--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Exhibit 10.4
 
 
 
WESTHOLLOW LANDMARK LP

 
as Grantor

 
to

 
JAY C. PAXTON,

 
as Trustee
for the benefit of
 
 
DEUTSCHE BANC MORTGAGE CAPITAL, L.L.C.,
 
as Beneficiary
 

--------------------------------------------------------------------------------

 
DEED OF TRUST AND SECURITY AGREEMENT
 
 

--------------------------------------------------------------------------------

 
Date: October 27, 2003
 
 
 
PREPARED BY AND UPON RECORDATION RETURN TO:
Cadwalader, Wickersham & Taft LLP
227 West Trade Street, Suite 2400
Charlotte, North Carolina 28202
Attention: Jeffrey J. Lee, Esq.
 

 
 

--------------------------------------------------------------------------------

 

 
 
This DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust"), dated as of October
27, 2003, is given by WESTHOLLOW LANDMARK LP, a Delaware limited partnership, as
grantor ("Grantor"), whose address is 8114 North Lawndale Avenue, Skokie,
Illinois 60076, to JAY C. PAXTON, as trustee ("Trustee"), whose address is 1980
Post Oak Blvd., Suite 700, Houston, Texas 77056, for the benefit of DEUTSCHE
BANC MORTGAGE CAPITAL, L.L.C., a Delaware limited liability company, as
beneficiary, and its successors and/or assigns ("Beneficiary"), whose address is
60 Wall Street, 11th Floor, NYC601120, New York, New York 10005.
 
In order to secure payment of the indebtedness evidenced by, and all other
amounts due as provided in, and the performance of the obligations under, the
Promissory Note in the principal amount ("Principal") of $13,850,000 ("Note"),
this Deed of Trust and the other Loan Documents (collectively, "Debt"), Grantor
irrevocably mortgages, deeds, grants, bargains, sells, conveys, transfers,
pledges, sets over and assigns to Beneficiary and Trustee, with power of sale,
and creates a security interest in, all of Grantor's estate, right, title and
interest in the following property, whether now or hereafter owned
(collectively, "Trust Property"):
 
i. The real property situated in Harris County, State of Texas, described in
Exhibit A ("Premises") and all structures, buildings and improvements of every
kind and description located on the Premises ("Improvements");
 
ii. All easements, rights-of-way, vaults, streets, alleys, sewer rights now or
hereafter associated with the Premises, and all estates, rights, interests and
appurtenances, reversions and remainders whatsoever, in any way pertaining to
the Premises;
 
iii. All supplies, equipment, furniture, furnishings, fixtures, goods, inventory
and personal property owned by Grantor or used in connection with the
Improvements (collectively, "Equipment").
 
iv. All leases and other agreements (each, a "Lease") and all rents, royalties,
issues, profits, revenue, income, rights and other benefits (collectively,
"Rents and Profits") and any security for the obligations of tenants, lessees or
licensees (each, a "Tenant") under any Leases;
 
v. All contracts and agreements (collectively, "Contracts") and all revenue
income and other benefits thereof;
 
vi. All present and future funds, accounts, instruments, accounts receivable,
documents, claims, trademarks, trade names, service marks, symbols in connection
with, and all names by which the Premises and Improvements may be known and all
other general intangibles (collectively, "General Intangibles");
 
vii. All insurance policies or binders, including any unearned premiums thereon;
 
viii. All cash funds, deposit accounts and other rights and evidence of rights
to cash, now or hereafter created or held by Beneficiary, including, without
limitation, all

 
- 1 -

--------------------------------------------------------------------------------

 

 
funds in the payment reserve, the Impound Account, the Replacement Reserve, the
Repair, Remediation Reserve, the Structural Repair Reserve and any other
reserves required under the Loan Documents (collectively, the "Reserves");
 
ix. All deposits given to any public or private utility for utility services;
 
x. All proceeds, products, substitutions and accessions (including claims and
demands therefor) of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including proceeds of insurance and
condemnation awards;
 
xi. Any and all other rights and interest of Grantor in and to the above items
or otherwise related to or connected with, the Premises or the Improvements; and
 
xii. And all renewals, replacements, substitutions, additions or proceeds of any
of the above.
 
TO HAVE AND TO HOLD the Trust Property unto Beneficiary and Trustee, their
respective successors and assigns forever;
 
IN TRUST, WITH POWER OF SALE, to secure payment to Beneficiary of the Debt at
the time and in the manner provided for its payment in the Note and in this Deed
of Trust; As used herein, "Loan Documents" means the Note, this Deed of Trust,
and all other agreements, certificates and instruments now or hereafter
evidencing or securing, or executed or delivered in connection with the Debt,
and all extensions and modifications thereof. For the purpose of further
securing the Debt, Grantor covenants and agrees as follows:
 
 
ARTICLE I. TAXES; UTILITIES; INSURANCE
 
 
1.1 Payment of Taxes. Grantor shall pay, except to the extent provided in
Section 1.2, all taxes, assessments, and water and sewer charges which are or
may become a lien on the Trust Property (collectively, "Taxes"), and shall
furnish Beneficiary with evidence showing payment of Taxes prior to the
applicable delinquency date therefor. Grantor may not contest any Tax unless (a)
Beneficiary determines in its subjective opinion that nonpayment of such Tax
during such contest will not result in the sale, forfeiture or diminution of the
Trust Property, and (b) Grantor deposits in the Impound Account an amount
determined by Beneficiary to be adequate to cover the payment of such Tax and
any possible interest, costs and penalties thereon; and only as long as Grantor
diligently contests.
 
