DEED IN LIEU OF FORECLOSURE TRANSACTIONS Ned W. Graber

I.

INTRODUCTION

Confronted with the inability to continue to make payments to a lender in accordance with the loan documents, a borrower may offer to convey the mortgaged property to the lender in exchange for not foreclosing on the property and settlement of the secured debt. This deed in lieu of foreclosure transaction can offer significant benefits to both borrower and lender, but presents risks and costs to the parties that require careful analysis and structure. If the disadvantages outweigh the benefits, the lender must to be prepared to abandon the deed in lieu transaction and proceed with foreclosure or another resolution. This article will examine the benefits of a deed in lieu transaction, the due diligence that a lender should conduct, the bankruptcy and equitable risks, subordinate lien and title insurance issues involved in these transactions and negotiation of the settlement agreement. Attached to this paper are a checklist for deed in lieu transactions and a form settlement agreement for a hotel property.

II.

BENEFITS

A deed in lieu of foreclosure provides several benefits to a lender and borrower. The primary benefit to a lender of a deed in lieu is quick control of the income and operation of the property, allowing the mortgagee to initiate actions to maximize the value of the property. Control also enables a lender to market the property for resale sooner. Accelerated control is particularly attractive in slow judicial foreclosure states such as Ohio and New York. Deeds in lieu are rarely used in quick action trustee sale states like Texas. In fact, the Texas Supreme Court stated in 1987 "there is no such deed as a deed-in-lieu of foreclosure."! In the case study, the lender seeks to gain control of the property to negotiate the expansion lease and retain the major tenant. A deed in lieu can save the parties the time and expense of foreclosure and receivership. A borrower may benefit in transactions in which the lender pays for part or all of the expenses of the transfer, such as transfer taxes, title policy and recording costs. A sales commission normally incurred in a sale of the property by a borrower to a third party will be saved. The delay of waiting for expiration of the redemption period can be avoided by recording of the deed. A deed in lieu reduces the risk of deterioration and waste to the property. If in construction, a deed in lieu can avoid work stoppages. A partially completed project is worth only a fraction of the outstanding loan and expeditious completion is necessary to maximize recovery. With respect to completed projects, a voluntary turnover can be less disruptive to tenants and vendors. Interruption of services to the property can also be avoided. The lender is 1 Flag-Redfern Oil Co. v. Humble Exploration Co., 744 S.W.2nd 6, 8 (Tex. 1987); The court's unenlightened position that was corrected by statute, TEX. PROPERTY CODE, §51.006.

1

able to capitalize on the borrower's cooperation and obtain better and more complete information about the property. Not only is the borrower more willing to operate the property through closing in accordance with the lender's standards, but borrowers will often agree to deliver more information and original documents regarding the property. Other covenants and warranties may be negotiated in the settlement agreement. As with any other workout, a settlement agreement is an opportunity to correct deficiencies in loan documentation. The lender may be able to avoid the risk of delay of a filing of a petition in bankruptcy. The filing of a deed in lieu is private transaction. The stigma of a foreclosure for the property and adverse credit rating can be avoided for the borrower. If the lender takes title in a subsidiary, it avoids the publicity and notoriety of a public sale. A quick closing can end the borrower's responsibility for payment of property expenses, insurance and property taxes. The parties can reach a final settlement of their liabilities under the loan documents. The borrower and guarantors can be released from claims for deficiency and carve-out liabilities and the lender can receive a release from any lender liability claims.

III.

DUE DILIGENCE

A. Property Review. A deed in lieu of foreclosure is an acquisition of title to real property and should be approached with the same due diligence and scrutiny of the purchase of any other property. A lender needs to understand all the obligations and responsibilities of ownership of the property. At a minimum, operating statements and books and records for the property should obtained and reviewed to understand the revenues, payables, capital expenditures, and security and utility deposits. The lender should review all contracts and other agreements relating to the property, including management contracts, brokerage agreements, equipment leases· and service contracts, and determine whether the contracts are assignable and whether to continue or terminate them upon closing. Replacement agreements may be needed in the event of any terminations. The lender may want to obtain estoppels from certain vendors and counterparties. For example, if the title to the property is held under a ground lease, the lender will want a current estoppel certificate from the ground lessor. A current rent roll and all leases and lease guaranties should be obtain and review to determine the obligations of the landlord and tenants, and confirm that that the tenants are required to attorn to a successor owner. It may be necessary to obtain subordination, non-disturbance and attornment agreements from some tenants and estoppels should be obtained from all tenants. If not already in its files, the lender should obtain copies of and review all permits, certificates of occupancy and other approvals for the property, plans and specifications, warranties, and insurance policies. The adequacy of the insurance policies should be assessed, payment of premiums confirmed, and a determination made whether to continue the policies or place new insurance at closing. The property should be inspected to determine its condition, identify needed repairs and unsafe conditions and conditions of non-compliance with applicable handicap access or other laws and regulations. Public records should be searched for any outstanding violations and whether the property 2

complies with existing zoning, land use and other laws and regulations. The lender should determine whether all property, gross receipt, income, sales, withholding and payroll taxes have been paid by the borrower. The lender should discover the status of any pending tax protests. The lender should also conduct searches for any pending litigation or claims against the property or borrower. Environmental. The lender must obtain an updated Phase I environmental report on the property. A mortgage lender acquiring title to a property by either a deed in lieu of foreclosure or by foreclosure may become an "owner or operator" with strict liability for future costs and expenses of remediation of hazardous substances under federal or state environmental laws unless the lender can prove it qualifies as a "bona fide prospective purchaser." This defense requires the owner to show that prior to purchasing or acquiring title to the property, it conducted all appropriate inquiry of the previous ownership and uses of the property consistent with good commercial or customary practices. 2 Thus, the lender cannot rely upon the old environmental report delivered at the time of the loan closing. This defense imposes continuing obligations upon the owner during its period of ownership regarding known contaminants. In some cases, the inquiry may lead the lender to conclude that it does not want to accept a deed to the property or foreclose on the property, and the lender may want to reconsider accepting a discounted payoff or a discounted sale of the mortgage loan. A lender should not accept a deed to the property unless it is confident that the cost of the clean-up is small. It has been suggested that a lender might accept title to a contaminated property in an entity controlled by the lender, but the lender may find that it is unable to resell the property to another purchaser without paying or indemnifying the purchaser for the costs of remediation. A lender may face the risk of an third party or the government piercing the corporate veil of the controlled entity to seek recovery directly from the lender. Moreover, a lender should determine whether the protection of secured lender exemptions extend to the controlled entity of the lender accepting a deed in lieu of foreclosure. Several states have adopted their own environmental liability schemes, such as Responsibility Transfer Acts which require the recording of environmental disclosure statements upon the recording of property transfer. Some of these states require the assumption of the responsibility to remediate known environmental conditions and permit any party to the transaction to void the transaction for non-compliance. The lender should determine whether any applicable state statutes require compliance or exempt a deed in lieu of foreclosure. 3 B.

240 C.P.R. §312 (2010); ASTM EI527-05; In addition, the "secured creditor" exemption can provide exemption from the status of an owner or operator even where the lender has taken title through foreclosure (including a deed in lieu), 42 U.S.C. A. §9601(20) (2010); See TEX. WATER CODE §26.3514(D) (Vernon 2010) dealing with storage tanks. 3 Indiana Responsible Party Transfer Act, IC 13-25.3; The Connecticut Transfer Act C.O.S.A. 22a134(1)(C) exempts a transferee of a deed in lieu of foreclosure, as defined in and that qualifies for the secured lender exemption pursuant to §22a-452f(b). 3

C. Title Search. A lender must obtain title and UCC financing searches of the property to identify all matters and liens affecting the property. Unlike a foreclosure, a voluntary transfer of the property pursuant to a deed in lieu conveys title to the lender subject to all subordinate encumbrances. 4 Many lenders will not accept a deed in lieu if any subordinate liens are revealed by the searches, even if it is anticipated that there will only be short time between recording of title and a later foreclosure cutting off the junior liens. For example, pension fund lenders do not want to be subject to acquisition indebtedness. The lender may not want to face the risk of dealing with other secured creditors in the event of a bankruptcy filing or a loan workout. Finally, a lender rarely will want to incur the substantial expenses of negotiating and closing a deed in lieu transaction and subsequently be compelled to pay for all the expenses of a subsequent foreclosure. If the lender accepts the deed in lieu of foreclosure, even if title and UCC financing searches are clean of junior liens, there is no guarantee that a subordinate lien will not appear after closing of the transaction so it is important that the lender preserve its mortgage lien. A lender in consideration of a deed in lieu transaction should carefully review local law on the issue of merger. Under the common law doctrine of merger the combination in the same person of greater estate of land, such a fee simple title, with a lesser estate, such as mortgage, extinguishes the lesser interest through a merger into the greater estate, leaving no mortgage lien to foreclosure. 5 Contrary to Section 8.5 of the Restatement on Property (Mortgages) which provides that the doctrine of merger applies to mortgages, several state foreclosure statutes provide that "a deed in lieu of foreclosure, whether to the mortgagee or mortgagee's nominee, shall not effect a merger of the mortgagee's interest as mortgagee and the mortgagee's interest derived from the deed in lieu of foreclosure. ,,6 Section 51.006 of the Texas Property Code allows a lender that has accepted a deed in lieu of foreclosure the option either (1) to void the deed within four years of the date of the deed if the debtor failed to disclose a lien or encumbrance and the lender has no personal knowledge of the undisclosed lien or encumbrances when it accepted the deed and reinstate the deed of trust without impairment of it priority, or (2) foreclose its deed of trust without electing to void the deed. Other states rely upon the intention of the parties to determine whether the mortgage lien merges into the deed. However, the Sixth Circuit Court of Appeals in United States Leather, Inc. 7 did not enforce the anti-merger provision in a deed in lieu of foreclosure because the rights of an innocent third party lender would be lost through a fraud or inequitable conduct by the parties to the deed where a mortgagee attempted to avoid paying a debt it had previously acknowledged owing. s Clear intent to preserve the mortgage lien should be placed in the settlement agreement and in the deed. In some states, it is prudent to take title in a separate entity controlled by the lender to avoid merger and extinguishment of the mortgage lien. Careful review of the state income and transfer taxes North Texas Building & Loan Ass'n v. Overton, 86 S.W.2d 738 (Tex. 1935). See Ann M. Burkhart, Freeing Mortgages of Merger, 40 VAND. L. REV. 283, 342 (1987). 6 S.H.A. 735 ILCS 5/15-140l. th 7 United States Leather, Inc. v. Mitchell Mfg. Group, Inc., 276 F.3d 782 (6 Cir. 2002). 8 John C. Murray, Deeds in Lieu: Subsequent Foreclosure of Mortgage (2006). 4

5

4

should be made before deciding to use a separate entity. For example, life insurance companies are not subject to state income taxes, but a corporation or limited liability company controlled by the insurance company may be. For this reason, a business trust may be preferable for the controlled entity. In addition, some states impose transfer taxes upon transfers to a separate entity, but not to the lender holding the debt. Finally, the lender should not, intentionally or inadvertently, extinguish the debt or cancel the mortgage lien before the property is ultimately resold to another third party purchaser. This means that a lender should give a covenant not to sue to the borrower and not a general release that may extinguish the debt and make a subsequent foreclosure impossible. A covenant not to sue has demonstrated the intent not to merge and overcome the mortgagor's burden of proof. 9 It should be noted, however, that if a new owner title policy is being issued to the lender, the title company may request that the mortgage lien be released of record. I believe that this request is based upon Section 2.a in the 1992 ALTA Loan Policy that provides for continuation of coverage only if the insured acquires the property by "conveyance in lieu of foreclosure, or other legal manner which discharges the lien of the insured mortgage." This provision does not appear in the new 2006 ATLA Loan Policy and therefore the title company should recognize procedures to preserve the mortgage lien.1O Reservation of the mortgage lien protects the lender against unknown subordinate encumbrances and allows reinstatement of the loan documents in the event that following recordation of the deed, the transfer is set aside by bankruptcy court as a fraudulent conveyance or preference. A lender should be, cautious about accepting a deed in lieu with known subordinate liens. There is a comment in the Restatement Third of Property, that a "mortgagee who takes a deed in lieu with actual knowledge of a junior lien will lose the right to foreclose irrespective of whether there is merger intent."ll Professor Burkhart has also written "the senior mortgagee should be prohibited from exercising its lien in this situation regardless of whether it has manifested any intent concerning merger. Each time a deed in lieu transaction is negotiated with the understanding that the mortgagee will acquire title subject to junior liens, the senior mortgagee has waived its right to eliminate those liens."I2 If the title or vee searches reveal subordinate liens, the lender may want to continue the benefits of a cooperative borrower and request that the borrower stipulate to the foreclosure of the property and appointment, if necessary of a receiver. In a friendly foreclosure, the lender could obtain the advantages of a comprehensive settlement agreement with the borrower and save time and expense. In the alternative, if the amount of the subordinate liens is small, the expense of negotiating settlement of the subordinate liens and proceeding with the deed in lieu may be less than the costs of completing the foreclosure. 9 Sanderson v. Hadlett, 832 So. 2d 845 (Fla. App. 4th Dist. 2002); See also Michael F. Jones, Structuring the Deed in Lieu of Foreclosure Transaction, 19 REAL PROP., PROB. & TR. J. 58, 70 (Spring 1984). 10 John C. Murray, Deeds in Lieu of Foreclosure - Title Insurance Issue, ACMA ABSTRACT (Spring

2011). 11 RESTATEMENT THIRD OF PROPERTY (MORTGAGES) §8.5 Comment. 12 Ann M. Burkhart, Freeing Mortgages of Merger, 40 VAND. L. REV. 283, 348-49 (1987). 5

D. Bankruptcy Concerns. A transfer to the lender can be voided under the Bankruptcy Code as a fraudulent conveyance if there is a lack of fair consideration. Section 548(a)( I) of the Bankruptcy Code provides that "the trustee may void any transfer ... of an interest of the debtor in property, or any obligation... incurred by the debtor, that was made or incurred on or within two years before the date of filing of the petition, if the debtor voluntarily or involuntarily ... received less than a reasonably equivalent value in exchange for such transfer or obligation; ... and was insolvent on the date that the transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation ... ,,13 In addition, a trustee may set aside a transfer using any applicable state fraudulent conveyance

statute which may be broader in scope. 14 A transfer can also be voided if made with the intent "to hinder, delay or defraud a creditor", but actual fraud is very difficult to prove and unlikely to be present in any arms-length deed in lieu transaction. In extreme cases, equitable subordination has been applied where the lender's behavior was overreaching. IS If the transfer is set aside, the lender will be considered a creditor, but if the lender's lien is shown to be unperfected, the lender will be treated as an unsecured creditor. This is a reason to confirm perfection of a lender's lien before recording a deed in lieu of foreclosure. If set aside, the trustee can either order the transferee to reconvey the property to the debtor or to pay to the trustee the difference between the value of the property as determined by the court and the sales price. I6 Satisfaction of an antecedent debt is considered value. Where the outstanding debt, including interest, default interest, and late charges, exceeds the value of the property, the debtor has received reasonably equivalent value. This is the reason it is critical to obtain a solid appraisal of the property from an independent qualified third party appraiser to establish that adequate consideration is being given for the property. A more difficult situation is where the value of the property and the debt are approximately equivalent. Most lenders prefer a margin of safety to avoid an evidentiary battle of appraisers. . If the value of the property exceeds the amount of the debt, the borrower and its constituent partners, members or shareholders of the borrower may have an incentive to challenge the transfer in bankruptcy court to recover their equity in the property. To avoid this situation, the lender might consider paying to the borrower at the time of the transfer an amount in cash equal to the shortfall between the difference between the amount of the debt and the value property. If the transaction is nevertheless voided I3 11 U.S. C. A. §548(a)(1) (Supp 2011); The preference period was extended from one to two years by Bankruptcy Abuse Prevention and Consumer Act of 2005. 14 A trustee can bring an action before the closing of the bankruptcy case using a state fraudulent conveyance law within of 2 years after the entry of order of relief or 1 year after appointment of the trustee, 11 U.S.C. A. §544(b) and §546(a); Section 3 of the Uniform Fraudulent Conveyance Act requires the transfer to be made in "good faith." 15 11 U.S.C.A. §51O. 16 11 U.S.C.A. §550.

