capital improvements Tenant makes to the Premises or (iii) to refinance an existing debt secured by the Lease; provided, than any equity is used to pay for costs directly associated with capital improvements Tenant makes to the Premises. 2.2 Surrender of Premises; Amendment of Lease. Landlord agrees it shall not allow or agree to any cancellation, mutual termination, surrender, acceptance of surrender or any material modification or amendment of the Lease that would materially diminish the Lender's security in the Leasehold as provided by the Deed of Trust or surrender of the Premises without the prior written consent of Lender. IN WITNESS WHEREOF, this Consent is executed on behalf of the parties' duly authorized representatives on the date(s) indicated below and effective as of the date set forth above. DATE: 5kry W y.nea. LANDLORD: City of Morro Bay: ST: Swanson, City Clerk APPROVED AS TO FORM: Uln'S Mit, Chris Neumeyer, City Attorn 1 01181.0024/789553.1 RECORDATION REQUESTED BY: ARTES CAPITAL REIT I, LLC 2829 Townsgate Road, Suite 100 Westlake Village, CA 91361 Attn: Loan Servicing Loan No. 22- 0000 WHEN RECORDED MAIL TO: ARTES CAPITAL REIT I, LLC 2829 Townsgate Road, Suite 100 Westlake Village, CA 91361 Attn: Loan Servicing SEND TAX NOTICES TO: TLC Family Enterprises, Inc. 665 Kings Avenue Morro Bay, CA 93442 FOR RECORDER'S USE ONLY CONSTRUCTION LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING THIS CONSTRUCTION LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING is dated 2022, among TLC Family Enterprises, Inc., a California corporation, whose address is 665 Kings Avenue, Morro Bay, CA 93442 ("Trustor"); ARTES CAPITAL REIT I, LLC, A Delaware limited liability company , whose address is 2829 Townsgate Road, Suite 100, Westlake Village, CA 91361, Loan No. 22- 0000 (referred to below sometimes as "Lender" and sometimes as "Beneficiary"); and [Title Company Name], whose address is (referred to below as "Trustee"). CONVEYANCE AND GRANT. For valuable consideration, Trustor irrevocably grants, transfers and assigns to Trustee in trust, with power of sale, for the benefit of Lender as Beneficiary, all of Trustor's right, title, and interest in, to and under the Lease described below of the following described real property, together with all existing or subsequently erected or affixed buildings, improvements and fixtures (the "Real Property" or "Property"); and all other rights, royalties, and profits arising out of the subject lease to which Trustee is entitled, (the "Leasehold Interest") located in San Luis Obispo County, State of California: See EXHIBIT "A", which is attached to this Deed of Trust and made a part of this Deed of Trust as if fully set forth herein. 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 2 The Leasehold Interest or its address is commonly known as 833 Embarcadero Rd., Morro Bay, CA 93442. The Assessor's Parcel Number for the Real Property is THIS SECURITY INSTRUMENT IS ALSO A FIXTURE FILING UNDER SECTION 9502(b) OF THE CALIFORNIA COMMERCIAL CODE [See Definitions set forth at the end of this Deed of Trust] Trustor presently assigns to Lender (also known as Beneficiary in this Deed of Trust) all of Trustor's right, title, and interest in the Leasehold Interest and to all Rents due pursuant to the Leasehold Interest. This is an absolute assignment of those Rents made in connection with an obligation secured by Leasehold Interest pursuant to California Civil Code Section 2938. In addition, Trustor grants to Lender a Uniform Commercial Code security interest in the Personal Property and Rents. This assignment includes all interests, and privileges of Trustor as provided by the Leasehold Interest, and all fixtures, fittings, apparatus, machinery, equipment, furniture, appliances, and all other personal property of Trustor and any replacements thereof, now or at any time hereafter located on or used in any way in connection with the Leasehold Interest. The listing of specific rights or property shall not be interpreted as a limit of general terms. THIS DEED OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS OF THE TRUSTOR UNDER THE NOTE, THE RELATED DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF TRUST IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS: PAYMENT AND PERFORMANCE. Except as otherwise provided in this Deed of Trust, Trustor shall pay to Lender all amounts secured by this Deed of Trust as they become due, and shall strictly and in a timely manner perform all of Trustor's obligations under the Note, this Deed of Trust, and the Related Documents. POSSESSION AND MAINTENANCE OF THE LEASEHOLD INTEREST. Trustor agrees Trustor's possession and use of the Property shall be governed by the following provisions: Possession and Use. Until the occurrence of an Event of Default, Trustor may, subject to the Leasehold Interest, (1) remain in possession and control of the Property; (2) use, operate or manage the Property; and (3) collect the Rents from the Property. Duty to Maintain. Trustor shall maintain the Property in tenantable condition and promptly perform all repairs, replacements, and maintenance necessary to preserve its value, subject to the Leasehold Interest. 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 3 Compliance With Environmental Laws. Trustor represents and warrants to Lender: (1) During the period of the Leasehold Interest, there has been no use, generation manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about o1 from the Property; (2) Trustor has no knowledge of, or reason to believe there has been, except as previously disclosed to and acknowledged by Lender in writing, (a) any breach or violation of any Environmental Laws, (b) any use, generation, manufacture, storage treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Property by any prior owners or occupants of the Property, or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters, and (3) Except as previously disclosed to and acknowledged by Lender in writing, (a) neither Trustor nor any tenant, contractor agent or other authorized user of the Property shall use, generate, manufacture store, treat, dispose of or release any Hazardous Substance on, under, about or from the Property; and (b) any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations and ordinances, including without limitation all Environmental Laws. Subject to the Leasehold Interest, Trustor authorizes Lender and its agents to enter upon the Property to make such inspections and tests at Trustor's expense, as Lender may deem appropriate to determine compliance of the Property with this section of the Deed of Trust. Any inspections or tests made by Lender shall be for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Trustor o1 to any other person. The representations and warranties contained herein are based on Trustor's due diligence in investigating the Property for Hazardous Substances. Trustor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Trustor becomes liable for cleanup or other costs under any such laws; and (2) agrees to indemnify, defend and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Deed of Trust or as a consequence of any use generation manufacture, storage, disposal release or threatened release occurring prior to Trustor's ownership or interest in the Property, whether or not the same was or should have been known to Trustor. The provisions of this section of the Deed of Trust, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the satisfaction and reconveyance of the lien of this Deed of Trust and shall not be affected by Lender's acquisition of any interest in the Property, whether by foreclosure or otherwise Without otherwise limiting Trustor's covenants as provided herein Trustor shall not without Lender's prior written consent, remove or permit the removal of sand, gravel or topsoil or engage in borrow pit operations, or use or permit the use of the Property as a land fill or dump, or store, burn or bury or permit the storage, burning o1 burying of any material or product which may result in contamination of the Property or the groundwater or which may require the issuance of a permit by the Environmental Protection Agency or any state or local government agency governing the issuance of hazardous or toxic 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 4 waste permits, or request or permit a change in zoning or land use classification, or cut or remove or suffer the cutting or removal of any trees or timber from the Property. At its sole cost and expense, Trustor shall comply with and shall cause all occupants of the Pioperty to comply with all Environmental Laws with respect to the disposal of industrial refuse or waste and/or the discharge, processing, manufacture generation, treatment, removal, transportation, storage and handling of Hazardous Substances, and pay immediately when due the cost of removal of any such wastes or substances from, and keep the Property free of any lien imposed pursuant to such laws, rules, regulations and orders. Trustor shall not install or permit to be installed in or on the Property, friable asbestos or any substance containing asbestos