1.2 Tax and Insurance Impound Account. Grantor shall maintain an impound account
(the "Impound Account") with Beneficiary for payment of Taxes and insurance on
the Trust Property. On each Payment Date, Grantor shall pay to Beneficiary an
amount equal to one-twelfth (1/12) of the amount of the then current annual
Taxes, plus one-twelfth (1/12) of the amount of the then current annual premiums
on insurance policies which Grantor is required to maintain hereunder, each as
reasonably determined by Beneficiary. So long as there has not

 
- 2 -

--------------------------------------------------------------------------------

 
 
been (i) an Event of Default or (ii) any event which with the passage of time,
the giving of notice or both would constitute an Event of Default ((i) and (ii)
being sometimes hereinafter referred to collectively as a "Default"), all sums
in the Impound Account shall be held by Beneficiary to pay Taxes and insurance
premiums. No interest on funds deposited in the Impound Account shall be paid to
Grantor.
 
1.3 Payment of Utilities Charges. Grantor shall pay when due all utility charges
which are incurred by Grantor or may become a charge or lien against the Trust
Property.
 
1.4 Additional Taxes. If after this date any Applicable Law is enacted which
imposes a tax on the Debt or on Beneficiary's interest in the Trust Property,
Grantor shall promptly pay such tax, together with interest and penalties
thereon, provided, however, that if, in the opinion of counsel for Beneficiary,
(a) it might be unlawful to require Grantor to make such payment or (b) the
making of such payment might result in the imposition of interest beyond the
maximum amount permitted by law, then, Beneficiary may upon not less than ninety
(90) days' notice, declare the Debt due and payable without prepayment premium
or fee (if paid when due).
 
1.5 Insurance. Grantor shall maintain at all times such insurance against loss
or damage and comply with all other requirements, terms and covenants
("Requirements") as set forth in the Insurance Rider.
 
 
ARTICLE II. CASUALTY AND CONDEMNATION
 
2.1           Casualty and Condemnation. Grantor shall give Beneficiary prompt
notice of any casualty affecting, or the institution of any proceedings for
eminent domain or condemnation of, the Trust Property. Beneficiary may
participate in any such proceedings and is authorized, in its own name or in
Grantor's name, to adjust, compromise or settle any loss covered by insurance or
any condemnation claim. If no Default exists, Beneficiary shall participate in
the adjustment of any loss which exceeds either $100,000 or five percent (5%) of
the then outstanding Principal. Beneficiary shall apply sums it receives
hereunder first to all of its costs to obtain those sums, and then:
 
(a)           If less than thirty-five percent (35%) of the Improvements (based
upon fair market value) have been destroyed or less than fifteen percent (15%)
of the Improvements have been taken, Beneficiary shall advance such proceeds
solely for the restoration and repair of the Trust Property (the "Restoration")
so long as (i) no Default has occurred, (ii) the Trust Property can, in
Beneficiary's judgment, be restored at least six (6) months prior to the
Maturity Date, (iii) in Beneficiary's judgment, upon Restoration (A) the value
of the Trust Property shall at least equal its value immediately prior to such
casualty or condemnation and (B) the income will be sufficient to cover
operating expenses of the Trust Property and debt service on the Debt with the
same debt service coverage ratio as reasonably determined by Beneficiary as
existed as of the date hereof or immediately prior to such casualty or
condemnation, whichever is greater, and (iv) there are sufficient sums available
(through proceeds and contributions by Grantor deposited with Beneficiary) for
the Restoration and for payment of all amounts to become due under the Loan
Documents during the Restoration. Beneficiary shall make the proceeds or awards
available to Grantor in the manner and upon such terms as would be required
 
- 3 -

--------------------------------------------------------------------------------

 
 
by a prudent interim construction lender. Following the completion of the
Restoration, Beneficiary may apply any remaining proceeds or awards toward
reduction of the Debt.

 
(b)           If thirty-five percent (35%) or more of the Improvements (based
upon fair market value) have been destroyed, or (ii) fifteen percent (15%) or
more of the Improvements have been taken, or (iii) Grantor fails to meet the
requirements of clause (a) above, then, Beneficiary may, in its absolute
discretion, accelerate the Maturity Date and declare any and all of the Debt
immediately due and payable and apply the remainder of the sums received
pursuant to this Section to the payment of the Debt in whatever order
Beneficiary directs, with any remainder being paid to Grantor. In such event,
the unpaid portion of the Debt shall remain in full force and effect and Grantor
shall not be excused in the payment thereof. Partial payments received by
Beneficiary, as described in the preceding sentence, shall be applied first to
the final payment due under the Note and thereafter to installments due under
the Note in the inverse order of their due date. If the Trust Property shall be
restored, Grantor shall promptly and diligently, and regardless of whether the
proceeds or award shall be sufficient for such purpose, restore and repair the
Trust Property as nearly as possible to its value, condition and character
immediately prior to such casualty or taking.
 
 
ARTICLE III. ENVIRONMENTAL MATTERS
 
3.1           Hazardous Waste and Other Substances.  (a) Grantor represents to
Beneficiary that, as of the date hereof: (i) to the best of Grantor's knowledge,
none of Grantor, the Trust Property, any Tenant nor the operations conducted
thereon is or has at any time been in violation of, or otherwise exposed to any
liability under, any state or federal law, rule or regulation or common law duty
pertaining to human health, natural resources or the environment (collectively,
"Environmental Laws"); (ii) no hazardous or toxic substances, materials, or
contaminants (including asbestos-containing materials, lead based paint,
polychlorinated biphenyls, petroleum products or byproducts, flammable
explosives, radioactive materials, infectious substances or raw materials which
include hazardous constituents) whether or not included under Environmental Laws
(collectively, "Hazardous Substances") or underground storage tanks are located
on, in or under or have been handled, generated, stored, processed or disposed
of on or released or discharged from the Trust Property (including underground
contamination), except for those substances used by Grantor or any Tenant in the
ordinary course of business and in compliance with all Environmental Laws
("Permitted Materials"); (iii) the Trust Property is not subject to any private
or governmental lien arising under Environmental Laws; (iv) there is no pending,
nor, to Grantor's knowledge, threatened litigation arising under Environmental
Laws affecting Grantor or the Trust Property; (v) to the best of Grantor's
knowledge there has been no notice of any investigation or proceeding which
could result in any liability, or any order in any way relating to any violation
or liability arising, under any Environmental Laws; and (vi) there has been no
claim by any party that a use or condition of the Trust Property has caused a
condition on any other property.
 