6

by a bankruptcy court, the cash payment would be not be refunded to the lender until after the plan of reorganization has been approved or the property is sold in the bankruptcy case. I7 The better approach under these circumstances is to proceed with a foreclosure because title taking through a foreclosure is not treated as a fraudulent conveyance under the Bankruptcy Code. IS Most lenders, after analyzing the risks under these circumstances where the value of the property exceeds the debt, will decline acceptance of a deed in lieu of foreclosure. A transfer to a lender by an insolvent borrower may be voided as a preferential transfer by a bankruptcy trustee in a subsequent bankruptcy filing made within 90 days of the date of the transfer. I9 The debtor must be insolvent or made insolvent at the time of the transfer. While there is a presumption of insolvency of the debtor within 90 days preceding the date of filing,20 the inability to pay debts as these become due does not indicate that the borrower is insolvent under the Bankruptcy Code. Insolvency is a balance sheet test. The trustee must prove all five elements in Section 547(b). If the lender can show that the borrower is solvent (which may not be possible if the borrower is a single asset entity), there is no preferential transfer. A lender should therefore obtain a current financial statement for the borrower to determine its solvency under the Bankruptcy Code. More importantly, the transfer can be only be a preference if the creditor receives more of its claim than it would have received in a distribution from the bankruptcy if the transfer has never been made. Once again, establishing the value of the property is critical to determining what the creditor is entitled to receive in a distribution. The creditor is entitled to receive the value of the property that does not exceed its secured debt. Therefore, if the value of the property is less than the secured debt, there is no preference and the transfer cannot be voided by the trustee. The lender should confirm that its debt is properly secured and perfected. An unperfected security interest will fail this test and can be voided by the trustee. For example, a security interest in a cooperative apartment would be unsecured if the lender failed to properly file and continue VCC financing statements.

III.

DOCUMENTATION

A. Negotiation. The motivations and positions of the parties are important in negotiating a settlement agreement. Both parties approach the possible transaction burdened with a misjudgment of the original loan transaction and the performance of the property and borrower. A borrower of a non-recourse loan is in a stronger bargaining position than an obligor of a personally guaranteed loan because the non-recourse lender's opportunity to recover depends solely upon the improvement of the value of the property. While a recourse lender may prefer to pursue the personal liabilities of the borrower and guarantors, a non-recourse lender has a strong incentive to obtain title to the property quickly. It is important to identify who is able to 11 U.S.C.A.§548(c). 18 BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757 (1994). 19 11 U.S.C. §548(a); The ninety day period can be extended to 1 year if the transferee is an insider, Levit v. Ingersoll Rand Fin. Corp., 874 F. 2d 1186 (7"' Cir. 1989). 20 11 U.S.C.A.§547(t). 17

7

negotiate for the borrower. 21 An awareness of possible conflicts among the parties constituting the borrower is important. The general partner or managers may want a release of all obligations under the loan documents and may want to retain project management. The limited partners or investors will be concerned about tbeir lost opportunity and tax liabilities. Their differences may create conflicting demands and the parties constituting tbe borrower may need separate counsel. The negotiating party for the borrower needs to remember his fiduciary duties to the other partners. Conveying the property to tbe lender in return for a release that benefits only the general partners may constitute use of a partnership asset for nonpartnership purposes. 22 Do not assume that the authority to make the original loan is sufficient to consummate the proposed transfer. The organizational documents of the borrower should be reviewed to determine tbe authority of the borrower to convey the property. The lender needs to confirm what consents are required for the proposed transaction and whether all necessary parties are willing and able to deliver such consents. A lack of consensus among the borrower parties can easily derail the transaction. A borrower may be using the negotiation of the settlement agreement as a delaying tactic to retain title to tbe property.23 A realistic schedule for tbe negotiations and closing of the transaction should be established, and if agreement is not reached within a reasonable time, the lender may have to proceed with foreclosure. The lender may want to initiate a foreclosure at the same time that the deed in lieu transaction is being negotiated to give the lender more leverage in the negotiations and forestall delays, but this approach imposes additional expenses on the lender. Voluntary Conveyance. A deed in lieu conveyance must be a voluntary transaction under state law. Every borrower has a right to redeem its property with full payment of the obligation within certain time frames. A borrower cannot lose its right of redemption, except through a valid foreclosure action or in a conveyance for adequate consideration. Jack Murray has written: B.

Unless the offer of conveyance by the borrower is voluntary, there is a significant risk that the borrower may later contest the transaction. Factors that taint a transaction include undue pressure, fraud (actual or constructive), unconscionable advantage, duress, undue influence, or grossly inadequate consideration. For example, if the borrower successfully argues duress or undue influence, the entire transaction may be set aside. In the alternative, the borrower may choose to recover the value of the property, the equity 21 Douglas R. Prince, Counseling the Borrower on Friendly Foreclosures and Deeds in Lieu, 10 PRAC. REAL ESTATE LAWYER 37 (March 1994). 22 Alan Bromberg & Larry Ribstein, BROMBERG AND RIB STEIN ON PARTNERSHIP §6.07 (1995). 23 Diane S. Coscarelli, The Deed in Lieu of Foreclosure: To Do or Not to Do? (ACMA Annual Meeting 2009); Dianne S. Coscarelli, Avoiding the Traps in Workouts and Deeds in Lieu of Foreclosure, 13 PRAC. REAL ESTATE LAWYER 7 (July 1997); Nancy J. Appleby, Counseling the Lender on Friendly Foreclosures and Deeds in Lieu, 10 PRAC. REAL ESTATE LAWYER 21 (March 1994).

8

of redemption, or the profits realized on sale. Additionally, if the lender's conduct is flagrant or outrageous, courts may assess punitive damages against the lender. 24 Moreover, if the transaction is set aside by reason of a lender's conduct, the title company may raise a defense of "acts of insured" to any claims. The best practice is to document that the transaction originated after a loan default with an offer from or on behalf of the borrower to tender a deed to the lender. The documentation should state the reasons for the offer. This will forestall later claims by the borrower or others of undue influence, duress, oppression or the absence of good faith. The lender should respond setting forth the written conditions under which the lender is willing to accept the voluntary conveyance. All these conditions must be satisfied before the lender is obligated to close the transaction. 25 C. Settlement Agreement. It is important for both the borrower and lender to document the transaction in a comprehensive settlement agreement. The draftsmen should be mindful that courts view deeds in lieu with suspicion because of the common unequal bargaining power between lenders and borrowers. Viewing the transaction as an arms-length purchase of the property, the lender will want representations, title warranties, extensive deliverables and title insurance. A borrower will prefer a simple transaction without these items involving delivery of a deed in exchange for a full release of all liabilities under the loan documents. The agreement should recite the voluntary nature of the transaction and set forth the consideration for the conveyance. If the loan is recourse, consideration is most likely the full or partial forgiveness of the debt. If non-recourse, the consideration is the value of the property. Waiver of the right to foreclose immediately and exercise other remedies is also consideration. The borrower should confirm the amount of the debt, the default, the value of the property, and that it has no equity in the property. The lender may ask for a representation of solvency of the borrower, but this may not be possible for a single asset borrower. The transaction should be described as an absolute conveyance with no continuing rights or interests of the borrower in the property or rights of redemption. Recitation should be made that the debt is not being extinguished and that there is no intent to merge the debt into the deed. The lender needs to identify all of the personal and real property that is to be transferred and address any special circumstances that require particular attention, such as liquor licenses, hotels, cooperatives and condominiums. The borrower will want to be released from any deficiency (if the loan is recourse) and all carve-out liabilities (if the loan is non-recourse) and all other obligations under the loan documents. The reasons for providing a covenant not to sue rather than a release have been discussed above. The agreement should clearly state what is and what is not being released 24 John C. Murray, Deeds in Lieu of Foreclosure: Practical and Legai Considerations, 26 REAL PROP. PROB.& TR. J. No.3, 459, at 463 (Fall 1991). 25 The unilateral execution and recording of a deed by a borrower to a lender is not binding upon the lender absence evidence that the lender accepted the deed, Martin v. Uvalde Savings and Loan Assn., 773 S.W. 2d 808 (Tex Civ. App. - San Antonio1989); Hennessey v. Bell, 775 S.W.2d 650 (Tex Civ. App.-Corpus Christi 1988), writ denied.

9

or covered by the covenant not to sue, and whether the guarantors are being released or covered. Acceptance of a deed in lieu of foreclosure generally does not preclude the lender seeking a deficiency, but to avoid an inadvertent release, it is advisable to review any applicable state statute governing this type of transaction. For example, an lllinois statute provides that "Acceptance of a deed in lieu of foreclosure shall relieve from personal liability all persons who owe payment or the performance of other obligations secured by a mortgage, including guarantors of such indebtedness or obligations, except to the extent a person agrees not to be relieved in an instrument executed contemporaneously.,,26 The lender will want to exclude from the covenant not to sue the representations and covenants of the borrower in the settlement agreement, deed warranties and environmental indemnifications. The borrower and guarantors should release any claims against the lender. The covenant not to sue should provide that in the event the transaction is subsequently set aside in a bankruptcy or other action, the covenant is null and void and all the loan documents are reinstated. 27 The covenant should contain a reservation of any claims against any other guarantors or other parties not being released. If not being fully released, the guarantor's consent should be obtained. The borrower's counsel should opine on the due authorization, execution, validity and enforceability of the settlement documents and that the mortgage and related security interests are valid and properly perfected under applicable state law. Finally, it is not in the interest of the lender for the terms of the settlement agreement to be shared with other borrowers or discussed among borrowers, so a confidentiality provision is recommended. D. Absolute Conveyance. The borrower may seek to retain control of the property by asking to remain in possession of the property, or to manage the property after the recording of the deed, or request a right to repurchase, right of first refusal, or share in the profits. The lender should be very cautious regarding these requests. These rights may be inconsistent with intent to divest title. 28 Each of these rights could be considered the equivalent of an equitable mortgage or may be deemed voidable as a clog on the equity of redemption. 29 For example, when a borrower defaulted under an arrangement by which it transferred the property to a lender who agreed to reconvey the property to the borrower upon completion of debt payment, the court held this arrangement a mortgage. 30 A transfer has been held a mortgage when the borrower leased back the property and retained an option to purchase the property for the amount of the debt,3! or retained possession and paid taxes, insurance, maintenance expenses,

S.H.A. 735 ILCS 5/15-1401. A title company may raise an exception in its owner policy for this reinstatement right, John C. Murray, Deed in Lieu of Foreclosure - Title Insurance Issues, 10, ACMA ABSTRACT (Spring 2011). 28 Riley v. W.R. Holdings UC, 138 P.3d 316 (Id. 2006). 29 In Re All American Hold Corp, 8 B.R. 459 (Bankr. S.D. Fla. 1981); See John C. Murray, Clogging Revisited, 33 REAL PROP. PROB. & TR. J. No.2, 279 (Summer 1998). 30 Davis v. Stone, 236 F. Supp. 553 (D.D.C. 1964). 31 Beeler v. American Trust Co., 147 P. 2d 583 (Cal. 1944). 26

27

10

and utilities. 32 In determining whether an equitable mortgage exists, a court will consider whether a debt exists, presence or absence of counsel, the relationship of the parties, the parties' sophistication, adequacy of consideration and who retained possession of the property.33 Rights to repurchase or profit sharing should be avoided. If the borrower manages the property after the conveyance, the engagement should be on daily basis terminable at will by the lender. The borrower should not be granted any authority to control the development, leasing or sale of the property. The best practice is to engage a new manager unaffiliated with the borrower to take over management of the property at closing. If the borrower is to lease any portion of the property after closing, the term should be short and rent at a market rate. Finally, the settlement agreement should clearly recite that the transaction is intended to be an absolute conveyance of the property and not a transfer for security purposes. If the conveyance is recharacterized as an equitable mortgage, not only will the lender have to resort to a judicial foreclosure to regain the property, but the lender will not have the benefit of the customary provisions and remedies, such as waivers of redemption, right to trustee's sale, or right to obtain a receiver. The equitable mortgage would have a different priority. As a mortgagee in possession, the lender could also be subject to claims by the borrower of mismanagement of the property. E. Deed in Escrow. The borrower may seek to retain possession of the property for a certain period of time by proposing to place a deed into escrow with instructions to deliver it to the lender upon the failure to meet certain goals. This arrangement affords a borrower additional time to stabilize the situation. The lender should carefully consider the risks of a placing a deed in escrow before adopting any escrow arrangement. 34 The deed will be frozen in escrow if the borrower later asserts to the escrow agent any dispute regarding the transaction. Courts will closely scrutinize deeds in escrow to determine whether it clogs the equity of redemption. A transaction may be characterized as merely a refinance or continuation of the old loan and void the deed as an attempt to evade the foreclosure process. 35 Unenforceability is based upon the theory that the deed is merely security for the mortgage loan,36 or that the borrower at the time of original. loan transaction could not have waived its right of redemption,37 or that the deed is voidable as a clog on the equity of redemption?8 Other

Striker v. Trans-West Discount Corp., 155 Cal. Rpt. 132 (Cal. Ct. App. 1970). Flack v. McClure, 565 N.E.2d 131 (ll!. App. Ct. 1990). 34 John C. Murray, Mortgage Workouts: Deeds in Escrow, 41 REAL PROP. PROB. & TR. J. No.2, 185 32

33

(Summer 2006) . . 35 Any deed in escrow executed in connection with the original loan transaction is void and unenforceable, First Illinois Bank v. Hans, 143 lil. App. 3d. 1033,493 N.B. 2d 1171 (2'd Dist. 1986). 36 Katheiser v. Hawkins, 645 P.2d 967 (Nev. 1982); See also Hendrickson v JGR Properties Inc., 2008 WL 5053440, Ohio Ct. of App., December 2008) discussed in Roger Bernhardt, Bad Timing for Deeds in Lieu, ACMA ABSTRACT (Fall 2009). 37 Marple v. Wyoming Production Credit Ass'n., 750 P.2d 1315, 1320 (Wyo. 1988). 38 C. Phillip Johnson Full Gospel Ministries, Inc. v. Investors Financial Services LLC, No. 115 (Md. Ct of App. Filed Jan. 31, 2011); Debra P. Stark, Avoiding the Recharacterization of Certain Deed-in-Lieu 11

courts have held that an executory deed arrangement is an equitable mortgage which must be foreclosed in order to enforce the agreement. 39 A deed in escrow has been considered a mortgage because of a recital of the existence of debt, that the borrower retained management of the property and the documents allowed the borrower to recover the property when the debt was paid. 4o Parol evidence is admissible to show that an absolute deed on its face was intended as security for an obligation and should be considered a mortgage. 41 The parties' intention may be shown by their statements, a substantial disparity between the value received by the grantor and the actual value of the property, continued possession by the grantor, continued payment of taxes by the grantor, improvements made by the grantor, and the relationship of the parties before and after the conveyance, and existence of contingencies that could unwind the transaction. 42 Under certain circumstances, however, a deed in escrow delivered in connection with a workout may be enforceable. There must be a default and fair and adequate consideration given to the borrower. In Ringling Brothers,43 the court found that the mortgagor received valuable new consideration and upheld the executory deed. The mortgagor received new loan proceeds and the pending foreclosure proceedings were halted. The court also noted that the transaction involved commercial and not residential real estate, the mortgagor was represented by counsel, the mortgagor had no equity in the property and the mortgagor had acknowledged it could not pay and had made no attempt to pay the debt. In Russo v. Wolbers, the court stated that "the exchange must be fair, frank, honest, and without fraud, misconduct, undue influence, oppression or unconscionable advantage of the poverty, distress or fears of the mortgagor.,,44 Forbearance to foreclose and acceptance of the property in full satisfaction of the debt,45 and an extension of the loan and release of a borrower's personalliabilitl6 have been held adequate consideration. Finally, the lender must analyze the risk that during the period the deed is in escrow, the borrower will file bankruptcy. A bankruptcy court will consider that the property remains part of the borrower's estate because title has not transferred to the lender under an escrow of an executory deed. 47 The automatic stay of Section 362(d) of the Bankruptcy Code will also

Foreclosure Transactions: Ensuring That What You Draft is What You Get, 110 BANKING L. J., 330

(1993). 39 40

McGuigan v. Miller, 117 Cal. App 739,750,4 P. 2d 607,611-12 (1931). Wallace v. McCabe, 245 N.Y.S. 2d 854 (Sup. C!. 1964).