and deemed hazardous by federal, state or local laws rules, regulations or orders respecting such material. Trustor shall further not install or permit the installation of any machinery, equipment or fixtures containing polychlorinated biphenyls (PCBs) on or in the Property. With respect to any such material or materials currently present in or on the Property Trustor shall promptly comply with all applicable Environmental Laws regarding the safe removal thereof, at Trustor's expense. Trustor shall indemnify and defend Lender and hold Lender harmless from and against all loss, cost, damage and expense (including, without limitation, attorneys' fees and costs incurred in the investigation, defense and settlement of claims) that Lender may incur as a result of or in connection with the assertion against Lender of any claim relating to the presence or removal of any Hazardous Substance, or compliance with any Environmental Law. No notice from any governmental body has ever been served upon Trustor or, to Trustor's knowledge after due inquiry upon any prior owner of the Property, claiming a violation of or under any Environmental Law or concerning the environmental state, condition or quality of the Property, or the use thereof, or requiring or calling attention to the need for any work, repairs, construction, removal, cleanup, alterations, demolition, renovation or installation on, or in connection with, the Property in order to comply with any Environmental Law; and upon receipt of any such notice, Trustor shall take any and all steps, and shall perform any and all actions necessary or appropriate to comply with the same, at Trustor's expense. In the event Trustor fails to do so, Lender may declare this Deed of Trust to be in default. Nuisance, Waste. Trustor shall not cause, conduct or permit any nuisance nor commit, permit, or suffer any stripping of or waste on or to the Property or any portion of the Property. Without limiting the generality of the foregoing, Trustor will not remove, or grant to any other party the right to remove, any timber, minerals (including oil and gas), coal, clay, scotra, soil, gravel or rock products without Lender's prior written consent. Removal of Improvements. Trustor shall not demolish or remove any Improvements from the Real Property without Lender's prior written consent. As a condition to the removal of any Improvements, Lender may require Trustor to make arrangements satisfactory to 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 5 Lender to replace such Improvements with Improvements of at least equal value, subject to the Leasehold Interest. Lender's Right to Enter. Subject to the Leasehold Interest, Lender and Lender's agents and representatives may enter upon the Real Property at all reasonable times to attend to Lender's interests and to inspect the Real Property for purposes of Trustor's compliance with the terms and conditions of this Deed of Trust. Compliance with Governmental Requirements. Trustor shall promptly comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the use or occupancy of the Property, including without limitation the Americans With Disabilities Act. Trustor may contest in good faith any such law ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Trustor has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Property are not jeopardized Lender may require Trustor to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest. Duty to Protect Trustor agrees neither to abandon or leave unattended the Property. Trustor shall do all other acts, in addition to those acts set forth above in this section, which from the character and use of the Property are reasonably necessary to protect and preserve the Property, subject to the Leasehold Interest. Compliance with Lease. Trustor will pay all rents and will strictly observe and perform on a timely basis all other terms, covenants and conditions of the Lease. Trustor will indemnify, defend, and hold Lender harmless against all losses, liabilities, actions, suits proceedings, costs including attorneys' fees claims, demands, and damages whatsoever which may be incurred by reason of Trustor's failure to pay rents or strictly observe or perform under the Lease. Other Agreements Relating to the Lease. Trustor further agrees (1) not to surrender, terminate, or cancel the Lease, and (2) not to modify, change, supplement, alter, or amend the Lease, either of ally or in writing, in any way that negatively effects Lender's rights under this Deed of Trust, without Lender's prior written consent Any attempt by Trustor to do any of the foregoing without Lender's prior written consent will be void and of no force and effect. At Lender's option, Trustor will deposit with Lender as further security all original documents relating to the Lease and the leasehold interest in the Property. Unless Trustor is in breach or default of any of the terms contained in this Deed of Trust, Lender will have no right to cancel, modify, change, supplement alter or amend the Leasehold Interest and even then any and all or those rights are subject to the Leasehold Interest. No estate in the Property, whether fee title to the leasehold premises the leasehold estate, or any subleasehold estate, will meige without Lender express written consent rather these estates will remain separate and distinct, even if there is a union of these estates in the landlord, Trustor, or a third party who purchases or otherwise acquires the estates. 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 6 Notices Relating to the Lease. Trustor will promptly notify Lender in writing: (1) if Trustor is in default in the performance or observance of any of the terms, covenants, or conditions which Trustor is to perform or observe under the Lease; (2) if any event occurs which would constitute a default under the Lease; (3) if any notice of default is given to Trustor by the landlord under the Lease; (4) if, pursuant to the Lease, any proceeds received for the Property are deposited with someone other than Lender, whether received from any insurance on the Property or from the taking of any or all of the Property by eminent domain; and (5) if any arbitration or appraisal proceedings are requested or instituted pursuant to the Lease. Trustor agrees to provide Lender promptly with a copy of all written materials relating to any of the above and to provide Lender with such other information as Lender may reasonably request. Tiustor agrees that promptly after the execution and delivery of this Deed of Trust Trustor will notify the landlord under the Lease in writing of the execution and delivery of this Deed of Trust and of the name and address of Lender and will deliver a copy of this Deed of Tiust to the landlord. Option to Cure Lease Default. Upon Lender's receipt of any written notice of Trustor's default under the Lease, Lender may, at Lender's option, cure such default, even though Trustor, or any patty on behalf of Trustor, questions or denies the existence of such default or the nature of the default Tiustor expressly grants to Lender the absolute and immediate right to enter upon the Property to such extent and as often as Lender in its sole discretion deems necessary or desirable in order to prevent or cure any such default by Trustor. Grant of License. Lender confers upon Trustor a license ("License") to collect and retain the Rents as they become due and payable, until the occurrence of an Event of Default (as hereinafter defined). Upon the occurrence of an Event of Default, the License shall be automatically revoked and Lender may collect and apply the Rents without notice and without taking possession of the Property. Trustor hereby irrevocably authorizes and directs the lessees under any leases to iely upon and comply with any notice or demand by Lender for the payment to Lender of any rental or other sums which may at any time become due under the leases, or for the performance of any of the lessees' undertakings under the leases and the lessees shall have no right or duty to inquire as to whether any Event of Default has actually occurred or is then existing hereunder. Trustor hereby relieves the lessees from any liability to Trustor by reason of relying upon and complying 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 7 with any such notice or demand by Lender. The foregoing is subject to the requirements of the Lease for payment of Rent and Percentage Rent, as defined in the Lease. Liens, Encumbrances and Charges. Trustor shall immediately discharge any lien not approved by Lender in writing that has or may attain priority over this Deed of Trust Subject to the provisions of the Loan Agreement secured by this Deed of Trust regarding mechanics' liens, Trustor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Property, or any interest therein, whether senior or subordinate hereto. DUE ON SALE - CONSENT BY LENDER. Lender may, at Lender's option, declare immediately due and payable all sums secured by this Deed of Trust upon the sale or transfer, without Lender's prior written consent, of all or any part of the Leasehold Interest. A "sale or transfer" means