(b)           Grantor shall comply with, and timely remedy any violation known
to Grantor of, all Environmental Laws, and keep the Trust Property free from
Hazardous Substances (except Permitted Materials).

 
- 4 -

--------------------------------------------------------------------------------

 

 
(c)           Grantor shall promptly notify and keep Beneficiary informed with
respect to (i) the actual or potential existence of any Hazardous Substances on
the Trust Property other than Permitted Materials, (ii) any violation relating
to the Trust Property or exposure under any Environmental Laws, or (iii) any
condition which could render Grantor's representations untrue.
 
(d)           Upon Beneficiary's request, following a Default, or at any time as
Beneficiary believes that the Trust Property or any Tenant is not conforming to
the terms of this Article 3, Grantor shall perform an inspection or audit of the
Trust Property prepared by an environmental engineer or other appropriate
consultant approved by Beneficiary regarding such matters as Beneficiary shall
require. Beneficiary may order the same. Grantor grants to Beneficiary and its
employees and agents access to the Trust Property and an irrevocable license to
undertake such inspection or audit and to do all things Beneficiary shall
reasonably deem necessary to bring the Trust Property into compliance with
Environmental Laws.
 
 
ARTICLE IV. REPLACEMENT RESERVE
 
4.1           Replacement Reserve.  (a) Grantor shall maintain a "Replacement
Reserve" with Beneficiary to pay expenses in connection with work deemed capital
improvements under generally accepted accounting principles (collectively,
"Replacements"). On the date hereof, Grantor shall pay to Beneficiary an amount
equal to $370,000.00 to be deposited into the Replacement Reserve.  Commencing
on the first Payment Date (as defined in the Note) and continuing on each
Payment Date thereafter, Grantor shall pay to Beneficiary, a monthly deposit to
the Replacement Reserve of $8,417.00. If no Default exists, Beneficiary shall to
the extent of funds in the Replacement Reserve disburse to Grantor the amount
paid or incurred by Grantor in performing Replacements, within ten (10) days
after Beneficiary's receipt of: (i) Grantor's written request for disbursement
from the Replacement Reserve and certification of completion; (ii) evidence
verifying the cost of the Replacements; (iii) for requests over $10,000, (A)
lien waivers or evidence that all contractors and materialmen furnishing
material or labor have been paid in full and (B) an inspecting architect's or
engineer's certification verifying completion and the value thereof; and (iv)
for disbursement requests over $50,000, proof of compliance with Applicable
Laws, such as a new certificate of occupancy. Beneficiary shall not be required
to disburse from the Replacement Reserve more frequently than once in any ninety
(90) day period. Beneficiary may, at Grantor's expense, inspect the Trust
Property to determine the need for further Replacements not more than once in
any calendar year unless a Default shall have occurred. If further Replacements
are required, Grantor shall complete same within ninety (90) days after
Beneficiary's written request.
 
(b)           The Replacement Reserve funds shall be in interest bearing
accounts of the type customarily maintained by Beneficiary or its servicing
agent for same. All interest earned shall be added to the balance in the
Replacement Reserve and disbursed pursuant to paragraph (a).
 
4.2           Reserves, General.  (a) Grantor consents to each Reserve account
being in Beneficiary's or its servicing entity's name and agrees that
Beneficiary or at Beneficiary's election, such servicing agent, shall have
exclusive control over each account. Grantor assumes all risk of loss with
respect to amounts on deposit in the Reserves other than loss resulting solely
from the willful misconduct of  Beneficiary as finally determined by a court of
competent
 
 
- 5 -

--------------------------------------------------------------------------------

 

 
jurisdiction. Grantor knowingly, voluntarily and intentionally agrees that the
advancement of the -funds from the Reserves as set forth herein is at Grantor's
direction and is not the exercise by Beneficiary of any right of set-off or
other remedy upon a Default. Grantor waives all right to withdraw funds from the
Reserves except as provided for in this Deed of Trust. If an Event of Default
shall occur, Beneficiary may, without notice or demand on Grantor, at its
option: (i) withdraw any or all of the funds then remaining in the Reserves and
apply the same to the Debt, after deducting all costs of safekeeping, collection
and delivery, in such manner as Beneficiary shall deem appropriate in its sole
discretion, and the excess, if any, shall be paid to Grantor, or (ii) exercise
any and all rights and remedies of a secured party under any applicable UCC or
available at law or in equity. No such use of the funds contained in the
Reserves shall be deemed to cure any Default.
 
(b)           At Beneficiary's option, the Reserves may either be held in a
separate account or commingled with Beneficiary's general funds. Upon
Beneficiary's assignment of this Deed of Trust, any funds in the Reserves shall
be turned over to the assignee and any responsibility of Beneficiary, as
assignor, with respect thereto shall terminate. If the funds in the applicable
Reserve shall exceed the amount of payments actually applied by Beneficiary for
the purposes and items for which the applicable Reserve is held, such excess may
be credited by Beneficiary on subsequent payments to be made hereunder or, at
the option of Beneficiary, refunded to Grantor. If, however, the applicable
Reserve shall not contain sufficient funds to pay the sums required by the
applicable due dates, Grantor shall, within ten (10) days after notice thereof,
deposit with Beneficiary such deficiency. If Grantor fails to so deposit the
deficiency, Beneficiary shall have the option, but not the obligation, to make
such deposit.
 