RESTATEMENT THIRD OF PROPERTY (MORTGAGES) §3.2 (1997); Compare MlNN. STAT. ANN. §559.18 (2010) and GA. CODE ANN. §44-14-32 (2011) which prohibits parol evidence to show a deed absolute on its face is a mortgage, unless there is fraud; with ARIZ. REV. STAT. ANN. §33-702(A) which permits parol evidence. 42 John C. Murray, Deed in Lieu of Foreclosure - Title Insurance Issues, ACMA ABSTRACT (Spring 2011). 43 Ringling Brothers Joint Venture v. Huntington National Bank, 595 So.2d 180 (Fla. Dis!. Ct. Ap. 1992). 44 116 Mich. App. 327, 389 (1982). 45 297 Mich. 315,297 N.W. 505 (Mich. 1941) . .,; Verity v. Metropolis Land Co., 288 N.Y.S. 625 (N.Y. App. Div 1936). 47 In re Sky Group International, Inc., 108 B.R. 86, 92 (Bankr. W.D. Pa. 1989); Matter of Scanlon, 80 B.R. 131, 134 (Bankr. S.D. Iowa 1987). 41

12

prohibit the delivery of the deed from escrow to the lender. 48 Of course, one method to bankruptcy proof an executor deed arrangement is to incorporate the escrow into an approved reorganization plan confirmed by the bankruptcy court. 49 Another alternative to the deed in escrow in judicial foreclosure states is a stipulation by the borrower that the foreclosure judgment can be entered in the future if the terms of the stipulation are breached. F. Title Insurance. A lender should consider purchase of an owner's title policy to mitigate the risk of subordinate encumbrances. Who pays for a new policy is negotiable, but the expense probably falls on the lender more often than the borrower. A lender will want a new owner's policy whenever title is transferred to an entity controlled by the lender. If the lender anticipates resale of the property within a short period of time, a lender may want to inquire whether a binder is available. A new title policy is necessary to insure current title because, even if title is accepted by the lender, the existing mortgagee title policy covers title to the property only as of the date of the recording of the mortgage. A title company should be involved early in the transaction for review of title and to address its requirements. The title company will want to confirm the amount of the debt and review a copy of the appraisal, settlement agreement, deed, and sometimes financial information on the borrower. Title companies prefer an appraisal showing that the property value is at least 10-20% less than the debt. 50 The lender may want to obtain a non-merger endorsement to its mortgagee title policy where available, insuring that vesting of title in the lender does not invalidate or make the mortgage unenforceable, and an endorsement insuring the continued validity and priority of its mortgage lien. 51 Until last year, title insurers were deleting the creditor rights exception by an endorsement for loss or damage by the insured by reason of a fraudulent transfer or avoidable preference under federal bankruptcy or state insolvency laws, including costs of defense. However effective March 8, 2010, the American Land Title Association withdrew ALTA Forms 21 and 21.06 and shortly thereafter the equivalent California Land Title Association Forms 131 and 131-06 were also withdrawn. All major title insurance groups have ceased to issue a creditor rights endorsement. 52 As a result lenders must increase their scrutiny of bankruptcy risks of deed in lieu transactions.

G. Taxes and Reporting Requirements. Tax considerations may also affect the transaction. If the loan is non-recourse, the borrower will realize the same gain whether the property is taken by foreclosure or transferred by a deed in lieu. However, if the loan is In re Stockbridge Funding Corp., 145 B.R. 797,811 (Bankr. S.D.N.Y. 1992). Matter of Howe, 913 F. 2d 1138 (5 th Cir. 1990). 50 John C. Murray, Deed in Lieu of Foreclosure - Title Insurance Issues, ACMA ABSTRACT (Spring 48 49

2011). 51CLTA 107.11-06; SE-233 (D.C.). 52 The creditor rights endorsement was never available in Florida, New Mexico, New York, or Texas; Title companies have ceased to issue in Florida and elsewhere ALTA 1970 Policy that contains creditors rights protection. 13

recourse, the transaction will be bifurcated with the portion of the debt equal to the value of the property treated as a disposition of the property and the remaining portion treated as personal debt which may be treated as cancellation of debt, unless the taxpayer is insolvent. The parties may be able to alter the timing of the impact of income taxes on the borrower with scheduling of the closing. Section 6050J of the Internal Revenue Code imposes a requirement upon the lender to report the acquisition of all property mortgaged as security for a debt, including by deeds in lieu of foreclosure. The lender must file Forms 1096 and 1099-A by February 28 of the year following the calendar year of the transfer. The lender should also obtain at closing a FIRPT A certificate to establish that the borrower is not a foreign entity for which withholding is required. With respect to state taxes, the lender should determine whether it needs upon taking title to the property to register to do business in the state or qualify the controlled entity taking title. Transfer taxes can add substantial costs to the transaction. If the borrower is unwilling to pay this cost, the burden will fallon the lender. The parties should determine whether transfer taxes will have to be paid with recording the deed in lieu. Applicability varies by jurisdiction. Some states exempt foreclosures, but not deeds in lieu, some exempt both, and some impose taxes on foreclosures, but not deeds in lieu. In some states the exemption applies solely to the holder of the debt, so a conveyance from the borrower to the lender's controlled entity without transfer of the debt may not qualify for the exemption. The amount of the tax depends upon the value of the property, and there may be a deduction for the amount of the outstanding debt. Bankruptcy court is an option to avoid transfer taxes because conveyance of property from a debtor to a lender made pursuant to a confirmed bankruptcy plan of reorganization is exempt from state or local stamp and transfer taxes. 53 The lender should conflITil that the borrower has paid all franchise taxes, income, sales, unemployment and other taxes which may become a lien against the property or impose liability upon a transferee. Some states have withholding or preclearance requirements for transferors.

IV.

CONCLUSION

The delivery and acceptance of a deed in lieu of foreclosure can benefit all parties provided that proper due diligence is performed, risks are accurately assessed, and the documents are carefully and properly prepared. The transaction requires an absolute and voluntary conveyance with adequate consideration, anti-merger provisions, covenant not to sue with appropriate reservations and reinstatement, proper turnover of the property, title insurance and proper settlement of applicable tax and other obligations to protect the lender.

ATTACHMENTS: 1. Checklist for Acceptance of a Deed in Lieu of Foreclosure 2. Deed in Lieu of Foreclosure Settlement Agreement

53

11 U.S.C.A.§ 1146(a).

14

CHECKLIST FOR ACCEPTING A DEED IN LIEU OF FORECLOSURE

A. Due Diligence Review

o o o o o o o o o o o o o o

Operating Statements, Books and Records, Rent Roll, Leases, Contracts, Licenses and Permits Inspect Property and Public Records for Compliance of Property Confirm Payment of Taxes and Insurance Premiums Current Title Commitment and Copies of all Exceptions Survey Confirm Proper Perfection of Liens and Adequacy of Loan Documents Determine No Subordinate Liens or Resolve Subordinate Liens UCC, Bankruptcy and Litigation Searches Confirm Amount of Debt and Default Current Financial Statement of Borrower and Guarantors Appraisal; Determine Risk of Reversal of Transaction in Bankruptcy Phase I Environmental Report Organizational Documents of Borrower; Determine Authority to Convey and Availability of Consents Relevant Local Law on Deeds in Lieu, Merger of Mortgages, Transfer Taxes, Withholding, Environmental Transfer Responsibilities etc.

B. Settlement Agreement

o Representations: Default, Debt Exceeds the Property Value; Status of the Property; Authority to Convey; Sophistication of Borrower and Representation by Counsel o Recite Consideration for Transfer o Recite Voluntary Offer by Borrower to Convey o Recite Absolute Conveyance with Borrower Retaining no Property Interests or Control of Property o Waiver of Rights of Redemption o Operating Covenants Prior to Closing, leasing, turning over rents, etc. o Release of Lender o Covenant Not to Sue o Anti-merger Provision and Recitation that Debt is Not Extinguished o Form Separate Entity, if necessary, or Confirm Lender is Qualified to do Business in State o Reaffirmation of Loan Documents 15

o o o o

Reinstatement of Loan Documents if Transfer Reversed in Bankruptcy. Establish Responsibility to Pay Expenses, Taxes, Title Insurance etc. Guarantor Consent to Transaction Confidentiality Provision

C. Deliverables o o o o o o o o o o o o o o o o o o o o o o o o o o o o o

Tenant Estoppels SANDAs Third Party Estoppels Notice to Tenants and Vendors of Transfer Security Deposits Original Leases, Tenant Files and Continuing Contracts Original Permits, Licenses, Certificates of Occupancy, Warranties, Plans & Specifications etc. Keys, Security Codes Cancel N on-continuing Contracts Deed and Recording Forms Bill of Sale Assignment of Leases and Other Contracts and Rights FIRPTA Certificate Covenant Not to Sue Opinion Letter of Borrower's Counsel Evidence of Authority; Incumbency Certificate, etc. Owner Title Policy, and Endorsement of Mortgagee Title Policy Transfer Taxes, Forms and Payment, if applicable Assignment of Tax Appeals, if applicable Tax Withholding and Pre-Clearance Requirements, if applicable Forms 1099 and 1099A Bulk Sale Notice, if applicable Responsibility Property Transfer Form, if applicable Proration of Taxes, Revenues and Operating Expenses Transfer Utilities New Insurance Coverage New Management Contract Execute New Service Contracts Closing Statement

16

Dated

,20_

DEED-IN-LIEU OF FORECLOSURE SETTLEMENT AGREEMENT

by and between

_ _ _ _ _ _ _ LIFE INSURANCE COMPANY,

a _ _ _ _ corporation

("Lender")

and

a _ _ _ _ limited partnership

("Borrower")

GUEST SUITES AND CONFERENCE CENTER

DEED-IN-LIEU OF FORECLOSURE SETTLEMENT AGREEMENT

THIS DEED-IN-LIEU OF FORECLOSURE SETTLEMENT AGREEMENT (this "Agreement") is made as of the Effective Date, by and between LIFE INSURANCE COMPANY, a corporation ("Lender"), and _ _ _ _ _ _ _ _ _ _ _ _ _ _ _, a limited partnership ("Borrower").

R E CIT A T ION S: A. Borrower is the sole owner of the hotel known as Guest Suites and Conference Center, in County, and all rights and obligations related thereto (the "Hotel"), including, but not limited to: (i) fee simple absolute title to and ownership of those certain parcels of real property particularly described on Exhibit A attached hereto (the "Land", as more specifically defined in Section 1.1 herein), (ii) the Hotel and all other buildings, improvements, structures, and all other items of real estate located on the Land (the "Improvements"), (iii) the Personal Property (as hereinafter defined) associated therewith, (iv) the operations associated with the Hotel as conducted on Borrower's behalf, (v) the Management Agreement (as hereinafter defined), (vi) the Franchise Agreement (as hereinafter defined), and (vii) all leases, licenses and other ancillary commercial operations located on the Land and the Improvements (collectively, the "Project"). B. Borrower has defaulted under the Loan Documents. All required default notices have been sent to Borrower by Lender, all applicable notice and cure periods have lapsed, and Lender has the right under the Loan Documents to accelerate the maturity of the Loan. All amounts owed by Borrower under the Loan Documents continue to be due and owing to Lender without any counterclaims, setoffs or defenses by Borrower. C. The value of the Project is substantially less than the outstanding balance of the Mortgage Loan, and Borrower has no equity in the Property.

D. Borrower does not wish to repay (or cause to be repaid) the Mortgage Loan and has voluntarily offered and agreed to transfer ownership of the Hotel and all other right, title and interest in Borrower in and to the Project to Lender, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants, promises and undertakings of the parties hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, it is agreed:

ARTICLE I DEFINITIONS 1.1 Definitions. The following terms shall have the indicated meanings: "Advance Bookings" shall mean reservations and agreements made or entered into by Borrower and/or Manager in the Ordinary Course of Business prior to Closing for hotel rooms, meeting rooms and other conference facilities and/or banquet facilities to be utilized after

Deed in Ueu of Foreclosure Settlement Agreement

1

Closing, or for catering services or other hotel services to be provided after Closing at or by the Hotel. "Affiliate" of a Person shall mean any other Person that is directly or indirectly (through one or more intermediaries) controlled by, under common control with, or controlling such Person. For purposes of this definition, "control" shall mean (i) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any Person or the power to veto major policy decisions of any Person, whether through the ownership of voting securities, by contract or otherwise, or (ii) any other Person in which such Person has a direct or indirect equity interest constituting at least a majority interest of the total equity of such other Person. When determining an Affiliate of Borrower, "Person" shall include for purposes of determining common control, any individual who is the ultimate, indirect owner of Borrower and that individual's spouse, lineal descendants, parents and their lineal descendants, parents' siblings and their lineal descendants, and grandparents and their lineal descendants. "Agreement" shall have the definition ascribed to such term in the introductory paragraph. "Applicable Laws" shall mean any applicable building, zoning, subdivision, environmental, health, safety or other governmental laws, statutes, ordinances, resolutions, rules, codes, regulations, orders or determinations of any Governmental Authority or of any insurance boards of underwriters (or other body exercising similar functions), or any restrictive covenants or deed restrictions affecting the Project or the ownership, operation, use, maintenance or condition thereof. "Assignment and Assumption Agreement" shall mean an assignment and assumption agreement in substantially the form attached hereto as Exhibit D whereby Borrower assigns and Lender assumes all of Borrower's right, title and interest in and to the Advanced Bookings, Franchise Agreement (if applicable), the Operating Agreements, the Management Agreement (if applicable), and the Leased Property Agreements. "Assignment of Occupancy Agreements" shall mean an assignment agreement in substantially the form attached hereto as Exhibit E whereby Borrower assigns and Lender assumes all of its right, title and interest in and to the Occupancy Agreements. "Authorizations" shall mean all licenses (inclusive of all liquor licenses), permits and approvals required by any governmental or quasi-governmental agency, body, department, commission, board, bureau, instrumentality or office, or otherwise appropriate with respect to the construction, ownership, operation, leasing, maintenance, or use of the Project or any part thereof. "Bill of Sale" shall mean a bill of sale in substantially the form attached hereto as Exhibit C whereby Borrower conveys its right, title and interest in and to the Personal Property (other than Leased Property) to Lender, together with any Warranties and Guaranties related thereto. "Borrower" shall have the definition ascribed to such term in the introductory paragraph.