the conveyance of the Leasehold Interest or any right, title or interest in the Leasehold Interest whether legal, beneficial or equitable, whether voluntary or involuntary; whether by outright sale, deed installment sale contract contract for deed leasehold interest with a term greater than three (3) years, lease -option contract, or by sale, assignment, or tiansfer of any beneficial interest in the Leasehold Interest, or by any other method of conveyance of an interest in the Leasehold Interest. If any Trustor is a corporation, partnership of limited liability company then tiansfer also includes any restructuring of the legal entity (whether by merger division or otherwise) or any change in ownership of more than twenty-five percent (25%) of the voting stock, partnership interests or limited liability company interests, as the case may be, of such Trustor. However, this option shall not be exercised by Lender if such exercise is prohibited by applicable law. TAXES AND LIENS. The following provisions relating to the taxes and liens on the Property are part of this Deed of Trust: Payment. Trustor shall pay when due (and in all events at least ten (10) days prior to delinquency) all taxes special taxes, assessments charges (including water and sewer), fines and impositions levied against or on account of the Leasehold Interest, and shall pay when due all claims for work done on of for services rendered or material furnished to the Property. Trustor shall maintain the Property free of all liens having priority over or equal to the interest of Lender under this Deed of Trust, except for the lien of taxes and assessments not due and except as otherwise provided in this Deed of Trust. Right to Contest. Trustoi may withhold payment of any tax, assessment, or claim in connection with a good faith dispute over the obligation to pay, so long as Lender's interest in the Leasehold Interest is not jeopardized. If a lien arises or is filed as a result of nonpayment, Trustor, then, within fifteen (15) days after the lien arises or, if a lien is filed, then, within fifteen (15) days after Trustor has notice of that filing, shall secure the discharge of the lien, or if requested by Lender, deposit with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender in an amount sufficient to 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 8 discharge the lien plus any costs and attorneys' fees, or other charges that could accrue as a result of a foreclosure or sale under the lien. In any contest, Trustoi shall defend itself and Lender and shall satisfy any adverse judgment before enforcement against the Property. Trustor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. Evidence of Payment. Trustor shall upon demand furnish to Lender satisfactory evidence of payment of the taxes or assessments and shall authorize the appropriate governmental official to deliver to Lender at any time a written statement of the taxes and assessments against the Property. Notice of Construction. Trustor shall notify Lender at least fifteen (15) days before any work is commenced, any services are furnished, or any materials are supplied to the Property, if any mechanic's lien, materialmen's lien, or other lien could be asserted on account of the work, services, or materials and the cost exceeds $25,000 00. Trustor will upon request of Lender furnish to Lender advance assurances satisfactory to Lender that Trustor can and will pay the cost of such improvements. PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the Property are a part of this Deed of Trust. Maintenance of Insurance. Trustor shall procure and maintain policies of fire insurance with standard extended coverage endorsements on a replacement basis for the full insurable value covering all Improvements on the Real Property in an amount sufficient to avoid application of any coinsurance clause, and with a standard mortgagee clause in favor of Lender Trustor shall also procure and maintain comprehensive general liability insurance in such coverage amounts as Lender may request with Trustee and Lender being named as additional insureds in such liability insurance policies. Additionally Trustoi shall maintain such other insurance, including but not limited to hazard business interruption, and boiler insurance, as Lender may reasonably require. Notwithstanding the foregoing, in no event shall Trustor be required to provide hazard insurance in excess of the replacement value of the improvements on the Real Property. Policies shall be written in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. All policies shall provide that the policies shall not be invalidated by any waiver of the right of subrogation by any insured and shall provide that the carrier shall have no right to be subrogated to Lender. Trustor, upon request of Lender, will deliver to Lender ftom time to time the policies or certificates of insurance in form satisfactory to Lender including stipulations that coverages will not be cancelled or diminished without at least thirty -days' prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Trustor or any other person The Real Property is or will be located in an area designated by the Administrator of the Federal Emergency Management Agency as a special flood hazard area Trustor agrees to 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 9 obtain and maintain flood insurance, if available, for the full unpaid principal balance of the loan and any prior liens on the property securing the loan, up to the maximum policy limits set under the National Flood Insurance Program, or as otherwise required by Lender, and to maintain such insurance foi the term of the loan. Flood insurance may be purchased under the National Flood Insurance Program, from private insurers providing "private flood insurance" as defined by applicable federal flood insurance statutes and regulations, or from another flood insurance provider that is both acceptable to Lender in its sole discretion and permitted by applicable federal flood insurance statutes and regulations. Application of Proceeds. Trustor shall promptly notify Lender of any loss or damage to the Property if the estimated cost of repair or replacement exceeds $10,000.00. Lender may make proof of loss if Trustor fails to do so within fifteen (15) days after the casualty. If in Lender's sole judgment Lender's security interest in the Property has been impaired, then Lender may, at Lender's election, receive and retain the proceeds of any insurance and apply the proceeds to the reduction of the Indebtedness payment of any lien affecting the Property, or the restoration and repair of the Property. If the proceeds are to be applied to restoration and repair, then Trustor shall repair or replace the damaged or destroyed Improvements in a manner satisfactory to Lender. Lender shall, upon satisfactory proof of such expenditure, pay or reimburse Trustor from the proceeds for the reasonable cost of repair or restoration if Trustor is not in default under this Deed of Trust. Any proceeds which have not been disbursed within 180 days after their receipt and which Lender has not committed to the repair or restoration of the Property shall be used first to pay any amount owing to Lender under this Deed of Trust then to pay accrued interest, and the remainder, if any, shall be applied to the principal balance of the Indebtedness. If Lender holds any proceeds after payment in full of the Indebtedness, then such proceeds shall be paid to Trustor as Trustor's interests may appear Unexpired Insurance at Sale. Any unexpired insurance shall inure to the benefit of, and pass to, the purchaser of the Leasehold Interest covered by this Deed of Trust at any trustee's sale or other sale held under the provisions of this Deed of Trust, or at any foreclosure sale of the Leasehold Interest Trustor's Report on Insurance. Upon request of Lender, however not more than once a year Trustor shall furnish to Lender a report on each existing policy of insurance showing: (1) the name of the insurer; (2) the risks insured (3) the amount of the policy; (4) the property insured, the then current replacement value of such property, and the manner of determining that value and (5) the expiration date of the policy. Trustor shall, upon request of Lender, have an independent appraiser satisfactory to Lender determine the cash value replacement cost of the Property. TAX AND INSURANCE RESERVES. Subject to any limitations and consistent with any requirements set by applicable law, Lender may require Trustor to maintain with Lender reserves foi payment of annual taxes assessments and insurance premiums, which reserves shall be created 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 10 by an initial deposit and subsequent monthly payments, or payments at such other interval as payments under the Note may be due, of a sum estimated by Lender to be sufficient to pay the total annual taxes assessments, and insurance premiums Lender reasonably anticipates to be paid from these reserves. The reserve funds shall be held by Lender as a general deposit from Trustor, which Lender may satisfy by payment