 
ARTICLE V. RENTS; LEASES; ALIENATION
 
5.1           Rents and Profits. Grantor absolutely and irrevocably assigns to
Beneficiary all Rents and Profits, continuing in full force and effect during
any period of foreclosure or redemption. Grantor grants to Beneficiary the sole,
exclusive and immediate right, without taking possession of the Trust Property
to demand, collect and receive any and all of the Rents and Profits, for which
purpose Grantor does irrevocably appoint Beneficiary its attorney-in-fact.
Beneficiary shall have no liability for any loss which may arise from a failure
to collect Rents and Profits. However, until the occurrence of an Event of
Default, Grantor shall have a license to collect, receive and use the Rents and
Profits.
 
5.2           Leases.  (a) Grantor shall not enter into any Lease ("Major
Lease") (i) greater than ten percent (10%) of the gross leaseable area of the
Improvements or 10,000 square feet of the Trust Property or (ii) with a term of
ten (10) years or more without the prior approval of Beneficiary, not to be
unreasonably withheld. Grantor shall specifically request approval in writing
and furnish such information as Beneficiary shall reasonably require.
Beneficiary shall approve or disapprove any such Major Lease within fifteen (15)
business days after receipt of such written request and all requested
information, otherwise such request shall be deemed approved.
 
(b)           All Leases shall be (i) at a rental and on terms consistent with
the terms for similar leases in the market area of the Premises and (ii) written
on a standard form approved by Beneficiary.  Grantor shall at all times promptly
and faithfully perform its obligations and

 
- 6 -

--------------------------------------------------------------------------------

 

 
agreements contained in all Leases. Grantor shall furnish to Beneficiary, within
ten (10) days after Beneficiary's request and by January 1 of each year, a
current Rent Roll, certified by Grantor as being correct and complete. Grantor
shall enforce all terms and conditions under the Leases. Grantor shall not,
without the prior consent of Beneficiary, modify, terminate or accept the
surrender of (x) any Major Leases without the prior consent of Beneficiary,
which consent shall not be unreasonable withheld, or (y) any other Lease except
in the normal course of business and consistent with sound and customary leasing
and management practices for similar properties. Grantor shall not permit or
collect (other than security deposits) the prepayment of any Rents and Profits
for more than one (1) month prior to the due date thereof.
 
5.3           Transfers; Further Encumbrances.  (a) Unless specifically allowed
herein, the following shall be an Event of Default: (i) a sale, conveyance,
lease (except in accordance with Section 5.2), assignment, pledge, mortgage or
other encumbrance or transfer of the Trust Property or any direct or indirect
interest therein, whether voluntary or involuntary (each, a "Transfer") without
Beneficiary's prior consent, which consent may be withheld in Beneficiary's sole
discretion, (ii) a direct or indirect Transfer of more than forty-nine percent
(49%) (in one or more related transactions) of the outstanding capital stock of
Grantor or any of its shareholders, partners or members or of the beneficial
interest of a trust (or the issuance of new shares of capital stock of any of
them (in one or a series of transactions) such that, after giving effect to such
issuance and any prior issuance, no more than forty-nine percent (49%) in the
aggregate of the outstanding capital stock of Grantor or any of its
shareholders, partners or members is owned by any person or entity and their
affiliates unless such person or entity and their affiliates owned more than
forty-nine percent (49%) of the outstanding capital stock of Grantor or such
shareholder, partner or member as of the date hereof), or (iii) a direct or
indirect change in the ownership interests in, or the Transfer of all or any
portion of the direct or indirect interest of Grantor or any shareholder,
partner, joint venturer or member, either voluntarily, involuntarily or
otherwise (whether in the form of a beneficial or partnership interest or in the
form of a power of direction, control or management, or otherwise). However, (x)
up to (but not more than) forty-nine percent (49%) of the limited partner or
non-managing member interests in Grantor (but not interests in a general partner
or managing member) shall be transferable without Beneficiary's consent so long
as, after giving effect to such transfer and any prior transfers, no more than
forty-nine percent (49%) in the aggregate of such limited partner or
non-managing member interests in Grantor are owned by any person or entity and
their affiliates unless such person or entity and their affiliates owned more
than a forty-nine percent (49%) limited partner or non-managing member interest
in Grantor as of the date hereof, (y) any involuntary transfer caused by the
death of any partner, shareholder, joint venturer or member of Grantor or
beneficial owner of a trust shall not be an Event of Default under this Mortgage
so long as Grantor is promptly reconstituted, if required, following such death
and so long as those persons responsible for the management of the Trust
Property and Grantor remain unchanged as a result of such death or any
replacement management is approved by Beneficiary and (z) gifts for estate
planning purposes of any individual's interests in Grantor or in any of
Grantor's partners, members or joint venturers to the spouse or any lineal
descendant of such individual, or to a trust for the benefit of such spouse or
lineal descendant, shall not be an Event of Default under this Mortgage so long
as Grantor is promptly reconstituted, if required, following such gift and so
long as those persons responsible for the management of the Trust Property and
Grantor remain unchanged following such gift or any replacement management is
approved by Beneficiary.

 
- 7 -

--------------------------------------------------------------------------------

 

 
(b)           Beneficiary shall consent to Transfers of the Trust Property in
its entirety (hereinafter, "Sale") if:  (i) no Default exists; (ii) Grantor
gives Beneficiary 60 days prior notice of the terms of such prospective Sale
along with (A) all information concerning the proposed transferee ("Buyer") as
Beneficiary shall reasonably require in evaluating an initial extension of
credit to a borrower and (B) a non-refundable Application Fee of $5,000; (iii)
Grantor pays Beneficiary at closing of such Sale, all of Beneficiary's
out-of-pocket costs relating to the Sale, plus a Transfer Fee equal to one
percent (1.0%) of the then outstanding principal balance of the Note (the
"Transfer Fee"); (iv) such Sale occurs no sooner than nine (9) months following
the Loan closing; (v) at Beneficiary's option, written confirmation is received
from a nationally-recognized statistical rating agency approved by Beneficiary
that the Transfer will not cause a negative change to the ratings applicable to
any outstanding securities related to this Deed of Trust; and (vi) Buyer (A)
executes such instruments, certificates, documents and agreements, and (B)
delivers such insurance policies and other documents, in each case as
Beneficiary, shall reasonably require in connection with the Sale. Beneficiary
shall have the right to approve or disapprove the proposed Buyer. The
Application Fee shall be credited toward payment of the Transfer* Fee at the
closing of such Sale. After a Sale occurs, Borrower shall be relieved of
liability under the Loan Documents that arises both (i) on or after the date of
such.  Sale and (ii) through no act or omission of Borrower.
 