Deed in Lieu of Foreclosure Settlement Agreement

2

"Borrower Released Parties" shall mean the Borrower and its Affiliates, and the officers, directors, members, partners, employees, agents and attorneys of the foregoing. "Capital Reserve Accounts" shall mean all funds reserved and set aside for expenditure for capital items or similar or related expenditures, if any, including, without limitation, any such sums as may be held or required by the Manager, Franchisor or Lender. "Closing" shall mean the consummation of the transfer of the Property pursuant to this Agreement and shall be deemed to occur on the Closing Date. "Closing Date" shall mean , 20_, unless Lender and Borrower mutually agree to a different date on which the Closing shall occur. Lender shall have the onetime right to extend the Closing Date, upon written notice thereof to Borrower, by up to thirty (30) days if Lender deems such extension necessary relative to the satisfaction of the condition precedent set forth in Section 5.1(c) below. "Closing Documents" shall mean the documents defined as such in Section 7.1 hereof. "Code" means the Internal Revenue Code of 1986, as amended. "Covenant Not to Sue" shall mean the Covenant Not to Sue to be executed by Lender, in substantially the form attached hereto as Exhibit G. "Deed" shall mean the special warranty deed in substantially the form attached hereto as Exhibit B conveying fee simple absolute title to the Real Property from Borrower to Lender [or its Designee]. "Deposits" shall mean all deposits made in connection with security deposits paid by tenants under the Leases and any and all other deposits made by, to or on behalf of Borrower or Manager. ["Designee" shall mean the entity controlled by Lender and designed by the Lender to accept title to the Property.] "Effective Date" (or other similar phrases such as "date of this Agreement" or "date hereof') shall have the definition ascribed to such term in Section 10.19 hereof. "Environmental Laws" shall mean, collectively, all federal, state and local environmental, safety or health laws and ordinances and rules of common law, including but not limited to, the Occupational Safety and Health Act of 1970, as amended (29 U.S.C.. 651 et seq.), the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.. 960 et seq.), the Hazardous Material Transportation Act (49 U.S.C.. 1081 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.. 6091 et seq.), the Toxic Substances Control Act of 1976, as amended (15 U.S.C.. 2601 et seq.), the Clean Air Act (42 U.S.C.. 7401 et seq.), the Safe Drinking Water Act (42 U.S.C .. 300f-300j), and the Federal Water Pollution Control Act (33 U.S.C.. 1251-1387), as any of the foregoing may hereafter be amended, any rule or regulation issued pursuant thereto, and any other present or future law, ordinance, rule, regulation, permit or permit condition, order or directive addressing environmental, health or

Deed in Lieu of Foreclosure Settlement Agreement

3

safety issues of or by the federal government, or any state or other political subdivision thereof, or any agency, court or body of the federal government, or any state or other political subdivision thereof, exercising executive, legislative, judicial, regulatory or administrative functions. "Escrow Agent" shall mean ____________________ "FF&E Reserve Accounts" shall mean all funds reserved and set aside, if any, for expenditure for furniture, fixtures or equipment or similar or related expenditures, including, without limitation, any such sums as may be held or required by the Manager, Franchisor or Lender. "FIRPTA Certificate" shall mean the affidavit of Borrower under Section 1445 of the Code, as amended, in substantially the form attached hereto as Exhibit F. "Franchise Agreement" shall mean the existing franchise agreement for the Hotel between Franchisor and Borrower. "Franchisor" shall mean ________________ "Governmental Authority" shall mean any federal, state, county, municipal or other government or any governmental or quasi-governmental agency, department, commission, board, bureau, office or instrumentality, foreign or domestic, or any ofthem. "Guaranties" shall mean, collectively, that certain Environmental Indemnity Agreement , 200_ made by Borrower, that certain Guaranty Agreement dated as of dated as of _ _ _ _ _., 200_ made by Guarantors. "Guarantors" shall mean, collectively, _________- - - - - - "Hazardous Substance" shall mean (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definitions of "hazardous substances," "hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," or words of similar import, under any applicable Environmental Laws. "Hotel" shall have the definition ascribed to such term in the Recitations. "Improvements" shall have the definition ascribed to such term in the Recitations. "Including" shall mean "including, without limitation," irrespective of whether or not words of similar import are utilized in a particular context. "Intangible Personal Property" shall mean, Borrower's right, title and interest in and to all intangible personal property owned or possessed by Borrower or in the reasonable control of Borrower (for purposes of this definition only, the reasonable control of Borrower shall be deemed to include the reasonable control of Manager as well) and used in connection with the

Deed in Lieu of Foreclosure Settlement Agreement

4

ownership or operation of the Project, including, without limitation: (1) Authorizations; (2) utility and development rights and privileges, general intangibles; (3) business records; (4) plans and specifications pertaining to the Real Property and the Personal Property; (5) any award for taking by condemnation or any damage to the Land by reason of a change of grade or location of or access to any street or highway; (6) the guest ledger and all accounts receivable attributable to the Project; (7) bookings and Advance Bookings; (8) cash on hand held or used by the Manager (or in accounts in the Borrower's name for Manager's use); (9) Deposits; (10) any ", or any derivative thereof, including all rights, trademarks, rights to the names " trademark registrations, trademark applications, copyrights, copyright registrations and copyright applications using or including such names; (11) proceeds of insurance maintained by or on behalf of Borrower relating to damage or insured casualty occurring prior to the Closing Date; (12) all sums segregated in all Tax and Insurance Reserve Accounts, FF&E Reserve Accounts, Capital Reserve Accounts and any and all other reserves, escrows, operating accounts, lockbox accounts, cash management accounts and deposits for the Project maintained by Manager (or in the name of the Borrower by Manager), Franchisor or Lender, if any; (13) accounts receivable (including any discounts thereon as provided herein) held by or on behalf of Borrower and related to the Project and other uncollected amounts; and (14) Warranties and Guaranties and other claims against third parties relating to the Project, subject to Borrower's right to retain and pursue any such claims (either individually or jointly with Lender, if both parties have an interest therein) to the extent that they relate to revenues, costs, expenses or liabilities for the period prior to the Closing. "Inventory" shall mean all inventories of goods which are located at, or held for use at, the Project or ordered for future use at the Project as of the Closing, including, without limitation, food and beverage (alcoholic and non-alcoholic) in opened or unopened cases, or ordered for future use, and all in use or reserve stock of china, glassware and silverware, pillows, hairdryers, ironing boards, hangers, irons, linens, uniforms, engineering, maintenance, cleaning and housekeeping supplies, matches and ashtrays, soap and other toiletries, stationery, menus, directories and other printed materials, towels, paper goods, soaps, and all other similar supplies and materials. "Land" shall mean those certain parcels of real estate lying and being in _ _ _ __ County, , and more particularly described on Exhibit A hereof, together with all rights, titles, benefits, easements, privileges, remainders, tenements, hereditaments, interests, reversions and appurtenances thereunto belonging or in any way appertaining, and all of the estate, right, title, interest, claim or demand whatsoever of Borrower therein, in and to adjacent strips and gores, if any, between the Land and abutting properties, and in and to adjacent streets, highways, roads, alleys or rights-of-way, and the beds thereof, either at law or in equity, in possession or expectancy, now or hereafter acquired, together with all oil, gas and other minerals situated in, under or upon the Land (to the extent that Borrower has right, title, interest, claim or demand to such oil, gas and other minerals). "Leased Property" shall mean all leased items of Tangible Personal Property, including, items subject to any capital lease, operating lease, financing lease, or any similar agreement. "Leased Property Agreements" shall mean the lease agreements pertaining to the Leased Property.

Deed in weu of Foreclosure Settlement Agreement

5

"Leases" shall mean any and all leases, either oral or written, or any letting of, or any agreement for the use and occupancy of, any part of the Real Property, including any amendments thereto, subleases thereunder, or assignments thereof. "Lender" shall have the definition ascribed to such term in the introductory paragraph and shall include all successors and assigns of the original Lender named in said introductory paragraph. "Lender Released Parties" shall mean the Lender and Prospective Purchaser, each of their respective officers, directors, members, partners, employees, agents and attorneys of the foregoing. "Loan Documents" shall mean all document and instruments executed by Borrower and/or Guarantors in connection with the Mortgage Loan including, without limitation: (i) the Note, (ii) the Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment of Leases and Rents, (iii) the Guaranties, and (iv) all other documents evidencing and/or securing the Mortgage Loan. "Management Agreement" shall mean the eXlstmg management agreement between Lender and Manager for the management and operation of the Hotel. "Manager" shall mean _ _ _ _ _ _ _ _, the manager of the Hotel. "Monetary Title Encumbrances" shall mean any title encumbrances affecting the Project which are comprised of delinquent taxes, mechanic's liens, or mortgages, deeds of trust, security agreements, or other liens or charges in a fixed sum (or capable of computation as a fixed sum) securing indebtedness or obligations. "Mortgage Loan" shall mean the loan made by Lender to Borrower evidenced by the Loan Documents. "Note" shall mean the Promissory Note dated , 200_, in the original principal Dollars ($ ) executed by Borrower in favor of Lender. amount of "Occupancy Agreements" shall mean all leases, concession or occupancy agreements in effect with respect to the Real Property and/or Project under which any tenants (other than customary nightly reservations) or concessionaires occupy space upon the Real Property. "Operating Agreements" shall mean all service, supply, maintenance, construction, capital improvement and other similar contracts in effect with respect to the Project (other than the Franchise Agreement, the Occupancy Agreements, Leased Property Agreements, and Management Agreement) related to construction, operation, or maintenance of the Project. "Ordinary Course of Business" means the ordinary course of business consistent with Borrower's past custom and practice for the Project, taking into account the facts and circumstances in existence from time to time. "Permitted Exceptions" shall have the meaning set forth in Section 2.1 below.

Deed in Lieu of Foreclosure Settlement Agreement

6

"Person" shall mean an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a Governmental Authority. "Personal Property" shall mean collectively the Tangible Personal Property and the Intangible Personal Property. "Project" shall have the definition ascribed to such term in the Recitations. "Property" shall mean the Real Property, the Personal Property and the other portions of the Project to be transferred from the Borrower to the Lender pursuant to the terms herein. For purposes of clarity, it is understood that the term "Property" is intended to encompass all of Borrower's rights in and to the Project, irrespective of when the same accrued. ["Prospective Purchaser" means ________, a _ _ _ _ _ _ limited liability company and its successors and assigns.] "Real Property" shall mean the Land and the Improvements situated thereon (including the Hotel). "Representatives" shall have the meaning ascribed to such term in Section 8.5 hereof. "Tangible Personal Property" shall mean the items of tangible personal property consisting of all furniture, fixtures, equipment, machinery, Inventory and other tangible personal property of every kind and nature (including cash-on-hand and petty cash funds), whether located at, or stored or used away from, the Project but used in connection with the Project solely for the Project, and owned or leased by Borrower, including, without limitation, Borrower's interest as lessee with respect to any such leased Tangible Personal Property. "Tax and Insurance Reserve Accounts" shall mean all funds reserved and set aside, if any, for expenditure for real estate taxes, assessments, insurance premiums, insurance proceeds and other escrowed or reserved amounts, including, without limitation, any such sums as may be held or required by the Manager, Franchisor or Lender. "Warranties and Guaranties" shall mean (i) any subsisting and assignable warranties and guaranties relating to the Improvements or the Personal Property or any part thereof, and (ii) to the extent any such warranties and guaranties are not assignable, then, the right to cause Borrower to use commercially reasonable efforts to enforce such warranties and guaranties for the benefit of Lender. For purposes of this Agreement, each reference to any contract, agreement or other instrument shall mean such instrument as the same may be supplemented and amended.

ARTICLE II CONVEYANCE OF PROPERTY IN LIEU OF FORECLOSURE 2.1 Conveyance of Property to Lender. Borrower shall convey to Lender absolutely and free of any right of redemption, rights of reinstatement, rights under homestead exemption

Deed in Lieu of Foreclosure Settlement Agreement

7

laws or other rights or interest of the Borrower, or anyone claiming through or under any Borrower Released Party, the Property free and clear of any liens or encumbrances with the exception of the title matters set forth on Exhibit H attached hereto ("Permitted Exceptions"), in accordance with the and subject to the terms and conditions set forth in this Agreement. 2.2 Deed-in-Lieu. Borrower hereby acknowledges and agrees that the conveyance of the Property is being made in lieu of a foreclosure upon the Property by Lender in Lender's capacity as the Lender. No cash consideration or other payment shall be due or owing from Lender to Borrower on account of any conveyance or other matter contemplated under this Agreement. 2.3 [Concurrent Loan Sale. Borrower acknowledges that Lender is concurrently negotiating to sell the Mortgage Loan to Prospective Purchaser. Borrower hereby agrees to cooperate reasonably, but at no cost or expense to Borrower, in connection with (a) Prospective Purchaser's survey, inspection and review of Real Estate and Personal Property and the operation of the Hotel, and (b) any designation by Lender of Prospective Purchaser as Lender's designee or assignee for purposes of the closing documents contemplated under this Agreement. Borrower hereby further agrees that Lender shall have the right to terminate this Agreement, at any time prior to Closing, if Prospective Purchaser terminates negotiations to purchase the Mortgage Loan or if said purchase has not closed for any other reason. Upon any termination of this Agreement, the parties shall have all of their respective rights, duties, liabilities and obligations with respect to the Mortgage Loan as though they had never entered into this Agreement.] ARTICLEllI "AS IS" CONVEYANCE LENDER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS CONTEMPLATED HEREUNDER, BORROWER IS MAKING NO REPRESENTATIONS AND WARRANTIES IN CONNECTION WITH THE SALE OF THE PROPERTY TO LENDER AND THAT THE PROPERTY IS SOLD "AS IS" "WHERE IS" AND "WITH ALL FAULTS" AND NEITHER BORROWER, NOR ANY AGENT OR REPRESENTATIVE OF BORROWER, HAS MADE, NOR IS BORROWER LIABLE FOR OR BOUND IN ANY MANNER BY ANY EXPRESS WARRANTIES, GUARANTEES, PROMISES, STATEMENTS, OR IMPLIED INDUCEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE HOTEL OR ANY PART THEREOF, THE PHYSICAL CONDITION, ENVIRONMENTAL CONDITION, INCOME, EXPENSES OR OPERATION THEREOF, THE USES WHICH CAN BE MADE OF THE SAME OR ANY OTHER MATTER OR THING WITH RESPECT THERETO; EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS CONTEMPLATED HEREUNDER. WITHOUT LIMITING THE FOREGOING, LENDER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS CONTEMPLATED HEREUNDER, BORROWER IS NOT LIABLE FOR OR BOUND BY (AND LENDER HAS NOT RELIED UPON) ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS, OR FINANCIAL STATEMENTS PERTAINING TO THE OPERATION OF THE HOTEL, OR ANY OTHER INFORMATION RESPECTING THE

Deed in Lieu of Foreclosure Settlement Agreement

8

HOTEL FURNISHED BY BORROWER OR ANY EMPLOYEE, AGENT, CONSULTANT OR OTHER PERSON REPRESENTING OR PURPORTEDLY REPRESENTING BORROWER. LENDER ACKNOWLEDGES THAT, TO THE EXTENT REQUIRED TO BE OPERATIVE, THE DISCLAIMERS OF WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR PURPOSES OF ANY APPLICABLE LAW, RULE, REGULATION OR ORDER. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING. ARTICLE IV REPRESENTATION AND WARRANTIES 4.1 Borrower's Representations and Warranties. warrants to Lender the following as of the Effective Date: 4.1.1

Borrower hereby represents and

Recitations. The recitations to this Agreement are true and correct.