of the taxes, assessments, and insurance premiums required to be paid by Trustor as they become due. Lender shall have the right to draw upon the reserve funds to pay such items, and Lender shall not be required to determine the validity or accuracy of any item before paying it. Nothing in the Deed of Trust shall be construed as requiring Lender to advance other monies for such purposes, and Lender shall not incur any liability for anything it may do of omit to do with respect to the reserve account. Subject to any limitations set by applicable law, if the reserve funds disclose a shortage or deficiency, Trustor shall pay such shortage or deficiency as required by Lender. All amounts in the reserve account are hereby pledged to further secure the Indebtedness, and Lender is hereby authorized to withdraw and apply such amounts on the Indebtedness upon the occurrence of an Event of Default. Lender shall not be required to pay any interest or earnings on the reserve funds unless required by law of agreed to by Lender in writing. Lender does not hold the reserve funds in trust foi Trustor, and Lender is not Tiustor's agent for payment of the taxes and assessments requited to be paid by Trustor. LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Leasehold Interest or if Trustor fails to comply with any provision of this Deed of Trust or any Related Documents, including but not limited to, Tiustor's failure to discharge of pay when due any amounts Trustor is required to discharge or pay under this Deed of Trust or any Related Documents, then Lender on Trustor s behalf may (but shall not be obligated to) take any action Lender deems appropriate, including but not limited to discharging of paying all taxes, liens, security interests, encumbrances and other claims at any time levied or placed on the Property and paying all costs for insuring, maintaining and preserving the Property All such expenditures incurred or paid by Lender for such purposes will then bear interest at the tate charged under the Note from the date incurred of paid by Lender to the date of repayment by Trustor. All such expenses will become a part of the Indebtedness and at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. The Deed of Trust also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon the occurrence of any Event of Default. WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of the Leasehold Interest are a part of this Deed of Trust: Title. Trustor warrants: (a) Trustor holds good and marketable title of record to the Leasehold Interest in the Property pursuant to the Lease free and clear of all liens and encumbrances other than those set forth in the Real Property description or in any title insurance policy, title report, or final title opinion issued in favor of and accepted by, 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 11 Lender in connection with this Deed of Trust, and (b) Trustor has the full right, power, and authority to execute and deliver this Deed of Trust to Lender. Defense of Title. Subject to the exception in the paragraph above, Trustor warrants and will forever defend the title to the Leasehold Interest in the Property against the lawful claims of all persons. In the event any action or proceeding is commenced that questions Trustor's title or the interest of Trustee or Lender under this Deed of Trust Tiustor shall defend the action at Trustor's expense. Trustor may be the nominal party in such proceeding but Lender shall be entitled to participate in the pioceeding and to be represented in the proceeding by counsel of Lender's own choice, and Trustor will deliver, or cause to be delivered, to Lender such instruments as Lender may request from time to time to permit such participation Compliance With Laws. Trustor warrants the Property and Trustor's use of the Property complies with all existing applicable laws, ordinances, and regulations of governmental authorities. Survival of Representations and Warranties. All representations, warranties, and agreements made by Trustor in this Deed of Trust shall survive the execution and delivery of this Deed of Trust, shall be continuing in nature, and shall remain in full force and effect until such time as Trustor's Indebtedness shall be paid in full. CONDEMNATION. The following provisions relating to eminent domain and inverse condemnation proceedings are a part of this Deed of Trust: Notice of Proceedings. Trustor shall immediately notify Lender in writing should all or any part of the Property become subject to any condemnation or expropriation proceedings or other similar proceedings, including without limitation any condemnation, confiscation, eminent domain, inverse condemnation or temporary requisition or taking of the mortgaged Property, or any part or parts of the Property. Trustor further agrees to promptly take such steps as may be necessary and propel within Lender's sole judgment and at Trustor's expense, to defend any such condemnation or expropriation proceedings and obtain the proceeds derived from such proceedings. Trustor shall not agree to any settlement or compromise or any condemnation or expropriation claim without Lender's prior written consent. Lender's Participation. Lender may, at Lender's sole option, elect to participate in any such condemnation or expropriation proceedings and be represented by counsel of Lender's choice. Trustor agrees to provide Lender with such documentation as Lender may request to permit Lender to so participate and to reimburse Lender for Lender's costs associated with Lender's participation including Lender's reasonable attorneys' fees. Conduct of Proceedings. If Trustor fails to defend any such condemnation or expropriation proceedings to Lender's satisfaction, then Lender may undertake the defense 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 12 of such a proceeding for and on behalf of Trustor. To this end, Trustor irrevocably appoints Lender as Trustor's agent and attorney -in -fact such agency being coupled with an interest, to bring, defend, adjudicate, settle, or otherwise compromise such condemnation or expropriation claims it being understood, however, that, unless one or more Events of Default (other than the condemnation or expropriation of the Property) then exists under this Deed of Trust, Lender will not agree to any final settlement or compromise of any such condemnation or expropriation claim without Trustor's prior approval, which approval shall not be unreasonably withheld. Application of Net Proceeds. Lender shall have the right to receive all proceeds derived or to be derived from the condemnation, expropriation, confiscation, eminent domain, inverse condemnation, or any permanent or temporary requisition or taking of the Leasehold Interest, or any part or parts of thereof ("condemnation proceeds"). In the event that Trustor should receive any such condemnation proceeds, Trustor agrees to immediately turn over and to pay such proceeds to Lendei. All condemnation proceeds, which are received by, or which are payable to either Trustor or Lender, shall be applied, at Lender's sole option and discretion, and in such manner as Lender may determine (after payment of all reasonable costs, expenses and attorneys' fees necessarily paid or incurred by Trustor and/or Lendei), for the purpose of: (a) replacing or restoring the condemned, expropriated confiscated or taken portion of the Property, subject to the Leasehold Interest; or (b) reducing the then outstanding balance of the Indebtedness, together with interest thereon, with such payments being applied in the manner provided in this Deed of Trust. Lender's receipt of such condemnation proceeds and the application of such proceeds as provided in this Deed of Trust shall not affect the lien of this Deed of Trust. IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following provisions relating to governmental taxes, fees and charges are a part of this Deed of Trust: Current Taxes Fees and Charges. Upon request by Lender, Trustor shall execute such documents in addition to this Deed of Trust and take whatever other action is requested by Lender to perfect and continue Lender's lien on the Leasehold Interest. Trustor shall reimburse Lender for all taxes, as described below, together with all expenses incurred in recording, perfecting or continuing this Deed of Trust including without limitation all taxes, fees, documentary stamps, and other charges for recording or registering this Deed of Trust. Taxes. The following shall constitute taxes to which this section applies: (1) a specific tax upon this type of Deed of Trust or upon all or any part of the Indebtedness secured by this Deed of Trust; (2) a specific tax on Trustor which Trustor is authorized or required to deduct from payments on the Indebtedness secured by this type of Deed of Trust; (3) a tax on this type of Deed of Trust chargeable against the Lender or the holder of the Note; 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 13 and (4) a specific tax on all or any portion of the Indebtedness or on payments of principal and interest made by Trustor. Subsequent Taxes. If any tax to which