5.4           Easements and Rights-of-Way. Grantor shall not grant any easement
or right-of-way without Beneficiary's prior consent. The purchaser at any
foreclosure sale may disaffirm any easement or right-of-way granted in violation
of this Deed of Trust.
 
 
ARTICLE VI. PROPERTY MANAGEMENT
 
6.1           Management. Grantor, or an affiliate or a professional property
management company approved by Beneficiary, shall manage the Trust Property in a
first class manner. Grantor shall promptly notify Beneficiary of any default
under any management contract. No manager shall be removed or replaced and no
term of any management agreement shall be changed without Beneficiary's prior
consent, which consent will not be unreasonably withheld. After an Event of
Default or a default under any management contract, Beneficiary may terminate,
or direct Grantor to terminate, the management contract upon thirty (30) days'
notice, and retain, or direct Grantor to retain, a new management agent approved
by Beneficiary. The terms of the Manager's Consent and Subordination of
Management Agreement ("Manager's Consent") executed by Grantor and by Cannon
Property Management Group, LLC, as manager, are incorporated herein as if fully
restated herein. Any replacement property manager shall execute a Manager's
Consent approved by Beneficiary. The management fee due under any management
agreement shall not exceed four percent (4%) of effective gross income.
 
 
ARTICLE VII. INDEMNIFICATION
 
7.1           Indemnification. Grantor shall indemnify, defend and hold
Beneficiary and Trustee harmless from and against all liability, obligations,
losses, damages, penalties, claims, actions, suits, costs and expenses of any
kind (including reasonable attorneys', consultants' and experts' fees and
disbursements actually incurred in investigating, defending, settling or
prosecuting any claim or proceeding) which may be asserted against or incurred
by

 
- 8 -

--------------------------------------------------------------------------------

 

 
Beneficiary or Trustee in connection with the Debt, this Deed of Trust, the
other Loan Documents or the Trust Property (collectively, "Claims"): (i) for
brokerage, leasing, finders or similar fees, (ii) relating to the enforcement or
exercise by Beneficiary or Trustee of any rights or remedies related thereto,
(iii) for damages or injury, including property damage, personal injury or
wrongful death, arising out of or in connection with any accident or fire or
other casualty on the Trust Property, or (iv) arising directly or indirectly
from (A) any violation or alleged violation of, or liability or alleged
liability under, any Environmental Law; (B) the presence, release or threat of
release of or exposure to any Hazardous Substances on, in, under or affecting
the Trust Property or any surrounding areas, regardless of whether or not caused
by or within the control of Grantor; (C) any transport, treatment, recycling,
storage, disposal or arrangement therefor of Hazardous Substances whether on,
originating from, or otherwise associated with the Trust Property, Grantor or
any operations conducted on the Trust Property at any time; (D) Grantor's
failure to comply fully with Section 3.1; (E) the breach of any representation
or warranty contained in Section 3.1; and (F) the enforcement of Section 3.1;
provided, however, excluding Claims incurred by Beneficiary or Trustee solely by
reason of Beneficiary's or Trustee's willful misconduct or gross negligence.
This indemnity shall also include any diminution in the value of the security
afforded by the Trust Property or any future reduction in the sales price of the
Trust Property by reason of any matter set forth in clause (iv) of this Section.
Beneficiary's and Trustee's rights under this Section shall survive payment in
full of the Debt and shall be in addition to all other rights of Beneficiary and
Trustee under this Deed of Trust and the other Loan Documents.
 
 
ARTICLE VIII. INSPECTIONS; REPORTING
 
8.1           Access and Inspections. Beneficiary shall, subject to the rights
of Tenants, have free access to the Trust Property and any location where books
and records concerning the Trust Property are kept at all reasonable times and,
except in the event of an emergency, upon not less than forty-eight (48) hours
prior notice (which notice may be telephonic), to inspect, examine, audit and
copy same.
 
8.2           Financial Statements, Books and Records. Grantor shall keep
accurate books and records of the Trust Property and its financial affairs
sufficient for preparing financial statements in accordance with generally
accepted accounting principles. Grantor shall provide Beneficiary the following
financial statements and information certified correct and complete by Grantor:
(a) monthly operating statements and Rent Roll for the Trust Property, by the
tenth day of the first full month following the closing of the Loan and by the
tenth business day of each month thereafter until such time as Beneficiary
securitizes the Loan; (b) all tax returns filed by Grantor, each general partner
and managing member within thirty (30) days after filing; (c) quarterly
operating statements for the Trust Property, stated on a month-by-month basis,
including Rent Rolls and physical occupancy statements, within thirty (30) days
after the end of each calendar quarter; (d) annual balance sheets for the Trust
Property and annual financial statements for Grantor and each general partner or
managing member in Grantor, within ninety (90) days after the end of each
calendar year (which, if requested by Beneficiary, shall be prepared by
independent certified accountants in accordance with generally accepted
accounting principles); and (e) such other information with respect to the Trust
Property, Grantor, the principals or general partners or managing members in
Grantor, and each Indemnitor, which may

 
- 9 -

--------------------------------------------------------------------------------

 

 
be reasonably requested from time to time by Beneficiary, within a reasonable
time after the applicable request. If Grantor fails to provide any of the
materials referred to above in this Section within twenty (20) days after the
due date and such failure continues for five (5) days written notice from
Beneficiary, Grantor shall incur a charge in the amount of Five Hundred and
00/100 Dollars ($500.00) payable on demand. It shall be an Event of Default, if
(i) Grantor fails to provide any of the materials referred to in this Section
within thirty (30) days after the due date, (ii) any materials or information
shall be materially inaccurate or false, or (iii) Grantor fails to allow
Beneficiary to inspect the books and records of the Trust Property in accordance
with the requirements of this Deed of Trust. As used herein "Rent Roll" shall
mean a schedule which completely sets forth in all material respects for each
.such Lease the name of the Tenant, the Lease expiration date, extension and
renewal provisions, the base rent payable, the security deposit held thereunder,
the square footage of the leased premises, the unit location of the leased
premises, reimbursements due thereunder and any other material provisions of
such Lease.
 