4.1.2 Status and Authority of Borrower. Borrower is a limited liability company duly organized and validly existing and in good standing under the laws of the State of _ _ _ _ _ . Borrower has full right, title, authority, and capacity to execute and perform this Agreement and to consummate all of the transactions contemplated herein, and the member of Borrower who executes and delivers this Agreement and all documents to be delivered to Lender hereunder are and shall be duly authorized to do so. This Agreement is fully binding on and enforceable against Borrower. 4.1.3 No Prohibitions. Borrower is not prohibited from (i) executing or delivering this Agreement, (ii) complying with the terms of this Agreement, or (iii) consummating the transactions contemplated by this Agreement by any contract or other agreement, by any applicable governmental requirement, agreement, instrument, restriction, or by any judgment, order, or decree of any governmental authority having jurisdiction over Borrower or Borrower's properties. All consents and approvals which are required in connection with such conveyances, assignments, execution, delivery and performance have been duly obtained and given and are in full force and effect. 4.1.4 No Litigation. There is no litigation pending, nor to the knowledge of Borrower threatened, that could affect Borrower's ability to consummate the transactions contemplated by this Agreement, other than as pertain to any defaults under the Mortgage Loan. Borrower has not received and does not know of any notice or demand with respect to any claim, liability or cause of action arising out of any facts or circumstances connected with the Project, which is not fully covered by insurance policies in force. 4.1.5 Borrower Not a Foreign Person. Borrower is not a Foreign Person within the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1954, as amended, and any applicable regulations thereunder. 4.1.6 No Bankruptcy or Insolvency Proceedings. There are no attachments, executions, assignments for the benefit of creditors, receiverships, conservatorships, or voluntary or involuntary proceedings in bankruptcy or pursuant to any other debtor relief laws

Deed in Lieu of Foreclosure Settlement Agreement

9

contemplated or filed by Borrower and Borrower has received no notice of any of the same pending or threatened against Borrower. 4.1.7 Title. Borrower has and shall convey to Lender by Borrower's execution and delivery of the Deed good and indefeasible fee simple title to the Property, free and clear of all conditions, exceptions, encumbrances, or reservations, except the Permitted Exceptions. Borrower has and shall convey to Lender good and indefeasible title to all other property comprising the Project, free and clear of all conditions, exceptions, encumbrances and reservations. Without limiting the generality of the foregoing, all Tangible Personal Property is owned by Borrower and is not the subject of any Leased Property Agreement, except that Leased Property, if any, set forth on Schedule 4.1.6 attached hereto. 4.1.8 No Undertakings. No person, fum or entity, other than Lender, has any right to purchase or otherwise acquire or possess the Property or any part thereof. Neither Borrower nor any Borrower Released Party has, without the approval or consent of Lender or Advisor, entered into any lease or other agreement, or any supplement, amendment or termination of any lease or other agreement, that would be binding upon Lender or a subsequent owner of the Property after Closing, or that would be binding upon, or create any lien rights in, the Property after Closing. 4.1.9 No Notices. Except as shall have been delivered to Lender prior to the Contract Date, neither Borrower nor any Borrower Released Party has received any written notice of any material outstanding violation of any Applicable Law, lease or other agreement concerning the Project. 4.1.10 No Outstanding Tax Liabilities. There are no outstanding or potential tax liabilities of Borrower or any other Borrower Released Party which would be binding upon Lender or a subsequent owner of the Property after Closing, or that would be binding upon, or create any lien rights in, the Property after Closing. 4.1.11 Deliveries. The information and documents to be furnished to Lender pursuant to Section 6.1 hereof are true, correct, accurate and complete in all material respects. Without limiting the generality of the foregoing, (a) true, correct and complete copies of the Management Agreement, Franchise Agreement, Leases, Leased Property Agreements, Occupancy Agreements, and Operating Agreements have been submitted by Borrower to Lender pursuant to Section 6.1 hereof; (b) no oral or written amendments of or modifications to the Management Agreement, Franchise Agreement, Leases, Leased Property Agreements, Occupancy Agreements, Operating Agreements or Loan Documents have been made except for any written amendments or modifications which have been delivered or submitted to Lender pursuant to Section 6.1 hereof; (c) neither Borrower nor (to Borrower's best knowledge) any other party is in breach of or default under any of the Loan Documents or the Management Agreement, Franchise Agreement, Leases, Leased Property Agreements, Occupancy Agreements or Operating Agreements in any material respect; (e) the Mortgage Loan is fully funded and Lender is not in breach of or default under any of the Loan Documents; and (f) other than the Management Agreement, Franchise Agreement, Leases, Leased Property Agreements, Occupancy Agreements, Operating Agreements, and Loan Documents, there are no contracts or

Deed in Lieu of Foreclosure Settlement Agreement

10

agreements relating to the ownership or operation of the Project or which shall be binding upon the Project following Closing. 4.1.12 Leases. There are no Leases binding on the Property after Closing other than those Leases expressly described on Schedule 4.1.11 attached hereto, if any. 4.1.13 Leased Property Agreements. There are no Leased Property Agreements binding on the Property after Closing other than those Leased Property Agreements expressiy described on Schedule 4.1.12 attached hereto, if any. 4.1.14 Occupancy Agreements. There are no Occupancy Agreements biuding on the Property after Closing other than those Occupancy Agreements expressly described on Schedule 4.1.13 attached hereto, if any. 4.1.15 Operating Agreements. There are no Operating Agreements binding on the Property after Closing other than those Operating Agreements expressly described on Schedule 4.1.14 attached hereto, if any. 4.1.16 Fees. There are no outstanding franchise fees, management fees, leasing commissions or brokerage fees with respect to the Property or other sums payable or reimbursable to any broker or the property manger of the Property or under sums payable or reimbursable under any other agreement relating to the Property; and (b) no expenses have been incurred in connection with the ownership or operation of the Hotel which are payable subsequent to the Closing Date except in the Ordinary Course of Business. 4.1.17 Hazardous Substances. To the best of Borrower's knowledge, the Real Estate does not contain any Hazardous Substance. Borrower has not conducted or authorized the generation, transportation, storage, treatment, or disposal at the Real Estate, of any Hazardous Substance. Borrower is not aware of any pending or threatened litigation or proceedings before any administrative agency in which any person or entity alleges the presence, release, threat of release, or placement on or in the Real Estate of any Hazardous Substances. Borrower has not received any notice of and has no actual or constructive knowledge that any governmental authority or any employee or agent thereof is investigating whether there is, or has determined that there has been (i) a presence, release, threat of release, or placement on or in the Real Estate of any Hazardous Substance, or (ii) any generation, transportation, storage, treatment or disposal at the Real Estate of any Hazardous Substance. Each of the representations set forth in this Section 4.1 will be deemed to have been remade by the Borrower as of the Closing Date, with the same force and effect as if first made on and as of such date and will survive the Closing and the filing of the Deed of record. Borrower hereby indemnifies and holds Lender and the other Lender Released Parties harmless from any loss, cost, claim expense or liability which Lender or any other Lender Released Party may suffer or incur as a result of the breach or failure of any of the above representations and warranties. 4.2 Lender's Representations and Warranties. Lender hereby represents and warrants to. Borrower the following as of the Contract Date:

Deed in Lieu of Foreclosure Settlement Agreement

11

4.2.1 Status and Authority of Borrower. Lender is a corporation duly organized and validly existing and in good standing under the laws of the State of _ _ __ Lender has full right, title, authority, and capacity to execute and perform this Agreement and to consummate all of the transactions contemplated herein, and the member of Lender who executes and delivers this Agreement and all documents to be delivered to Borrower hereunder are and shall be duly authorized to do so. This Agreement is fully binding on and enforceable against Lender. No Prohibitions. Lender is not prohibited from (i) executing or 4.2.2 delivering this Agreement, (ii) complying with the terms of this Agreement, or (iii) consummating the transactions contemplated by this Agreement by any contract or other agreement, by any applicable governmental requirement, agreement, instrument, restriction, or by any judgment, order, or decree of any governmental authority having jurisdiction over Lender or Lender's properties. 4.2.3 No Litigation. There is no litigation pending, nor to the knowledge of Lender threatened, that could affect Lender's ability to consummate the transactions contemplated by this Agreement, other than as pertain to any defaults under the Mortgage Loan. 4.2.4 Lender Not a Foreign Person. Lender is not a Foreign Person within the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1954, as amended, and any applicable regulations thereunder. 4.2.5 No Bankruptcy or Insolvency Proceedings. There are no attachments, executions, assignments for the benefit of creditors, receiverships, conservatorships, or voluntary or involuntary proceedings in bankruptcy or pursuant to any other debtor relief laws contemplated or filed by Lender and Lender has received no notice of any of the same pending or threatened against Lender. Each of the representations set forth in this Section 4.2 will be deemed to have been remade by Lender as of the Closing Date, with the same force and effect as if first made on and as of such date and will survive the Closing and the filing of the Deed of record. ARTICLE V CONDITIONS PRECEDENT 5.1 As to Lender's Obligations. Lender shall not be required to close the transaction provided for herein unless and until each and everyone of the following conditions has been satisfied or waived by Lender in writing: (a)

Owner's Policy. Lender has received a binding and irrevocable commitment for a current ALTA form owner's title insurance policy issued by the Title Company, in an amount satisfactory to Lender, showing Lender or its designee to be the owner of the Real Estate, subject only to the Permitted Exceptions, and with such endorsements as may be reasonably requested by Lender. The cost of such commitment (and the title policy to be issued pursuant thereto) shall be paid by Lender;

Deed in Lieu of Foreclosure Settlement Agreement

12

(b)

Survey. Lender has received a plat of survey of the Real Estate, prepared and certified to Lender and the Title Company, in accordance with the standard detail requirements for Class A Land Title Surveys currently promulgated by the American Congress on Surveying and Mapping and the American Title Association, which survey discloses that there are no: (i) encroachments onto the Land from any adjacent property, (ii) encroachments by or from the Real Estate onto any adjacent property, (iii) violations of or encroachments on any recorded building lines, restrictions or easements affecting the Real Estate, (iv) exceptions to title other than the Permitted Exceptions or (v) other matters to which Lender objects. The cost of such survey shall be paid by Lender.

(c)

Searches. Lender has obtained searches of the records of the Recorder of Deeds of County, , the Secretary of State of _ _ and the U.S. District Court for the District of and the jurisdictions in which Borrower resides or has its principal place of business, confirming the absence of any security interests, judgments, tax liens and bankruptcy proceedings affecting Borrower's interest in the Property (except the Permitted Exceptions). The cost of such searches shall be paid by Lender.

(d)

Environmental Assessment. Lender has obtained a current environmental survey of the Property reasonably satisfactory to Lender. The cost of such assessment shall be paid by Lender.

(e)

Representations and Warranties. All of the representations and warranties of Borrower contained in Section 4.1 hereof are true and correct.

(f)

Borrower's Deliveries. Borrower shall have delivered to or for the benefit of Lender, on or before the Closing Date, all of the documents required of Borrower pursuant to Sections 7.2 and 7.4 hereof.

(g)

Covenants of Borrower. Borrower shall have performed in all material respects all of its covenants and other obligations under this Agreement.

(h)

Modification of Management Agreement. Lender and Manager shall have entered into a modification of the Management Agreement.

(i)

Modification of Franchise Agreement. Lender and Manager shall have entered into a modification of the Franchise AgreemeI)t.

(j)

Hotel Manager Recognition Letter. Lender (or, if applicable, any alternative designee of Lender) shall have received from Hotel Manager written confmnation (in form and substance reasonably satisfactory to Lender) that from and after Closing all funds held in the Operating Account and accounts receivable transferred under this Agreement shall belong to Lender (or if applicable, any alternative designee of Lender) and Hotel Manager will recognize Lender or Lender's Designee as the

Deed in Lieu of Foreclosure Settlement Agreement

13

successor owner of the Property upon its acquisition of ownership of the Property. (k)

License Agreement. Lender (or, if applicable, any alternative designee of Lender) shall have entered into a license agreement with the owner of the " for use in connection with the hotel and name!mark " conference center, in form and substance acceptable to Lender.

(1)

Liquor Licenses!Authorizations. Lender shall have determined that Lender (or, if applicable, any alternative designee of Lender) or its manager of the Property shall hold or otherwise have the right to use in the ordinary course of business all liquor licenses and other authorizations currently utilized in connection with the operation of the Property.

(m)

No Material Adverse Change. There shall have been no material adverse change in the condition of the Project.

(n)

[Sale of Mortgage Loan. Lender and Prospective Purchaser shall have consummated Prospective Purchaser's acquisition of the Mortgage Loan.]

Each of the conditions contained in this Section are intended for the benefit of Lender and may be waived in whole or in part, in writing, by Lender and shall be deemed to have been waived automatically if Lender closes under this Agreement. Lender shall have the remedies set forth in Section 9.1 hereof, which Section contains remedies of Lender, if any of the following conditions are not satisfied on account of any default or other breach by Borrower. 5.2 As to Borrower's Obligations. Borrower shall not be required to close the transaction provided for herein unless and until each and everyone of the following conditions has been satisfied or waived by Borrower in writing: (a)

Lender's Deliveries. Lender shall have delivered or caused to be delivered to or for the benefit of Borrower, on or before the Closing Date, all of the documents and payments required of Lender pursuant to Sections 7.3 and 7.4 hereof.

(b)

Covenants of Lender. Lender shall have performed in all material respects all of its covenants and other obligations under this Agreement.