this section applies is enacted subsequent to the date of this Deed of Trust, then this event shall have the same effect as an Event of Default, and Lender may exercise any or all of its available remedies for an Event of Default as provided below unless Trustor either (1) pays the tax before it becomes delinquent, or (2) contests the tax as provided above in the Taxes and Liens section and deposits with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender. SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to this Deed of Trust as a security agreement are a part of this Deed of Trust: Security Agreement. This instrument shall constitute a Security Agreement to the extent any of the Leasehold Interest constitutes fixtures, and Lender shall have all of the rights of a secured party under the Uniform Commercial Code as amended from time to time. Security Interest. Upon request by Lender, Trustor shall take whatever action is requested by Lender to perfect and continue Lender's security interest in the Leasehold Interest Trustor shall reimburse Lender for all expenses incurred in perfecting or continuing this security interest. Upon default, Trustor shall not remove, sever or detach the Personal Property from the Property. Upon default Trustor shall assemble any Personal Property not affixed to the Property in a manner and at a place reasonably convenient to Trustor and Lender and make it available to Lender within three (3) days after receipt of written demand from Lender to the extent peimitted by applicable law. Addresses. The mailing addresses of Trustor (debtor) and Lender (secured party) from which information concerning the security interest granted by this Deed of Trust may be obtained (each as required by the Uniform Commeicial Code) are as stated on the first page of this Deed of Trust. Rights of Lender. In addition to Lender's rights as a Secured Party' under the UCC, Lender may, but shall not be obligated to, at any time without notice and at the expense of Trustor: (a) give notice to any person of Lender's rights hereunder and enforce such rights at law or in equity; (b) insure, protect defend and preserve the Property or any rights or interests of Lender therein; (c) inspect the Property; and (d) endorse, collect and receive any right to payment of money owing to Trustor under or from the Property. Notwithstanding the above, in no event shall Lender be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Lender unless Lender shall make an express written election of said remedy under UCC §9620, or other applicable law. 7.12 Fixture Filing. This Deed of Trust constitutes a financing statement filed as a fixture filing pursuant to Section 9502(c) of the UCC as amended or recodified from time 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 14 to time, covering any portion of the Property which now is or later may become a fixture attached to the Property or any Improvement. In that regard, the following information is provided: Name of Debtor: TLC Family Enterprises, Inc. Type of Organization: corporation State of Organization: California Organizational Identification No.: C FURTHER ASSURANCES; ATTORNEY -IN -FACT. The following provisions relating to further assurances and attorney -in -fact are a part of this Deed of Trust: Further Assurances. At any time, and from time to time, upon request of Lender, Trustor will make, execute and deliver, or will cause to be made, executed or delivered, to Lender or to Lender's designee, and when requested by Lender, cause to be filed, recorded, refiled, or rerecorded, as the case may be, at such times and in such offices and places as Lender may deem appropriate, any and all such mortgages, deeds of trust, security deeds, security agreements, financing statements, continuation statements, instruments of further assurance, certificates, and other documents as may, in the sole opinion of Lender, be necessary or desirable in order to effectuate, complete, perfect, continue, or preserve (1) Trustor's obligations under the Note, this Deed of Trust, and the Related Documents, and (2) the liens and security interests created by this Deed of Trust as first and prior liens on the Property, whether now owned or hereafter acquired by Trustor. Unless prohibited by law or Lender agrees to the contrary in writing, Trustor shall reimburse Lender for all costs and expenses incurred in connection with the matters referred to in this paragraph. Attorney -in -Fact. If Trustor fails to do any of the things referred to in the preceding paragraph, then Lender may do so for and in the name of Trustor and at Trustor's expense. For such purposes, Trustor hereby irrevocably appoints Lender as Trustor's attorney -in - fact for the purpose of making, executing, delivering, filing, recording, and doing all other things as may be necessary or desirable, in Lender's sole opinion, to accomplish the matters referred to in the preceding paragraph. FULL PERFORMANCE. If Trustor pays all the Indebtedness when due, and otherwise performs all the obligations imposed upon Trustor under this Deed of Trust, then Lender shall execute and deliver to Trustee a request for full reconveyance and shall execute and deliver to Trustor suitable statements of termination of any financing statement on file evidencing Lender's security interest in the Rents and the Personal Property. Lender may charge Trustor a reasonable reconveyance fee at the time of reconveyance. EVENTS OF DEFAULT. Each of the following, at Lender's option, shall constitute an Event of Default under this Deed of Trust: 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 15 Payment Default. Trustor fails to make any payment when due under the Indebtedness. Other Defaults. Trustor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Deed of Trust or in any of the Related Documents or to comply with or to perform any team, obligation, covenant or condition contained in any other agreement between Lender and Trustor. Compliance Default. Failure to comply with any other term obligation, covenant or condition contained in this Deed of Trust, the Note or in any of the Related Documents. Default on Other Payments. Failure of Trustor within the time required by this Deed of Trust to make any payment for taxes or insurance or any other payment necessary to prevent filing of or to effect discharge of any lien. Environmental Default. Failure of any party to comply with or perform when due any term, obligation, covenant or condition contained in any environmental agreement executed in connection with the Property. Default in Favor of Third Parties. If Trustor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of the Leasehold Interest or Trustor's ability to repay the Indebtedness or Trustor's ability to perform Trustor's obligations under this Deed of Trust or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Trustor or on Trustor's behalf, or made by Guarantor, or any other guarantor, endorser, surety, or accommodation party, under this Deed of Trust or the Related Documents in connection with the obtaining of the Indebtedness evidenced by the Note or any security document directly or indirectly securing repayment of the Note is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Defective Collateralization. This Deed of Trust or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. Death or Insolvency. The dissolution of Trustor s (regardless of whether election to continue is made), any member withdraws from the limited liability company, or any other termination of Trustor s existence as a going business or the death of any member, the insolvency of Trustor, the appointment of a receiver for any part of Trustor's property, any assignment for the benefit of creditors any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Trustor. 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 16 Creditor or For feiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any othei method, by any creditor of Trustor or by any governmental agency against any property secur ing the Indebtedness. This includes a garnishment of any of Trustor's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Trustor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Trustor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Execution; Attachment. Any execution or attachment is levied against the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied. Change in Zoning or Public Restriction. Any change in any zoning ordinance or regulation or any other public restriction is enacted, adopted or implemented, that limits or defines the uses which may be made of the Property such that the present or intended use of the Property, as specified in the Related Documents, would be in violation of such zoning ordinance or regulation or public restriction, as changed Default Under Other Lien Documents. A default occurs under any other mortgage, deed of trust or security agreement covering all or any portion of the Property. Judgment. Unless adequately covered by insurance in the opinion of Lender, the entry of a final judgment for the payment of money involving more than ten thousand dollars ($10,000.00) against Trustor and the failure by Trustor to discharge the same, or cause it to be discharged, or bonded off to Lender's satisfaction, within thirty (30) days from the date of the order, decree or piocess under which or pursuant to which such judgment was entered Lease Default. Trustor defaults under the terms of the Lease, or any othei event (whether or not Trustor's fault) results in the termination or cancellation of Trustor's leasehold rights. Breach of Other Agreement. Any breach by Trustor under the terms of any other agreement between Trustor and Lender that is not remedied within any grace period provided therein, including without limitation any agreement concerning any indebtedness or other obligation of Trustor to Lender, whether existing now or later. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor, or any other guarantor, endorser, surety, or accommodation party of any of the Indebtedness or any Guarantor, or any other guarantor, endorser, surety, or accommodation patty dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 17 Adverse Change. A material adverse change occurs in Trustor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. Insecurity. Lender in good faith believes itself insecure. Right to Cure. If any default, other than a default in payment, is curable and if Trustor has not been given a notice of a breach of the same provision of this Deed of Trust within the preceding twelve (12) months, it may be cured if Trustor, after Lender sends written notice to Trustor demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Deed of Trust, at any time thereafter, then Trustee or Lender may exercise any one or more of the following rights and remedies: Election of Remedies. b lection by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Trustor under this Deed of Trust, after Trustor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies. Foreclosure by Sale. Upon an Event of Default under this Deed of Trust, Beneficiary may declare the entire Indebtedness secured by this Deed of Trust immediately due and payable by delivery to Trustee of written declaration of default and, subject to the assignment and assumption provisions of the Lease, demand for sale and of written notice of default and of election to cause to be sold the Leasehold Interest, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this Deed of Trust the Note, other documents requested by Trustee, and all documents evidencing expenditures secured hereby. After the lapse of such time as may then be required by law following the recordation of the notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Leasehold Interest at the time and place fixed by it in the notice of sale, either as a whole or in separate parcels and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the I Jnited States, payable at time of sale. Trustee may postpone sale of all or any portion of the Leasehold Interest by public announcement at such time and place of sale and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement in accordance with applicable law. Trustee shall deliver to such purchaser its deed conveying the Leasehold Interest so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof Any person, including Trustor, Trustee or Beneficiary may purchase at such sale. After deducting all costs, fees and expenses of Trustee and of this Trust, including cost of evidence of title in connection 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 18 with sale, Trustee shall apply the proceeds of sale to payment of all sums expended under the terms hereof, not then repaid, with accrued interest at the amount allowed by law in effect at the date hereof all other sums then secured hereby; and the remainder, if any, to the person or persons legally entitled thereto. Judicial Foreclosure. With respect to all or any part of the Leasehold Interest, Lender shall have the right in lieu of foreclosure by power of sale to foreclose by judicial foreclosure in accordance with and to the full extent provided by California law, but subject to the assignment and assumption provisions of the Lease. UCC Remedies. With respect to all or any part of the Personal Property, Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code, including without limitation the right to recover any deficiency in the manner and to the full extent provided by California law. Collect Rents. Subject to the Lease, Lender shall have the right, without notice to Trustor to take possession of and manage the Property and collect the Rents, including amounts past due and unpaid, and apply the net proceeds, over and above Lender's costs, against the Indebtedness, subject to the provisions of the Lease. In furtherance of this right, Lender may require any tenant or other user of the Property to make payments of rent or use fees directly to Lender. If the Rents are collected by Lender, then Trustor inevocably designates Lender as Trustor's attoiney-in-fact to endorse instruments received in payment thereof in the name of Trustor and to negotiate the same and collect the proceeds. Payments by tenants or other users to Lender in response to Lender's demand shall satisfy the obligations for which the payments ate made, whether or not any propel grounds for the demand existed. Lender may exercise its rights under this subparagraph either in person, by agent or through a receiver. Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Leasehold Interest, with the power to protect and preserve the Property, to operate the Property preceding foreclosure or sale, and to collect the Rents from the Property and apply the proceeds, over and above the cost of the receivership, against the Indebtedness subject to the provisions of the Lease. The receiver may serve without bond if pet miffed by law. Lender's right to the appointment of a receiver shall exist whether or not the apparent value of the Leasehold Interest exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver. No Cure or Waiver. Neither Lender's not Trustee's nor any receiver's entry upon and taking possession of all or any part of the Property, nor any collection of rents issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security or other sums, nor the application of any collected sum to any Indebdtedness, nor the exercise or failure to exercise of any other right or remedy by Lender or Trustee or any receiver shall cure or waive any breach, Event of Default or notice of 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 19 default under this Deed of Trust, or nullify the effect of any notice of default or sale (unless all Indebtedness then due have been paid and performed and Trustor has cured all other defaults), o>_ impair the status of the security, or prejudice Lender or Trustee in the exercise of any right or remedy, or be construed as an affirmation by Lender of any tenancy, lease or option or a subordination of the lien of or security interests created by this Deed of Trust. Tenancy at Sufferance. If Trustor remains in possession of the Property after the Leasehold Interest is sold as provided above or Lender otherwise becomes entitled to possession of the Leasehold Interest upon default of Trustor, Trustor shall become a tenant at sufferance of Lender or the purchaser of the Leasehold Interest and shall, at Lender's option, either (1) pay a reasonable rental for the use of the Property or (2) vacate the Property immediately upon the demand of Lender. Other Remedies Trustee or Lender shall have any other right or remedy provided in this Deed of Trust or the Note or available at law or in equity. Notice of Sale Lender shall give Trustor reasonable notice of the time and place of any public sale of the Personal Property or of the time after which any private sale or other intended disposition of the Personal Property is to be made. Reasonable notice shall mean notice given at least ten (10) days before the time of the sale or disposition. Any sale of the Personal Property may be made in conjunction with any sale of the Real Property. Sale of the Property. To the extent permitted by applicable law, Trustor hereby waives any and all rights to have the Property mai shaped. In exercising its rights and remedies, the Trustee or Lendei shall be free to sell the Leasehold Interest. Lender shall be entitled to bid at any public sale the Leasehold Interest. Attorneys' Fees; Expenses. If Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, then Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys' fees at trial and upon any appeal. Whether or not any court action is involved, and to the extent not prohibited by law, all 1 easonable expenses Lendei incurs that in Lender's opinion are necessary at any time for the protection of its interest or the enforcement of its rights shall become a part of the Indebtedness payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by this paragraph include, without limitation, however subject to any limits under applicable law Lendei s attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post judgment collection services, the cost of searching records, obtaining title reports (including foreclosure