 
ARTICLE IX. WARRANTIES AND COVENANTS
 
9.1           Warranties of Grantor. Grantor represents to Beneficiary and
agrees to that:
 
(a)           Grantor has good and marketable fee simple title to the Trust
Property. Grantor will preserve its interest in and title to the Trust Property
and will forever warrant and defend the same. There are no security agreements
or financing statements affecting the Trust Property other than as expressly
accepted in writing by Beneficiary;
 
(b)           The execution, delivery and performance of this Deed of Trust and
the other Loan Documents have been duly authorized by all necessary action and
are binding and . enforceable against Grantor in accordance with their terms and
do not (i) constitute a breach or default under Grantor's organizational
documents or any other agreement regarding Grantor or any of its property or
(ii) violate any Applicable Law;
 
(c)           Regarding the Trust Property (i) to the best of Grantor's
knowledge, its intended use complies in all material respects with all
restrictive covenants, Environmental Laws and Applicable Laws, including zoning
and building codes, and it constitutes one or more separate tax parcels for
purposes of ad valorem taxation; (ii) it is served by all utility services
necessary for its current or contemplated use; (iii) it is free from damage
caused by fire or other casualty; (iv) no proceeding for the total or partial
condemnation against the Trust Property is pending or threatened; and (v) except
as expressly disclosed in that certain Engineering Report entitled Property
Condition Report, dated August 1, 2003 and prepared by EMG (the "Engineering
Report"), the Improvements are structurally sound, in good repair and free of
defects in materials and workmanship, all major building systems are in good
working order and condition.
 
(d)           All insurance required hereunder is in full force and effect and
none of the premiums have been or at any time will be financed; and
 
(e)           Grantor and the Trust Property are free from any past due
obligations for sales and payroll taxes.

 
- 10 -

--------------------------------------------------------------------------------

 

 
 
9.2           Waste; Alteration of Improvements. Grantor shall (a) not commit or
permit any waste on the Trust Property, (b) maintain the Trust Property in good
condition and repair and (c) other than the rehabilitation presently
contemplated by Grantor and disclosed to Beneficiary in writing prior to the
date hereof, not materially alter any part of the Improvements.
 
9.3           Zoning. Grantor shall not make, consent to or acquiesce in any
change in the zoning or use of the Trust Property. Grantor shall comply with all
existing and future Applicable Laws. Grantor shall operate the Trust Property as
an apartment complex.
 
9.4           Indebtedness, Operations, Fundamental Changes of Grantor. Grantor
represents and agrees that Grantor:
 
(a)           will not, nor will any partner, limited or general, member or
shareholder thereof, as applicable, change its partnership certificate,
partnership agreement, articles of incorporation, by-laws, operating agreement,
articles of organization or other formation agreement, as applicable, in any
manner which is material or adversely affects Grantor's existence as a single
purpose entity;
 
(b)           will not cause or permit any liquidation or dissolution, or any
transaction of merger or consolidation, or acquire by purchase or otherwise any
part of the business or assets of, or any stock or other evidence of beneficial
ownership of, or make any investment in, any entity;
 
(c)           does not and will not own any asset other than the Trust Property;
 
(d)           is not engaging and will not engage, either directly or
indirectly, in any business other than the ownership, management and operation
of the Trust Property;
 
(e)           will not enter into any agreement with any general partner,
member, principal, affiliate or any affiliate of any of them (each, a "Related
Part y"), except upon terms that are intrinsically fair, and the same as on an
arms'-length basis with unrelated third parties;
 
(f)           has not and will not incur any debt, secured or unsecured, direct
or contingent (including guaranteeing any obligation), other than (i) the Debt,
(ii) debt from Related Parties, expressly approved by Beneficiary in its sole
discretion, and (iii) ordinary course trade payables or expenses of the Trust
Property not more than 60 days old, and will not pledge or assign its assets for
or become liable for any other obligation;
 
(g)           has not made and will not make any loans or advances to any third
party or Related Party;
 
(h)           is and will be solvent and pay its debts from its assets as the
same shall become due;
 
(i)           has done and will do all things necessary to preserve its
existence, and will observe all applicable formalities;
 
(j)           will conduct its business in its own name and as presently
conducted;

 
- 11 -

--------------------------------------------------------------------------------

 

 
(k)           will maintain financial statements, books and records and bank
accounts separate from those of the Related Parties, and will file its own tax
returns;
 
(1)           will be, and will hold itself out to the public as, a legal entity
separate and distinct from any other entity (such as Related Parties);
 
(m)           will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;
 
(n)           will maintain an office separate and apart from those of the
Related Parties or shall allocate fairly and reasonably any overhead and expense
for office space shared with the Related Parties;
 
(o)           will not commingle its assets with Related Parties' or any other
person's;
 
(p)           has and will maintain its assets in a manner such that its
individual assets can be segregated and identified from those of any Related
Party or any other person without cost or difficulty;
 
(q)           does not and will not hold itself out as responsible for any other
person's debts or obligations;
 
(r)           will pay any liabilities including salaries of its employees, out
of its own funds and not funds of any Related Party; and
 
(s)           will use stationery, invoices, and checks separate from the
Related Parties.
 
 
ARTICLE X. FURTHER ASSURANCES
 
10.1           Performance of Obligation. Grantor shall punctually and promptly
repay the Debt when due and perform and discharge all of its obligations in the
Loan Documents.
 