Each of the conditions contained in this Section are intended for the benefit of Borrower and may be waived in whole or in part, in writing, by Borrower or shall be deemed to have been waived automatically upon Closing of the sale to Lender. ARTICLE VI

COVENANTS OF BORROWER 6.1 Initial Deliveries. Within five (5) days after the Effective Date, Borrower shall deliver to Lender, or otherwise make available to Lender in a form and substance reasonably acceptable to Lender, the following:

Deed in Lieu of Foreclosure Settlement Agreement

14

(a)

A complete inventory of all Personal Property which is to be conveyed pursuant to the Bill of Sale, identifying with as much specificity as possible all items of Tangible Personal Property and Intangibles, including the present locations of Tangible Personal Property and written evidence of Intangible Personal Property. The inventory shall indicate the Personal Property which has been fully paid for, the Personal Property on which a balance is owed to the vendor thereof, the amounts owed thereon, and the name, address and phone number of the party to whom such amounts are owed;

(b)

Originals of the Management Agreement, Franchise Agreement, Leases, Leased Property Agreements, Occupancy Agreements, Operating Agreements, Loan Documents and all other contracts and agreements relating to the ownership or operation of the Project, including any and all supplements and amendments to any of the foregoing;

(c)

A detailed written description of all Advanced Bookings;

(d)

A detailed written description of all Deposits;

(e)

Evidence of the payment of real estate taxes levied against the Real Property that are due and payable; and

(1)

A detailed description of any and all violation notices, notices of default, notices of litigation or other claims, notices of non-renewal and other notices received or given by or on behalf of Borrower relating to the ownership, maintenance, repair, insurance or use of the Property.

6.2 Updated Deliveries. Not later than five (5) days prior to the Closing Date, Borrower shall'deliver to Lender, or otherwise make available to Lender in a form and substance reasonably acceptable to Lender, the following: (a)

Update of the materials described in Section 6.1 above, covering the period from and after the date such materials were prepared; and

(b)

Consents from all third parties, governmental or otherwise, that are necessary for the transactions contemplated under this Agreement.

6.3 Inspection. Lender, [prospective Purchaser] and [their respective] [its] agents, employees and contractors may, at any time prior to and between the Effective Date and Closing: (a)

Inspect, audit and transcribe the books and records, agreements, insurance policies and all other documents and correspondence related to the Project which are in the possession or control of Borrower; and

(b)

Inspect the Real Estate and Personal Property.

Deed in Lieu of Foreclosure Settlement Agreement

15

Borrower shall reasonably cooperate in connection with all such inspections. 6.4 Negative Covenants. Between the Effective Date and the Closing, Borrower shall not: (a)

Enter into any leases, contracts or agreements that would impose any obligation to liability with respect to the Project after Closing, without first obtaining the written consent of Lender; or

(b)

Amend, modify, waive or terminate any agreement or waive any rights under any agreement that would impose any obligation to liability with respect to the Project after Closing, without first obtaining the written consent of Lender; or

(c)

Conveyor remove from the Improvements, or from any other location where now located, any of the Personal Property otherwise remove or convey (or agree to remove or convey) any component of the Project; or

(d)

Transfer or withdraw any moneys from any escrow, reserve or similar account relating to the Property without the prior written consent of Lender; or

(e)

Make any principal payment on the Mortgage Loan; or

(f)

Default in the performance of any of Borrower's obligations under the Loan Documents, except that (for purposes of this subsection) Borrower shall not be obligated to pay any installment of interest due and owing under the Loan Documents if and to the extent that revenues from the Project are not sufficient to pay the same and all expenses of operating the Project incurred in the Ordinary Course of Business.

6.5 Affirmative Covenants. Between the Effective Date and the Closing, Borrower

shall: (a)

Operate the Project in the Ordinary Course of Business; and

(b)

ARTICLE VII CLOSING 7.1 Closing. The Closing shall occur on the Closing Date. As more particularly described below, at the Closing the parties hereto will (i) execute or cause to be executed, or instruct the Escrow Agent to release, all of the documents required to be delivered in connection with the transactions contemplated hereby (the "Closing Documents"), (ii) deliver or cause to be delivered the same to Escrow Agent, and (iii) take or cause to be taken all other action required to be taken in respect of the transactions contemplated hereby. The Closing will occur at the offices of the Escrow Agent, or at such other place as Lender and Borrower may

Deed in Lieu of Foreclosure Settlement Agreement

16

mutually agree, through a customary New York-style closing. Possession of the Property shall be delivered to Lender at the Closing. Lender reserves the right to designate a designee for purposes of the Closing Documents prior to Closing. 7.2 Borrower's Deliveries. At or prior to the Closing, Borrower shall deliver to Escrow Agent all of the following instruments, each of which shall have been duly executed and, where applicable, acknowledged and/or sworn, on behalf of Borrower and shall be dated to be effective as of the Closing Date: (a)

The Deed;

(b)

The Bill of Sale;

(c)

The Assignment and Assumption Agreement;

(d)

The Assignment of Occupancy Agreements;

(e)

The FIRPTA Certificate;

(f)

The Covenant Not to Sue.

(g)

A certificate or registration of title for all vans and any other owned vehicles or other Personal Property included in the Property which requires such certification or registration, duly executed by Borrower, coriveying such vehicle or such other Personal Property to Lender;

(h)

An ALTA extended coverage statement and gap undertaking;

(i)

Written opinion letter addressed to Lender [and its Designee] from Borrower's counsel opining on the due authorization and execution of this Agreement and the Closing Documents by Borrower and Guarantors, their validity and enforceability against Borrower and Guarantors, and that the mortgage and related security interests are valid and properly perfected under applicable state law.

G)

Any other document or instrument specifically required by this Agreement to be delivered by Borrower on or before the Closing Date, or which shall assist with the consummation of the transactions contemplated hereby.

7.3 Lender's Deliveries. At or prior to the Closing, Lender shall deliver or cause to be delivered to Escrow Agent the following, duly executed and, where applicable, acknowledged and/or sworn on behalf of Lender, or duly executed, and, where applicable, acknowledged and/or sworn in to, by the applicable third party and dated as ofthe Closing Date: (a)

The Assignment and Assumption Agreement;

(b)

The Assignment of Occupancy Agreements;

Deed in Ueu of Foreclosure Settlement Agreement

17

(c)

The Covenant Not to Sue;

(d)

Any other documents or instruments specifically required by this Agreement to be delivered by Lender on or before the Closing Date.

7.4 Mutual Deliveries. At the Closing, Lender and Borrower shall mutually execute and deliver or cause to be delivered: (a)

A closing statement reflecting any closing costs and adjustments required hereunder.

(b)

Such other and further documents, papers and instruments as may be reasonably required by the parties hereto or their respective counselor the Escrow Agent which are not inconsistent with this Agreement or the other Closing Documents.

To the extent the delivery of any ofthe items in Sections 7.2, 7.3 or 7.4 of this Agreement are conditions precedent to the obligation of a party pursuant to Sections 5.1 or 5.2 of this Agreement, and the condition relating to any such item is not satisfied as of Closing, but the party for whose benefit such unsatisfied condition is made elects, nonetheless, to proceed in writing to Closing, the delivery of the item applicable to the unsatisfied condition shall not be required pursuant to the provisions of Sections 7.2, 7.3 or 7.4 of this Agreement. 7.5 Closing Costs. Each party hereto shall pay its own legal fees and expenses and other costs and expenses incurred by it in connection with the transaction contemplated hereunder, except that Lender shall pay the following costs related to the transactions contemplated herein, including without limitation: (i) all recording and filing fees for the Deed and any release or assignment of the Loan DocumeI)ts; (ii) any transfer or other similar taxes and surtaxes due with respect to the transfer of title that may be imposed by the State of _ _ _ _ _ , County of or Village of (it being understood that the parties believe that no such taxes or surtaxes are applicable to the transaction contemplated under this Agreement); and (iii) the cost for title insurance, endorsements and surveys, and any other costs as may be required by Lender. The provisions of this Section 7.5 shall survive the Closing and any termination of this Agreement. 7.6 Insurance and Utilities. The present insurance coverage and public utility service on the Property shall be terminated as of the Closing Date and there shall be no proration of insurance premiums or public utility bills. ARTICLE VIII GENERAL PROVISIONS

8.1 Fire or Other Casualty. If, prior to Closing, the Project is damaged by fire or other casualty, then Lender shall have the right, at its option, to terminate this Agreement upon written notice thereof delivered to Borrower prior to Closing. Otherwise, the Closing shall take place in accordance with this Agreement and Borrower shall assign to Lender at the Closing all of Borrower's interest in any insurance proceeds that may be payable to Borrower on account

Deed in Lieu of Foreclosure Settlement Agreement

18

of any such fire or other casualty, Borrower will have no obligation to pay any portion of any deductibles or coinsurance payments under any policies related to such insurance proceeds. 8.2 Condemnation. If, prior to the Closing, there shall occur a taking by condemnation of any part of or rights appurtenant to the Project, Lender shall have the right, at its option, to terminate this Agreement upon written notice thereof delivered to Borrower prior to Closing. Otherwise, the Closing shall take place in accordance with this Agreement and Borrower shall assign to Lender at the Closing all of Borrower's interest in any condemnation award with respect to the Project which may be payable to Borrower on account of any such condemnation. 8.3 Broker. There is no real estate broker involved in this transaction. Lender warrants and represents to Borrower that Lender has not dealt with any real estate broker in connection with this transaction, and Lender shall indemnify Borrower and hold Borrower harmless from and against any claims, suits, demands or liabilities of any kind or nature whatsoever arising on account of the claim of any person, firm or corporation to a real estate brokerage commission or a finder's fee as a result of having dealt with Lender. Borrower warrants and represents to Lender that Borrower has not dealt with any real estate broker in connection with this transaction, and Borrower shall indemnify Lender and hold Lender harmless from and against any claims, suits, demands or liabilities of any kind or nature whatsoever arising on account of the claim of any person, firm or corporation to a real estate brokerage commission or a finder's fee as a result of having dealt with Borrower. The provisions of this Section 8.3 shall survive the Closing and any termination of this Agreement. 8.4 Bulk Sale and Tax Clearance Certificates. Borrower and Lender believe that (i) the transaction contemplated hereunder is 'not subject to any statutory bulk sale or similar requirements and (ii) such transaction does not require any sale and occupancy or similar tax clearance certificates in connection with Closing (collectively, "Tax Clearances"). Accordingly, the parties do not intend to file any applications or similar materials seeking Tax Clearances relative to the transaction contemplated hereunder. However, if any governmental or quasi-governmental body or person ever seeks to impose any liability against Lender or any Lender Released Party on account of any actual or alleged failure to obtain any Tax Clearances, Borrower shall indemnify and hold Lender and the other Lender Released Parties harmless from any loss, cost, claim expense or liability which Lender or any other Lender Released Party may suffer or incur as a result on account of any tax or other liability of Borrower. The provisions of this Section 8.4 shall survive the Closing. 8.5 Confidentiality. Lender, Borrower and Guarantors hereby covenant and agree that, unless consented to in writing by the other party, no press release or other public disclosure concerning this transaction shall be made, and each party agrees to use best efforts to prevent public disclosure of this transaction, other than (a) to directors and officers of the parties, and employees, agents and affiliates of the parties who are involved in the ordinary course of business with this transaction, and to any proposed purchasers, investors or lenders with respect to the Project, all of which shall be instructed to comply with the non-disclosure provisions hereof; (b) in response to lawful process or subpoena or other valid or enforceable order of a court of competent jurisdiction; (c) in any filings with governmental and regulatory authorities required by reason of the transactions provided for herein; and (d) by Lender to any existing or any other third party reasonably believed necessary by Lender in connection with its

Deed in Lieu of Foreclosure Settlement Agreement

19

due diligence of the Property and evaluation of this transaction. No press release or other public disclosure before or after Closing shall contain Lender's name without Lender's prior written consent. Borrower and Guarantors covenant not to discuss or disclose the terms and conditions of this transaction with any other borrower of Lender. The provisions of this Section 8.5 shall survive the Closing. 8.6 Release. Effective as of the Closing, Borrower and Guarantors, for and on behalf of each of themselves and the Borrower Released Parties, hereby unconditionally and irrevocably remises, releases, waives and forever discharges Lender, the other Lender Released Parties and each of the respective affiliates, successors and assigns of the foregoing from and against any all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, claims, and demands whatsoever, in law or equity, which the Borrower, .Guarantors and the Borrower Released Parties and their heirs, executors, administrators, receivers, successors and assigns ever had, now have or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the date of this RELEASE in any way connected with the Project, the Mortgage Loan and the Loan Documents. Furthermore, Borrower and Guarantors agree that they will not commence any action to sue for any claim, injury or cause of action, of any kind, arising out of any prior, current or future action of the Seller Released Parties or any action by or through Seller Released Parties. Nothing contained in this Section is intended to release, waive or modify (a) any collateral or other security for the Mortgage Loan or (b) any of the parties' respective duties, obligations or liabilities under the Agreement or the Closing Documents; all of which survive the making of this instrument. The provisions of this Section 8.6 shall survive Closing. 8.7 Disclaimers regarding Potential Sale of Mortgage Loan. Borrower and Guarantors understand and agree that (a) [neither Prospective Purchaser nor] Lender is [not] under any obligation to purchase or sell the Mortgage Loan, [and] (b) [neither Prospective Purchaser nor] Lender is [not] the agent of the other[, and (c) unless and until Prospective Purchaser shall have consummated the purchase of the Mortgage Loan, Prospective Purchaser is not authorized to enter into any agreement on behalf of Lender or to make any modification, amendment, waiver or other change on behalf of Lender]. Borrower and Guarantors hereby agree not to make any claim that is contrary to, or inconsistent with, the foregoing understandings and agreements. [Lender shall give Borrower prompt notice if and when Prospective Purchaser (or its designee) acquires ownership of the Mortgage Loan from Lender.] 8.8 Management and Franchise Agreements. Borrower and Guarantors acknowledge that Lender [and/or Prospective Purchaser] may negotiate new management with Manager (a "New Management Agreement") and/or a new franchise agreement with Franchisor (a "New Franchise Agreement") to be effective (if applicable) after Closing. In the event that any such New Management Agreement is entered into prior to Closing, then Borrower and Guarantors would cooperate with the termination of the existing Management Agreement and the Assignment and Assumption would no longer include the existing Management Agreement. In the event that any such New Franchise Agreement is entered into prior to Closing, then Borrower and Guarantors would cooperate with the termination of the existing Franchise