reports), surveyors' reports, and appraisal fees, title insurance, and fees for the Trustee, to the extent permitted by applicable law. Trustor also will pay any court costs, in addition to all other sums provided by law 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 20 Rights of Trustee. Trustee shall have all of the rights and duties of Lender as set forth in this section. POWERS AND OBLIGATIONS OF TRUSTEE. The following provisions relating to the powers and obligations of Trustee are part of this Deed of Trust: Powers of Trustee. In addition to all powers of Trustee arising as a matter of law, Trustee shall have the power to take the following actions with respect to the Leasehold Interest upon the Awl itten i equest of Lender and Trustor: (a) join in preparing and filing a map or plat of the Real Property and (b) join in any subordination or other agreement affecting this Deed of Trust or the interest of Lender under this Deed of Trust. Obligations to Notify. Except for the landlord under the Lease, Trustee shall not be obligated to notify any other party of a pending sale under any other trust deed of lien, or of any action or proceeding in which Trustor, Lender, or Trustee shall be a party, unless the action or proceeding is brought by Trustee. Trustee. Trustee shall meet all qualifications required for Trustee under applicable law. In addition to the rights and remedies set forth above, with respect to all or any part of the Leasehold Interest, Tiustee shall have the right to foreclose by notice and sale, and Lender shall have the right to foreclose by judicial foreclosure in either case in accordance with and to the full extent provided by applicable law and subject to the Lease. Successor Trustee. Lender, at Lender's option, may from time to time appoint a successor Trustee to any Trustee appointed under this Deed of Trust by an instrument executed and acknowledged by Lender and recorded in the office of the recorder of San Luis Obispo County, State of California. The instrument shall contain, in addition to all other matters requited by state law, the names of the original Lendei, Trustee, and Trustor, the book and page where this Deed of Trust is recorded, and the name and address of the successor trustee, and the instrument shall be executed and acknowledged by Lendei or its successors in interest. The successor trustee, without conveyance of the Leasehold Interest, shall succeed to all the title, power, and duties conferred upon the Tiustee in this Deed of Trust and by applicable law. This procedure foi substitution of Trustee shall govern to the exclusion of all other provisions for substitution. Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. NOTICES. Any notice required to be given under this Deed of Trust shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Deed of Trust. Trustor requests that copies of any notices of default and sale be directed to Trustor's address shown near the 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 21 beginning of this Deed of Trust. All copies of notices of foreclosure from the holder of any lien which has priority over this Deed of Trust shall be sent to Lender's address, as shown near the beginning of this Deed of Trust. Any party may change its address for notices under this Deed of Trust by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Trustor agrees to keep Lender informed at all times of Trustor's current address. Unless otherwise provided or requited by law, if there is more than one Trustor, any notice given by Lender to any Trustor is deemed to be notice given to all Trustors. STATEMENT OF OBLIGATION FEE. Lender may collect a fee, not to exceed the maximum amount permitted by law, for furnishing the statement of obligation as provided by Section 2943 of the Civil Code of California. WAIVER OF STATUTE OF LIMITATIONS. Trustor waives, to the fullest extent permitted by law, the right to assert any statute of limitations as a defense to any obligation(s) secured by this Deed of Trust or outlined in the Related Documents. WAIVER OF RIGHT OF OFFSET. No portion of the indebtedness secured by this Deed of Trust shall be o1 be deemed to be offset or compensated by all or any part of any claim, cause of action, counterclaim, or cross -claim, whether liquidated or unliquidated, that Trustor may have or claim to have against Lender. Trustor hereby waives, to the fullest extent permitted by law the benefits of California Code of Civil Procedure Section 431 70 (as amended or recodified from time to time). DISCONTINUED. ADDITIONAL COVENANTS WITH RESPECT TO LEASES. Trustor (t) shall observe and perform the material obligations imposed upon the lessee under the Lease and shall not do or permit anything to impair the value of the Lease as security for the Indebtedness• (ii) shall piomptly send copies to Lender of all notices of default that Trustor shall send o1 receive under the Lease; (iii) shall enforce, in accoi dance with commercially reasonable pi actices for properties similar to the Property, the terms, covenants and conditions in the Lease to be observed or performed by the lessee, short of termination thereof; (iv) shall not collect any of the Rents more than one (1) month in advance (other than security deposits) (v) shall not execute any other assignment of Trustor's interest in the Lease or the Rents (except as contemplated by the Related Documents); (vi) shall not modify any Lease in a manner inconsistent with the Related Documents; (vii) shall not convey or transfer or suffer or permit a conveyance or transfer of the Property so as to effect a merger of the estates and rights of or a termination or diminution of the obligations of, lessees under the Lease; (viii) shall not consent to any assignment of or subletting under the Lease unless required in accordance with its terms without the prior consent of Lender, which, with respect to a subletting, may not, so long as no Event of Default is continuing, be unreasonably withheld or delayed; and (ix) shall not cancel or terminate any Lease or accept a surrender thereof (except in the exercise of Trustor's commercially reasonable Judgment in connection with a tenant default under a minor Lease) without the prior consent of Lender, which consent shall not, so long as no Event of Default is continuing be unreasonably withheld or delayed. 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 22 MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Deed of Trust: Amendments. This Deed of Trust together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set fotth in this Deed of Trust. No alteration of or amendment to this Deed of Trust shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Annual Reports. If the Property is used for purposes other than Trustor's residence, then Trustor shall furnish to Lender, upon request, a certified statement of net operating income received from the Property during Trustor's previous fiscal year in such form and detail as Lender shall requite. "Net operating income' shall mean all cash receipts from the Property less all cash expenditures made in connection with the operation of the Property. Caption Headings. Caption headings in this Deed of Trust are for convenience purposes only and are not to be used to interpret or define the provisions of this Deed of Trust Merger. There shall be no merger of the interest or estate created by this Deed of Tiust with any other interest or estate in the Property at any time held by or for the benefit of Lender in any capacity, without the written consent of Lender. Governing Law. This Deed of Trust will be governed by federal law applicable to Lender and, to the extent not pieempted by federal law, the laws of the State of California without regard to its conflicts of law provisions. This Deed of Trust has been accepted by Lender in the State of California. Choice of Venue. If there is a lawsuit, then the parties agree to the jurisdiction of the courts of San Luis Obispo County, State of California. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Deed of Trust unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Deed of Trust shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Deed of Trust. No prior waiver by Lender, nor any course of dealing between Lender and Trustor shall constitute a waiver of any of Lender's rights or of any of Trustor's obligations as to any future transactions. Whenever the consent of Lender is required under this Deed of Trust, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 23 Severability. If a court of competent jurisdiction finds any provision of this Deed of Trust to be illegal, invalid, or unenforceable as to any circumstance, then that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Deed of Trust. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Deed of Trust shall not affect the legality, validity or enforceability of any other provision of this Deed of Trust. Non -Liability of Lender. The relationship between Trustor and Lender created by this Deed of Trust is strictly a debtor and creditor relationship and not fiduciary in nature, nor is the relationship to be construed as creating any partnership or joint venture between Lender and Trustor. Trustor is exercising Trustor's own judgment with respect to Trustor's business. All information supplied to Lender is for Lender's protection only and no other party is entitled to rely on such information. There is no duty for Lender to review, inspect, supervise or inform Trustor of any matter with respect to Trustor's business. Lender and Trustor intend Lender may reasonably rely on all information supplied by Trustor to Lender, together with all representations and warranties given by Trustor to Lender, without investigation or confirmation by Lender and any investigation or failure to investigate will not diminish Lender's right to so rely. Sole Discretion of Lender. Whenever Lender's consent or approval is required under this Deed of Trust, the decision as to whether or not to consent or approve shall be in the sole and exclusive discretion of Lender and Lender's decision shall be final and conclusive. Successors and Assigns. Subject to any limitations stated in this Deed of Trust and the Lease, on transfer of Trustor's interest, this Deed of Trust shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Leasehold Interest becomes vested in a person other than Trustor, then Lender, without notice to Trustor, may deal with Trustor's successors with reference to this Deed of Trust and the Indebtedness by way of forbearance or extension without releasing Trustor from the obligations of this Deed of Trust or liability under the Indebtedness. Time is of the Essence. Time is of the essence in the performance of this Deed of Trust. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Deed of Trust. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Deed of Trust shall have the meanings attributed to such terms in the Uniform Commercial Code: Beneficiary. The word "Beneficiary" means [BankNarne}, and its successors and assigns. 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 24 Deed of Trust. The words "Deed of Trust" mean this Deed of Trust among Trustor, Lender, and Trustee, and includes without limitation all assignment and security interest provisions relating to the Personal Property and Rents. Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.0 Section 9601, et seq. ("OH RCLA"), the Super fund Amendments and Reauthoi ization Act of 1986, Pub. L. No. 99-499 ('SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code Section 25100, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto. Event of Default. The words "Event of Default' mean individually, collectively, and interchangeably any of the events of default set forth in this Deed of Trust in the events of default section of this Deed of Trust. Guarantor The word "Guarantor" means any guarantor, surety, or accommodation party of any o1 all of the Indebtedness, and, in each case, the successors, assigns, heirs personal representatives executors and administrators of any guarantor, surety, or accommodation party. Guaranty. The word "Guaranty" means the guaranty from Guarantor, or any other guarantor, endorser, surety, 01 accommodation party to Lender, including without limitation a guaranty of all or part of the Note. Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored disposed of, generated, manufactured, transported or otherwise handled The words ' Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation petroleum and petroleum by-products or any fraction thereof and asbestos. Improvements. The word 'Improvements" means all existing and future improvements, buildings, structures, mobile homes affixed on the Real Property, facilities, additions, replacements and other construction on the Real Property. Indebtedness. The word 'Indebtedness" means all principal, interest, and other amounts, costs and expenses payable under the Note or Related Documents, together with all 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 25 renewals of, extensions of, modifications of, consolidations of and substitutions for the Note or Related Documents and any amounts expended or advanced by Lender to discharge Trustor's obligations or expenses incurred by Trustee or Lender to enforce Trustor's obligations under this Deed of Trust, together with interest on such amounts as provided in this Deed of Trust. Lease. The word "Lease" means the lease of the Property dated December 11, 2018 , as amended by Amendment # 1 dated January 12, 2021 and by Amendment # 2. Dated December 16, 2021, between City of Morro Bay, as Landlord and Trustor, which was recorded as follows: Memorandum of Lease and Agreement to Lease, as of the date it was signed recording concurrently herewith in the Official Records. Lender. The word "Lender" means ARTES Capital REIT I, LLC, a Delaware limited liability company, its successors and assigns. Note. The word "Note" means the promissory note dated _ , in the original principal amount of $ from Trustor to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement. . Personal Property. The words "Personal Property" mean all equipment, fixtures, and other articles of personal property now or hereafter owned by Trustor, and now or hereafter attached or affixed to the Real Property; together with all accessions, parts, and additions to, all replacements of, and all substitutions for, any of such property; and together with all proceeds (including without limitation all insurance proceeds and refunds of premiums) from any sale or other disposition of the Property. Property. The word "Property" means collectively the Leasehold Interest and the Personal Property. Real Property. The words "Real Property" mean the real property, interests and rights, as further described in this Deed of Trust. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness; except that the words do not mean any guaranty or environmental agreement, whether now or hereafter existing, executed in connection with the Indebtedness. Rents. The word "Rents" means all present and future leases, rents, revenues, income, issues, royalties, profits, and other benefits derived from the Property together with the cash proceeds of the Rents. 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 26 Trustee. The word "Trustee" means [Title Company Name], whose address is and any substitute or successor trustees. Trustor. The word "Trustor" means TLC Family Enterprises, Inc., a California corporation. TRUSTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS DEED OF TRUST, AND TRUSTOR AGREES TO ITS TERMS, INCLUDING THE VARIABLE RATE PROVISIONS OF THE NOTE SECURED BY THIS DEED OF TRUST. TRUSTOR: TLC Family Enterprises, Inc., a California corporation By: [narne and title) By: [narne and title] 01181.0024/780399.2 Loan No: *233* DEED OF TRUST (Continued) Page 27 CERTIFICATE OF ACKNOWLEDGMENT A notary public or other offices 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 COUNTY OF ) SS On , 20 before me, (here insert name and title of the officer) personally appeared [name], who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatui e(s) on the instrument the person(s), or the entity upon behalf of which the person(s) 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) 01181.0024/780399.2 *233* DEED OF TRUST Loan No: 6250008222 (Continued) Page 28 CERTIFICATE OF ACKNOWLEDGMENT A notary public or other offices 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 COUNTY OF ) SS On , 20 before me, (here insert name and title of the officer) personally appeared [name], who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatuie(s) on the instrument the person(s), or the entity upon behalf of which the person(s) 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) (DO NOT RECORD) REQUEST FOR FULL RECONVEYANCE (To be used only when obligations have been paid in full) To: , Trustee The undersigned is the legal owner and holder of all Indebtedness secured by this Deed of Trust All sums secured by this Deed of Trust have been fully paid and satisfied. You are hereby directed, upon payment to you of any sums owing to you under the terms of this Deed of Trust or pursuant to any applicable statute, to cancel the Note secured by this Deed of Tiust (which is delivered to 01181.0024/780399.2 Loan No: 6250008222 *233* DEED OF TRUST (Continued) Page 29 you together with this Deed of Trust), and to reconvey, without warranty, to the parties designated by the terms of this Deed of Trust, the estate now held by you under this Deed of Trust. Please mail the reconveyance and Related Documents to: Date: • Beneficiary: By: Its: LaserPro, Ver. 20.3.10.002 Copr. Finastra USA Corporation 1997, 2021. All Rights Reserved. - CA C:\LENDING\CFI\LPL\G01.FC TR-13369 PR-194 01181.0024/780399.2 r E/ Jo © /nnys ?PS (/g V1 .l,S' '.4/% (.-7-ti ./' 1 1 1 1 • 1 1 • • • 1 • mmip • 1 i 1 .SI Pp/ Si op •L276 LZ/f/ O/17Q 1 AVQ Od:?O/Y 1 1 • n V n ti h 4- 09 %f / !B16 ,SF7f/ ,CO f6 ,EVEN ?2TL2,r/// .7 Pi ,?u Itr Jt2T,L2.t1N Ct .217 04" ,20054/ 1 7T.P, tT.^i/1 I (' 1 •Ic56 IS S'/ d' Tl,L.t LJ VLL S �7/047' p 1 1 1 1 I 1 1 1 1 1 1 0 CV 2 1 is .tot: .or Is• •O 4 h 1 it 1I 1 1 1 i LUIS OBISPO CO., CALIF. V) 2 0 2 0 U Z U ,0 Q O 0 u 0 } z C0 1 Sheet 7 of E'/ i0 9 /??!/s 22s-