10.2           Construction Liens. Grantor shall pay when due all claims for any
work performed or materials delivered for the Trust Property. Grantor may
contest in good faith any claim by appropriate proceedings after notifying
Beneficiary of such contest and, if Beneficiary requests, providing a bond, cash
deposit or other security to fully protect Beneficiary's interests if
unsuccessful.
 
10.3           Further Documentation. At Beneficiary's request, Grantor shall
promptly (a) execute, acknowledge, deliver and file such further instruments,
mortgages, deeds of trust, security agreements, financing statements,
continuation statements and assignments and do such further acts deemed
necessary, desirable or advisable by Beneficiary to carry out the purposes of
this Deed of Trust and the other Loan Documents or to protect, continue or
perfect the liens or the security interests; and (b) furnish to Beneficiary or
any proposed assignee, a duly acknowledged written statement in form and
substance supplied by Beneficiary, stating the amount of the Debt, whether any
Default has occurred, whether any offsets or defenses to the Debt exist and such
other matters as Beneficiary may require.

 
- 12 -

--------------------------------------------------------------------------------

 

 
10.4           Payment of Costs. Grantor shall pay all costs and expenses of
every character (a) incurred in connection with (i) the closing of the loan,
(ii) the performance of Grantor's obligations under the Loan Documents and (iii)
the administration and enforcement of the Loan Documents or (b) attributable or
chargeable to Grantor as the owner of the Trust Property, including all taxes
and fees of every kind. Wherever this Deed of Trust or other Loan Documents
provides that (x) Beneficiary or Trustee may perform Grantor's obligations, such
shall be at Grantor's expense unless otherwise expressly provided herein and (y)
Grantor is responsible for reimbursing Beneficiary's or Trustee's costs, such
shall include reasonable attorneys fees and expenses including Beneficiary's or
Trustee's in-house and appellate counsel.
 
10.5           Compliance with Laws. Grantor shall at all times comply with all
statutes, ordinances, regulations and other governmental or quasi-governmental
requirements and private covenants affecting or relating to the ownership, use
or operation of the Trust Property (collectively, "Applicable Law") unless
Grantor obtains Beneficiary's prior consent and satisfies all of Beneficiary's
reasonable conditions for such consent.
 
10.6           Attorney-in-Fact Provision. Grantor's grant to Beneficiary of a
power-of attorney under this Deed of Trust and any other Loan Document (a) shall
be deemed irrevocable and coupled with an interest, and (b) shall, if no Event
of Default exists, require three (3) days prior notice to Grantor before acting
under such power.
 
 
ARTICLE XI. SECURITY PROVISIONS
 
11.1           Security Interest; Security Agreement. This Deed of Trust (a)
creates a security interest in all personal property included within the Trust
Property and all other property covered under the UCC (collectively,
"Collateral"), and (b) constitutes a security agreement under the Uniform
Commercial Code of the state in which the Premises are located ("UCC"). To the
extent permitted by law, the personal property is deemed a part of and affixed
to the Premises and the Improvements. All of the Collateral shall be kept at the
location of the Premises except as otherwise required by the terms of the Loan
Documents. Any sale made pursuant hereto shall be deemed a public sale conducted
in a commercially reasonable manner if held contemporaneously with, and upon
giving the same notice as, a foreclosure sale as provided in Section 13.1(e) of
the Deed of Trust.
 
 
ARTICLE XII. DEFAULT
 
12.1           Events of Default. The occurrence of any of the following shall
be an "Event of Default":
 
(a)           Grantor fails to make any payment under the Note when due, subject
to any grace period set forth therein, or any other payment on or before the
date such payment is due.
 
(b)           Grantor fails to maintain insurance as required by Article 1.5 or
fails to perform any covenant, agreement, obligation, term or condition set
forth in Section 3.1, 5.3 or or 9.4.

 
- 13 -

--------------------------------------------------------------------------------

 

 
(c)           Grantor fails to perform any other term or condition herein not
otherwise described in this Section 12.1, and such failure can be cured but
continues for thirty (30) days after notice thereof from Beneficiary to Grantor;
provided, that if such failure can be cured but, despite reasonable diligence,
not within such time, the time to cure shall be extended up to an additional
sixty (60) days if Grantor has commenced and diligently pursues cure of the
default.
 
(d)           Any representation or warranty made in connection with the Loan or
any of the Loan Documents by or on behalf of Grantor or any Indemnitor or
guarantor shall have been false or misleading in any material respect at the
time made.
 
(e)           A default occurs under any of the other Loan Documents which has
not been cured within any applicable grace or cure period therein provided.
 
(f)           (i) If Grantor shall (A) file a petition for relief under the
Bankruptcy Reform Act of 1978, as amended or under any other present or future
Applicable Law regarding bankruptcy, reorganization or other relief to debtors
(collectively, "Debtor Relief Law"); (B) file any pleading in any involuntary
proceeding under any Debtor Relief Law which admits the jurisdiction of a court
over Grantor or the Trust Property or the petition's material allegations
regarding Grantor's insolvency; (C) make a general assignment for the benefit of
creditors; (D) apply for, or there shall be appointed, a receiver, trustee,
custodian or liquidator of Grantor or any of its property; (E) file (or there
shall be a filing against Grantor) of a petition seeking the liquidation or
dissolution of Grantor or the commencement of any other procedure to liquidate
or dissolve Grantor, and (F) fail to obtain a dismissal of any involuntary
proceeding under any Debtor Relief Law against Grantor within 45 days after the
filing; and (ii) the occurrence of an event specified in any of clauses (ii)(A)
through (F) above as to any general partner or managing member of Grantor, or
any Indemnitor or guarantor of any of Grantor's obligations under the Loan
Documents.
 
(g)           The Trust Property or any part thereof is taken on execution or
other process of law in any action against Grantor.
 