Deed in Lieu of Foreclosure Settlement Agreement

20

Agreement and the Assignment and Assumption would no longer include the existing Franchise Agreement. ARTICLE IX DEFAULT; TERMINATION RIGHTS 9.1 Default by BorrowerlFailure of Conditions Precedent. If any condition set forth herein for the benefit of Lender cannot or will not be satisfied prior to Closing, and if Borrower fails to satisfy that condition within ten (10) business days after written notice thereof from Lender (or such other time period as may be explicitly provided for herein), (which ten (10) business day or other such time periods shall, if necessary, automatically extend the Closing Date to the expiration date of such ten (10) business day or other such time period), Lender, as its sole and exclusive remedy shall elect either (a) to terminate this Agreement in which event the parties hereto shall be released from all further obligations hereunder except those which expressly survive a termination of this Agreement, or (b) to waive its right to terminate, and instead, to proceed to Closing. Notwithstanding the preceding sentence, if Closing does not occur on account of Borrower's failure to perform any of its obligations under this Agreement and such default is not timely cured during the aforedescribed period, and if all other conditions precedent to Lender's and Borrower's obligations hereunder have been waived or satisfied, then Lender's sole remedy for such default shall be either (i) to terminate this Agreement and to retain its right to enforce the other provisions of this Agreement which expressly survive a termination of this Agreement and to pursue a claim for damages directly resulting from such default, or (ii) to pursue a suit for specific performance of Borrower's obligations under this Agreement. 9.2 Default by LenderlFailure of Conditions Precedent. If any condition set forth herein for the benefit of Borrower cannot or will not be satisfied prior to Closing, and if Lender fails to satisfy that condition within ten (10) business days after notice thereof from Borrower (or such other time period as may be explicitly provided for herein), (which ten (10) business day or other such time periods shall, if necessary, automatically extend the Closing Date to the expiration date of such ten (10) business day or other such time period), Borrower, as its sole and exclusive remedy, shall elect either (a) to terminate this Agreement in which event the parties hereto shall be released from all further obligations under this Agreement except those which expressly survive a termination of this Agreement, or (b) to waive its right to terminate, and instead, to proceed to Closing. 9.3 Costs and Attorneys' Fees. In the event of any litigation or dispute between the parties arising out of or in any way connected with this Agreement, resulting in any litigation, then the prevailing party in such litigation shall be entitled to recover its costs of prosecuting and/or defending same, including, without limitation, reasonable attorneys' fees at trial and all appellate levels. 9.4 Conditions Subsequent. Consummation of the transactions contemplated by this Agreement will be void and will be of no force or effect and the Borrower and Guarantors will be obligated to the extent required by the Loan Documents to repay the Loan if anyone or more of the matters described at sub-paragraphs (a) through (c) of this Section 9.4 occurs. The reinstatement of the obligations of the Borrower to pay the Loan to the extent obligated will not

Deed in Lieu of Foreclosure Settlement Agreement

21

operate to affect or alter the release given by the Borrower to the Lender pursuant to this Agreement. The conditions subsequent are as follows: (a) Litigation. If Borrower, or any person claiming by or through the Borrower commences, joins in, assists, cooperates in or participates as an adverse party or as an adverse witness in any suit or other proceeding against the Lender relating to the Loan, the Loan Documents or the Property. The Lender agrees that in the event Borrower is involuntarily compelled to be a party to a suit or other proceeding against the Lender instituted by a party other than Borrower or any party related to Borrower and relating to the aforementioned, and provided Borrower and any party related to Borrower do not join in, assist, cooperate or participate in any such suit or proceeding except to the extent such party is legally compelled to do so, the provisions of this Section shall not be deemed to have come into effect; or A voidance. If the conveyance of the Property to Lender is ever rendered void or rescinded by operation of law or by order of any State or Federal Court of competent jurisdiction by reason of an order arising out of any claim or proceeding initiated or commenced, against or in favor of, on behalf of, or in concert with, directly or indirectly, the Borrower or any person claiming by or through Borrower or any of its respective partners, agents, employees, representatives, officers, directors, shareholders, subsidiaries, affiliates, heirs, personal representatives, successors or assigns; or (b)

(c) Release. If the release set forth in Section 8.6 of this Agreement is ever rendered void, is rescinded or adjudicated unenforceable by operation of law or by order of any State or Federal Court of competent jurisdiction by reason of an order arising out of any claim or proceeding initiated or commenced in favor of, on behalf of or in concert with, directly or indirectly, Borrower or any person claiming by or through Borrower, or its agents, employees, representatives, officers, directors, shareholders, subsidiaries, affiliates, heirs, personal representatives, successors or assigns. 9.4 Subsequent Oligations. With respect to any transfer or payments made by Borrower to Lender pursuant to this Agreement or any other agreement with Lender in existence prior to, on or after the date of this Agreement, which are for any reason subsequently declared to be fraudulent, preferential or otherwise void, voidable or recoverable (within the meaning of any state or federal law relating to creditors rights, collectively, "Voidable Transfers"), in whole or in part for any reason, and Lender is required to repay, disgorge or restore the amount of any such Voidable Transfers, then, as to the amount repaid or restored pursuant to any such Voidable Transfers, the liability of Borrower shall automatically be revived, reinstated and restored in such amount or amounts (together with all costs, expenses and attorneys' fees of the Lender related thereto), and shall exist as though such Voidable Transfers had never been made to the Lender and any security therefor shall be reinstated. Nothing set forth herein is an admission that such Voidable Transfers have occurred or will occur. The provisions of this ARTICLE IX shall survive the Closing or any termination of this Agreement.

Deed in Lieu of Foreclosure Settlement Agreement

22

ARTICLE X

MISCELLANEOUS PROVISIONS 10.1 Completeness: Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the transactions contemplated hereby and supersedes all prior discussions, understandings, agreements and negotiations between the parties hereto. This Agreement may be modified only by a written instrument duly executed by the parties hereto. 10.2 Assignments. Neither party may assign its rights hereunder without the prior consent of the other party, which consent may, at such other party's discretion, be withheld, provided, however, Lender may assign its rights hereunder to [Prospective Purchaser or] any entity under common control with Lender. 10.3 Successors and Assigns. This Agreement shall bind and inure to the benefit of the parties hereto and their permitted respective successors and assigns. 10.4 Days. If any action is required to be performed, or if any notice, consent or other communication is given, on a day that is a Saturday or Sunday or a legal holiday in the jurisdiction in which the action is required to be performed or in which is located the intended recipient of such notice, consent or other communication, such performance shall be deemed to be required, and such notice, consent or other communication shall be deemed to be given, on the first business day following such Saturday, Sunday or legal holiday. Unless otherwise specified herein, all references herein to a "day" or "days" shall refer to calendar days and not business days. 10.5 Governing Law. This Agreement and all documents referred to herein shall be governed by and construed and interpreted in accordance with the laws of the state in which the Project is located without regard to its principles of conflicts of law. 10.6 Countemarts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required. It shall not be necessary that the signature on behalf of both parties hereto appear on each counterpart hereof. All counterparts hereof shall collectively constitute a single agreement. Telecopied signatures shall have the same valid and binding effect as original signatures. . 10.7 Severability. If any term, covenant or condition of this Agreement, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to other persons or circumstances, shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 10.8 Costs. Regardless of whether Closing occurs hereunder, and except as otherwise expressly provided herein, each party hereto shall be responsible for its own costs in connection with this Agreement and the transactions contemplated hereby, including, without limitation, fees of attorneys, engineers and accountants. The provisions of this Section 10.8 shall survive termination of this Agreement. Deed in Lieu of Foreclosure Settlement Agreement

23

10.9 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered by hand, transmitted by facsimile transmission, sent prepaid for next-day delivery by Federal Express (or a comparable overnight delivery service) or sent by the United States mail, certified, postage prepaid, return receipt requested, at the addresses Any notice, request, demand or other and with such copies as designated below. communication delivered or sent in the manner aforesaid may be given by the party required to give such notice, etc., or its attorney, and shall be deemed given or made (as the case may be) when actually delivered to or refused by the intended recipient. If to Borrower:

Facsimile: __________ Email: _ _ _ _ _ _ _ _ __ and: Facsimile: __________ Email: _ _ _ _ _ _ _ _ __ If to Lender:

Facsimile: __________ Email: _ _ _ _ _ _ _ _ __ and: Facsimile: __________ Email: _ _ _ _ _ _ _ _ __ or to such other address as the intended recipient may have specified in a notice to the other party. Any party hereto may change its address or designate different or other persons or entities to receive copies by notifying the other party in a manner described in this Section. 10.10 Absolute Conveyance. Borrower acknowledges and agrees that (a) the conveyance to Lender of the Property, according to the terms of this Agreement is an absolute conveyance of all of Borrower's right, title and interest in and to the Property in fact as well as form and is not intended as a mortgage, trust conveyance, deed of trust or security instrument of any kind; and (b) the consideration for such conveyance is exactly as recited herein and Borrower has no further interest or claims of any kind (including but not limited to homestead rights and rights of reinstatement or redemption) in or to the Property or any other part of the Project, or to the proceeds and profits which may be derived thereof, whether sold for more or less than the outstanding indebtedness due under the Loan Documents.

Deed in Lieu of Foreclosure Settlement Agreement

24

10.11 No Merger. The parties hereto acknowledge and agree that this Agreement and the Closing Documents shall not cancel or release the Mortgage Loan (although the Covenant Not to Sue does by its terms affect the Lender's right to enforce the Loan Documents as against Borrower and Guarantors personally) and that all of the Loan Documents which evidence or secure such indebtedness shall remain in full force and effect (subject to the terms of this Agreement) after the transactions contemplated by this Agreement have been consummated. The parties hereto further acknowledge and agree that the interest of Lender or Lender's designees in the Property under the conveyances provided for in this Agreement shall not merge with the interest of Lender in the Property under the Loan Documents. It is the express intention of each of the parties hereto (and all of the conveyances provided for in this Agreement shall so recite) that such interest of Lender or Lender's designees in the Property shall not merge, but shall be and remain at all times separate and distinct, notwithstanding any union of said interest in Lender at any time by purchase, termination or otherwise, and that the liens and security interests of Lender in the Property created by the Loan Documents shall be and remain at all times valid and continuous liens and security interests in the Property. BORROWER AND LENDER HEREBY 10.12 Waiver of Jurv Trial. KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE CLOSING DOCUMENTS, THE LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE BORROWER OR LENDER WITH RESPECT THERETO. THIS PROVISION SETS FORTH THE MUTUAL DESIRE OF BORROWER AND LENDER TO AVOID DELAYS IN THE RESOLUTION OF DISPUTES INVOLVING THIS AGREEMENT. BORROWER ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT. 10.13 Invalidation of Closing Documents. If, in any insolvency, bankruptcy or reorganization proceedings or other proceedings similar to the foregoing which may be instituted in any state or federal court or other tribunal, by or against Borrower, the Deed or any other Closing Document, or any other documents or instruments to be executed and delivered by Borrower pursuant to the terms of this Agreement, are challenged and sought to be canceled, nullified or set aside, and if any such documents or instruments are canceled, nullified or set aside by a final nonappealable decision of a state or federal court, then at the option of Lender either (i) all Closing Documents and all other documents and instruments executed and delivered pursuant to the terms of this Agreement, including any release, shall be void and of no further force and effect and in such event, Lender shall have any and all rights and remedies available to it under the Loan Documents or under this Agreement; or (ii) Lender may invalidate any release as to those entities that have become involved in bankruptcy, insolvency or reorganization proceedings and allow this Agreement to remain in full force and effect in all other respects. 10.14 Incorporation by Reference. All of the exhibits and schedules attached hereto are by this reference incorporated herein and made a part hereof.

Deed in Lieu of Foreclosure Settlement Agreement

25

10.15 Further Assurances. Borrower and Lender each covenant and agree to sign, execute and deliver, or cause to be signed, executed and delivered, and to do or make, or cause to be done or made, upon the written request of the other party, any and all notices, filings, agreements, instruments, papers, deeds, acts or things, supplemental, confirmatory or otherwise, as may be reasonably required by either party hereto for the purpose of or in connection with consummating the transactions described herein provided that compliance with this Section 10.12 shall not increase the liability of the complying party. 10.16 No Partnership. This Agreement does not and shall not be construed to create a partnership, joint venture or any other relationship between the parties hereto except the relationship of Borrower and Lender specifically established hereby. 10.17 Time of Essence. Time is of the essence with respect to every provision hereof. 10.18 Signatory Exculpation: Limitation of Liability. (a)

The signatory(ies) for Lender and Borrower is/are executing this Agreement in his/their capacity as representative of such party and not individually and, therefore, shall have no personal or individual liability of any kind in connection with this Agreement and the transactions contemplated by it.

(b)

No constituent member or partner in or agent of Lender, nor any advisor, trustee, director, officer, employee, beneficiary, shareholder, member, partner, participant, representative or agent of any corporation or trust that is or becomes a constituent partner or member in Lender shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and Borrower and its successors and assigns and, without limitation, all other persons and entities, shall look solely to Lender's assets for the payment of any claim or for any performance, and Borrower, on behalf of itself and its successors and assigns, hereby waives any and all such personal liability.

10.19 Rules of Construction. The following rules shall apply to the construction and interpretation of this Agreement, unless otherwise indicated by the context: (a)

Singular words shall connote the plural number as well as the singular and vice versa, and the masculine shall include the feminine and the neuter.

(b)

All references herein to particular articles, sections, subsections, clauses or exhibits are references to articles, sections, subsections, clauses or exhibits of this Agreement. .

Deed in Ueu of Foreclosure Settlement Agreement

26

(c)

The table of contents and headings contained herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.

(d)

Each party hereto and its counsel have reviewed and revised (or requested . revisions of) this Agreement and have participated in the preparation of this Agreement, and therefore any usual rules of construction requiring that ambiguities are to be resolved against a particular party shall not be applicable in the construction and interpretation of this Agreement or any exhibits hereto. .

10.20 No Recording. Neither this Agreement nor any memorandum hereof, or any other instrument intended to give notice hereof (or which actually gives notice hereof) shall be recorded. 10.21 Email or Facsimile Signatures. The execution of this Agreement and all notices given hereunder and all amendments hereto, may be effected by emailed or facsimile signatures, all of which shall be treated as originals; provided, however, that the party receiving a document with such an emailed or facsimile signature may, by notice to the other, require the prompt delivery of an original signature to evidence and confirm the delivery of the emailed or facsimile signature. 10.22 Effective Date. The "Effective Date" shall mean the first date on which Lender and Borrower shall have executed this Agreement. 10.23 Survival. The provisions of this Article X shall survive Closing. Unless otherwise expressly provided in this Agreement, all of the covenants of the parties contained in this Agreement shall not survive the Closing and shall merge into the Closing Documents. Upon Closing, any breach or default of any such covenants that do not expressly survive the Closing, whether known or unknown, shall be deemed waived by the Closing. [REMAINDER OF PAGE LEFT BLANK. SIGNATURE PAGES FOLLOW.]

Deed in Lieu of Foreclosure Settlement Agreement

27

IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be executed in their names by their respective duly authorized representatives. BORROWER:

_____________________________________ ,a _________ limited partnership By: _ _ _ _ _ _ _ _ _ _ _ _ __ Name: _______________________________ Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___

LENDER:

_ _ _ _ _ LIFE INSURANCE COMPANY By:. _ _ _ _ _ _ _ _ _ _ ___ Name: ______________________ Title:. _ _ _ _ _ _ _ _ _ _ ___ Date: _ _ _ _ _ _ _ _ ___ [continued on next pagel

Deed in Lieu of Foreclosure Settlement Agreement

28

JOINDER

The undersigned Guarantors hereby join in the execution of this Agreement for the purpose of making those acknowledgments, releases and agreements of Guarantors expressly set forth in this Agreement and of guarantying Borrower's performance of its obligations and liabilities under this Agreement. GUARANTORS:

Deed in Lieu of Foreclosure Settlement Agreement

29

Exhibits and Schedules A-Land B - Form of Deed C - Form of Bill of Sale D - Form of Assignment and Assumption Agreement E - Form of Assignment of Occupancy Agreements F - Form of FIRPTA Certificate G - Covenant Not to Sue H - Permitted Exceptions Schedule 4.1.6 Schedule 4.1.11 Schedule 4.1.12 Schedule 4.1.13 Schedule 4.1.14 Schedule 4.1.15

Deed in Lieu of Foreclosure Settlement Agreement

30

EXHIBIT A

LAND

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBIT A-I

EXHIBITB FORM OF DEED This instrument was prepared by and upon recording should be returned to:

(For Recorder's Use Onl )

DEED

_ _ _ _ _ _ _ _ _ _" a limited partnership ("Grantor"), for and in consideration of the sum of Ten and NollOO Dollars ($10.00) cash and other good and valuable consideration to it paid by a _ _ _ _ _ _ ("Grantee"), has GRANTED, BARGAINED, SOLD and CONVEYED and by these presents does GRANT, BARGAIN, SELL AND CONVEY unto Grantee all of Grantor's right, title and interest in and to the tract of land (the "Land") in _ _ _ __ County, more fully described on Exhibit A hereto, together with all improvements thereon and all easements, rights-of-way, rights and appurtenances appertaining thereto (the "Property"). TO HAVE AND TO HOLD the Property unto Grantee, its successors and assigns forever. Address of Grantee: WITNESS THE EXECUTION HEREOF effective as of _ _ _ _ _ _, 20_. GRANTOR:

__________________ ,a _ _ _ _ limited partnership

By: _ _ _ _ _ _ _ _ _ _ _ _ _ __ Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

STATEOF _ _ _ _ _)

SS

)

COUNTY OF _ _ _ _-1)

SS

This instrument was acknowledged before me on 20_, by _________ , a managing director of _ _ _ _ _ _ as the act and deed of said entity. Name:

Notary Public in and for the State of _ __ My commission expires: _ _ _ _ _ _ __ (Seal of Notary)

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITB -2

Exhibit A to Deed LEGAL DESCRIPTION See Attached

Deed in Lieu of Foreclosure Settlement Agreement

EXHffiITB-3

EXHffiITC

BILL OF SALE For Ten and NollOO Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, _____________ a limited partnership ("Borrower") hereby conveys to ("Lender") the "Personal Property" as described in that certain Deed in Lieu of Foreclosure Settlement Agreement dated , 20_ by and between Borrower and Lender (the "Agreement") and all other "Property" (as defined in the Agreement) (other than the Real Property). TO HAVE AND TO HOLD its right, title and interest in the Personal Property, together with any rights and appurtenances thereto, unto Lender, its successors and assigns, subject to all terms and provisions hereof.

Borrower hereby warrants to Lender that Borrower has ownership of and good title to the Personal Property, that Borrower has the right to transfer the Personal Property, that there are no liens, encumbrances, charges, or security interests on or against any of the Personal Property other than the Permitted Exceptions (as defined in the Agreement), that it shall defend the title and possession hereby transferred against all claims other than the Permitted Exceptions, and that each item comprising a part of the Personal Property is located at the Property or in the possession or control of Lender. Except as otherwise expressly set forth herein, Borrower makes no representations or warranties with respect to the Personal Property and the Personal Property is transferred to Lender "as is," "where is" with all faults. IN WITNESS WHEREOF, Borrower had executed this Bill of Sale effective as of _ _ _ _ _ _ _ _ , 20_.

BORROWER:

___________________,a _____limited partnership

By: _ _ _ _ _ _ _ _ _ _ _ _ __ Name:. _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Title:. _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Dllie:. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ ~

Deed in Lieu of Foreclosure Settlement Agreement

EXHffiITC -1

EXHIBITD ASSIGNMENT AND ASSUMPTION AGREEMENT

For Ten and NollOO Dollars ($10.00) and other good and valuable consideration, the , a receipt and sufficiency of which are hereby acknowledged, limited partnership ("Borrower"), hereby assigns and delegates to _ _ _ _ _ _ _ _ _ _ _ ("Lender") all of Borrower's right, title and interest, in and to the following (collectively, the "Assigned Agreements"): (i)

[insert description of Franchise Agreement, if applicable];

(ii)

[insert description of Management Agreement, if applicable];

(iii)

all Operating Agreements (as defined in that certain Deed-in-Lieu of Foreclosure Settlement Agreement dated , 20_ by and between Borrower and Lender as "Lender" (the "Agreement") with respect to the Property (as defined in the Agreement), including, without limitation, those listed on Exhibit A attached hereto; and

(iv)

all Leased Property Agreements (as defined in the Agreement) including, without limitation, those described on Exhibit A attached hereto.

Borrower shall remain liable for all liabilities and obligations of Borrower having accrued under the Assigned Agreements prior to the assignment effectuated hereby. If any litigation between Borrower and Lender arises out of the obligations of the parties under this Assignment and Assumption Agreement or concerning the meaning or interpretation of any provision contained herein, the losing party shall pay the prevailing party's costs and expenses of such litigation including, without limitation, reasonable attorneys' fees.

This Assignment and Assumption Agreement may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an original and all of which shall constitute one and the same instrument. Telecopied signatures shall have the same valid and binding effect as original signatures. IN WITNESS WHEREOF, Borrower and Lender have executed this Assignment as of _ _ _ _ _ _ _ , 2011. BORROWER:

_____________~~~----~-------,a _ _ _ _ _ _ _ limited partnership

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITD-l

By: _ _ _ _ _ _ _ _ _ _ _ _ __ Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

LENDER:

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITD-2

Exhibit A to Assignment and Assumption Agreement ASSIGNED AGREEMENTS [TO BE ATTACHED]

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITD- 3

EXHIBITE FORM OF ASSIGNMENT OF OCCUPANCY AGREEMENTS ASSIGNMENT OF OCCUPANCY AGREEMENTS

For Ten and NollOO Dollars ($10.00) and other good and valuable consideration, the of which are hereby acknowledged, receipt and sufficiency _ _ _ _ _ _ _ _ _ _ _ _ _ _, a limited partnership ("Borrower") hereby assigns to ("Lender") all of Borrower's right, title and interest, in and to the Occupancy Agreements, as defined in that certain Deed in Lieu of Foreclosure Settlement Agreement dated , 20_ by and between Borrower and Lender (the "Agreement"), including, without limitation, those listed on Exhibit A attached hereto. If any litigation between Borrower and Lender arises out of the obligations of the parties under this Assignment of Occupancy Agreements or conceming the meaning or interpretation of any provision contained herein, the losing party shall pay the prevailing party's costs and expenses of such litigation including, without limitation, reasonable attorneys' fees .

.This Assignment of Occupancy Agreements may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an original and all of which shall constitute one and the same instrument. Telecopied signatures may be attached hereto and shall have the same valid and binding effect as original signatures. IN WITNESS WHEREOF, Borrower and Lender have executed this Assignment of Occupancy , 2011. Agreements as of [signatures on the following page]

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBIT E-l

BORROWER: __________________________________,a _________ limited partnership·

By: _ _ _ _ _ _ _ _ _ _ _ _ __

Name: _________________ Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _-,---_ __

LENDER: [TBA]

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITE-2

Exhibit A to Assignment of Occupancy Agreements Occupancy Agreements

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITE- 3

EXHIBITF

FORM OF FIRPTA CERTIFICATE CERTIFICATE OF NON-FOREIGN STATUS TO: FROM: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _, a _________ limited partnership ("Borrower")

Section 1445 of the Code provides that a Lender of a U.S. real property interest must withhold tax if the Borrower is a foreign person. To inform the Lender that withholding of tax is not required upon the disposition of a U.S. real property interest by Borrower, the undersigned hereby certifies the following on behalf of Borrower: (a) Borrower is not a foreign corporation, foreign partnership, foreign trust, foreign estate or foreign person (as those terms are defined in the Code and related regulations); (b)

Borrower's U.S. employer identification number is __________

(c)

Borrower's office address is: _________

and

Borrower understands that this certification may be disclosed to the Internal Revenue Service by Lender and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalties of perjury, I declare that I have examined this certification, and it is true, correct, and complete; and I further declare that I have authority to sign this document on behalf of Borrower.

.BORROWER: __________________ ,a _ _ _ _ _ limited partnership

By: __________________ Narne: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITF-4

EXHIBITG COVENANT NOT TO SUE

This Covenant Not to Sue is made this __ day of , 20_, by and among _ _ _ _ _ _ _~INSURANCE COMPANY, a corporation (together with its successors and assigns, "Lender"), ,a limited partnership ("Borrower") and and (collectively, "Guarantors", and together with Borrower, the "Obligated Parties"). RECITALS

Lender and Borrower have entered into a Deed in Lieu of Foreclosure Settlement A. Agreement dated , 20_ ("Settlement Agreement"). Pursuant to the Settlement Agreement, the defaults of the Obligated Parties under B. the Loan Documents are to be resolved by, among other things, the execution and delivery of this Covenant Not to Sue. NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and for the purposes stated in the preceding paragraph, Lender, Borrower and Guarantors hereby agree as follows: 1. Terms used in this Covenant Not to Sue and not specifically defined herein shall have the meaning given such terms in the Settlement Agreement.

2. Lender, for itself and its successors and assigns, hereby covenants and agrees that it shall not sue, commence, assert, bring or file in any court or other tribunal, in any jurisdiction, any suit, action, litigation, complaint, counterclaim, cross-claim, cross-complaint, third-party complaint or other pleading (with the exception of mandatory counter or cross-claims) setting forth any claim or cause of action as described below, or otherwise seeking affirmative relief against any of the Obligated Parties or their respective past, present or future partners, or the past, present or future directors, officers, employees, attorneys, agents or representatives, if any, of any of their partners or any or all executors, administrators, successors, heirs, predecessors, successors or assigns of any kind of the foregoing (collectively, the "Borrower Related Parties") for any claims or causes of action of any kind or nature whatsoever, known or unknown, which Lender has, has had or may have against any or all of the Borrower Related Parties, in any way arising from or connected with the Mortgage Loan or the Loan Documents; provided, however, that this Covenant Not to Sue shall not apply to any claims or causes of action based on (a) fraud, (b) a material breach of any of the covenants, agreements, warranties, representations or obligations of Borrower under the Settlement Agreement or any of the Closing Documents executed pursuant to the Settlement Agreement (including, without limitation, any violation of Section 10.13 of the Settlement Agreement), (c) obligations of the Obligated Parties under that certain Environmental Indemnity for the benefit of Lender dated , 20_, (d) any foreclosure action brought by Lender under the Loan Documents for the sole purpose of obtaining lien free title to the Property, where no monetary claims are asserted against the Borrower Related Parties, or (e) any liability imposed on Lender on any Lender Related Parties (hereinafter defmed) resulting from the failure of any of Deed in Lieu of Foreclosure Settlement Agreement

EXHIBIT G- 1

the Borrower Related Parties to pay any federal, state or local taxes. 3. Lender, for and on behalf of itself and its successors and assigns, represents that it has not sold, assigned or transferred to any person any claims or causes of action of any kind or nature whatsoever, known or unknown, which Lender has, has had or may have against any of the Borrower Related Parties, in any way arising from or connected with the Loan Documents, [except with respect to an assignment of the Loan Documents to J. Lender has been represented by legal counsel in connection with this Covenant Not to Sue, the Settlement Agreement and the Closing Documents, and has entered into the same voluntarily and without any coercion or duress by the Obligated Parties. 4. Each of the Obligated Parties, for and on behalf of itself and its successors and assigns, hereby covenants and agrees that it shall not sue, commence, assert, bring or file in any court or other tribunal, in any jurisdiction, any suit, action, litigation, complaint, counterclaim, cross-claim, cross-complaint, third-party complaint or other pleading setting forth any claim or cause of action as described below, or otherwise seeking affirmative relief, against Lender, Lender's investment advisor , Lender's servicer , or any or all of each of their past, present or future directors, officers, employees, attorneys, agents or representatives, or any or all executors, administrators, successors, heirs, predecessors, successors or assigns of any of the foregoing, including, without limitation, and their respective successors and assigns (collectively, the "Lender Related Parties"), for any claims or causes of action of any kind or nature whatsoever, known or unknown, which Borrower, any Guarantor or any other Borrower Related Party has, has had, or may have against any or all of the Lender Related Parties, in any way arising from or connected with the Mortgage Loan or the Loan Documents; provided, however, that this Covenant Not to Sue shall not apply to any claims or causes of action based on a material breach of any of the covenants, agreements, warranties, representations or obligations of Lender under the Settlement Agreement or any of the Closing Documents executed pursuant to the Settlement Agreement.

5. Each of the Obligated Parties, for and on behalf of itself, and its respective successors and assigns, represents that it has not sold, assigned or transferred to any person any claims or causes of action of any kind whatsoever, known or unknown, which Borrower or any Guarantor has, has had, or may have against any of the Lender Related Parties, in any way arising from or connected with the Loan Documents. Each of the Obligated Parties has been represented by legal counsel in connection with this Covenant Not to Sue, the Settlement Agreement and the Closing Documents, and has entered into the same voluntarily and without any coercion or duress by Lender or any Lender Related Parties.

6. Notwithstanding anything contained in this Covenant Not To Sue to the contrary, if, in any insolvency, bankruptcy or reorganization proceedings or other proceedings similar to the foregoing which may be instituted in any state or federal court or other tribunal, by or against Borrower or any other Borrower Related Party, the Deed described in the Settlement Agreement or any other Closing Document, or any other documents or instruments to be executed and delivered by Borrower, or any Borrower Related Party pursuant to the terms of the Settlement Agreement, are challenged and sought to be canceled, nullified or set aside, and if any such documents or instruments are canceled, nullified or set aside by any such court or tribunal, then at Lender's option the covenants and representations made by Lender in paragraphs 2 and 3 of this Covenant

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITG-2

Not to Sue, shall be void and of no further force and effect and in such event, Lender shall have any and all rights and remedies available to it under the Loan Documents. 7. This Covenant Not to Sue may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall be deemed to constitute one instrument. Signatures hereon transmitted by fax, e-mail or other electronic means may be treated as original signatures. This Covenant Not to Sue has been executed on the day and year fust written above.

LENDER: _ _ _ _ _ INSURANCE COMPANY

By: _ _ _ _ _ _ _ _ _ _ _ _ __ Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

BORROWER:

_ _ _ _~---------,a ____ limited partnership By: _ _ _ _ _ _ _ _ _ _ _ _ __ Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

GUARANTORS:

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITG-3

EXHIBITH PERMITTED EXCEPTIONS

Deed in Lieu of Foreclosure Settlement Agreement

EXHIBITH-l

SCHEDULE 4.1.6

SCHEDULE 4.1.6 - 1

SCHEDULE 4.1.11

Deed in Lieu of Foreclosure Settlement Agreement

SCHEDULE 4.1.11 - 1

SCHEDULE 4.1.12

Deed in Lieu of Foreclosure Settlement Agreement

SCHEDULE 4.1.12 - 1

...

SCHEDULE 4.1.13

Deed in Lieu of Foreclosure Settlement Agreement

SCHEDULE 4.1.13 - 1

SCHEDULE 4.1.14

Deed in Lieu of Foreclosure Settlement Agreement

SCHEDULE 4.1.14 - 1

SCHEDULE 4.1.15

Deed in Lieu of Foreclosure Settlement Agreement

SCHEDULE 4.1.15 - 1