 
ARTICLE XIII. REMEDIES
 
13.1           Remedies Available. If an Event of Default occurs, then
Beneficiary may, at its option and by or through a trustee, nominee, assignee or
otherwise (including, without limitation, the Trustee), exercise any or all of
the following rights or remedies, either successively or concurrently, all of
which shall be cumulative, including:
 
(a)           Acceleration. Declare any or all of the Debt to be immediately due
and payable.
 
(b)           Entry. Either in person or by agent, with or without bringing any
proceeding, or by a receiver and without regard to the adequacy of its security,
enter upon and take possession of the Trust Property.
 
(c)           Collect Funds. With or without taking possession of the Trust
Property, sue or otherwise collect the Rents and Profits, including those past
due and unpaid.

 
- 14 -

--------------------------------------------------------------------------------

 

 
(d)           Appoint Receiver. Apply to a court for appointment of a receiver,
trustee, liquidator or conservator of the Trust Property without notice to
Grantor.
 
(e)           Foreclosure. Commence an action to foreclose this Deed of Trust or
to specifically enforce its provisions with respect to any of the Debt and sell
or cause to be sold the Trust Property in accordance with Applicable Law in one
or more parcels. Beneficiary may bid the Debt and all other obligations secured
by this Deed of Trust in a foreclosure sale hereunder.
 
(f)           Judicial Remedies. Proceed by suit, at law or in equity, to
enforce the payment of the Debt or the other obligations of Grantor under this
Deed of Trust or the other Loan Documents and to have the Trust Property sold
under the judgment or decree of a court of competent jurisdiction.
 
(g)           Sale of Property.
 
(i)           Trustee, at the request of Beneficiary, shall have the power to
sell the Trust Property or any part thereof at public auction, in such manner,
at such time, and place, upon such terms and conditions, and upon five (5) days
notice to Grantor and such public notice as Beneficiary may deem best for the
interest of Beneficiary or as may be required or permitted by applicable law,
consisting of advertisement in a newspaper of general circulation in the
jurisdiction and for such period as applicable law may require and at such other
times and by such other methods, if any, as may be required by law to convey the
Trust Property in fee simple by trustee's deed with special warranty of title to
and at the cost of the purchaser, who shall not be liable to see to the
application of the purchase money. The proceeds or avails of any sale made under
or by virtue of this paragraph, together with any other sums which then may be
held by Beneficiary under this Deed of Trust, whether under the provisions of
this paragraph or otherwise, shall be applied as provided in Section 13.2
hereof. Beneficiary, Trustee and any receiver or custodian of the Trust Property
or any part thereof shall be liable to account for only those rents, issues,
proceeds and profits actually received by it.
 
(ii)           Beneficiary and Trustee, as applicable, may adjourn from time to
time any sale by it to be made under or by virtue of this Deed of Trust by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales and, except as otherwise provided by any applicable law,
Beneficiary or Trustee, without further notice or publication, may make such
sale at the time and place to which the same shall be so adjourned.
 
(iii)           Upon the completion of any sale or sales ordered by Beneficiary
and made by Trustee under or by virtue of this paragraph, Beneficiary or
Trustee, or any officer of any court empowered to do so, shall execute and
deliver to the accepted purchaser or purchasers a good and sufficient
instrument, or good and sufficient instruments, granting, conveying, assigning
and transferring all estate, right, title and interest in and to the property
and rights sold. Trustee is hereby irrevocably appointed the true and lawful
attorney-in-fact for Grantor (coupled with an interest), in its name and stead,
to make all necessary conveyances, assignments, transfers and deliveries of the
property and rights so sold and for that purpose Trustee may execute all
necessary

 
- 15 -

--------------------------------------------------------------------------------

 

 
instruments of conveyance, assignment, transfer and delivery, and may substitute
one or more persons with like power, Grantor hereby ratifying and confirming all
that its said attorney-in-fact or such substitute or substitutes shall lawfully
do by virtue hereof. Nevertheless, Grantor, if so requested by Trustee or
Beneficiary, shall ratify and confirm any such sale or sales by executing and
delivering to Beneficiary, or to such purchaser or purchasers all such
instruments as may be advisable, in the sole judgment of Beneficiary, for such
purpose, and as may be designated in such request. Any such sale or sales made
under or by virtue or this paragraph, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or a judgment or
decree of foreclosure and sale, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of
Grantor in and to the property and rights so sold, and shall, to the fullest
extent permitted under law, be a perpetual bar both at law and in equity against
Grantor and against any and all persons claiming or who may claim the same, or
any party thereof, from, through or under Grantor.
 
(iv)           In the event of any sale made under or by virtue of this Deed of
Trust (whether made under the power of sale herein granted or under or by virtue
of judicial proceedings or a judgment or decree of foreclosure and sale), the
entire Debt relative to the Trust Property, immediately thereupon shall,
anything in the Note, this Deed of Trust or any other of the Loan Documents to
the contrary notwithstanding, become due and payable.
 
(v)           Upon any sale under or, by virtue of this Deed of Trust (whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or a judgment or decree of foreclosure and sale), Beneficiary may
bid for and acquire the Trust Property or any part thereof and in lieu of paying
cash therefor may make settlement for the purchase price by crediting the Debt
to and against the net sales price after deducting therefrom the expenses of the
sale and the costs of the action.
 
(vi)           No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or any part thereof or upon
any other property of Grantor shall release the lien of this Deed of Trust upon
the Trust Property or any part thereof, or any liens, rights, powers or remedies
of Beneficiary hereunder, but such liens, rights, powers and remedies of
Beneficiary shall continue unimpaired until the entire Debt is paid in full.
 
(h)           Other Remedies. Exercise any other right or remedy available under
the Loan Documents, at law or in equity.
 
13.2           Application of Proceeds. The proceeds of any sale under this Deed
of Trust shall be applied in such order as Beneficiary in its discretion may
determine: the expenses of taking possession of the Trust Property, and of
operating, repairing and selling the same and enforcing Beneficiary's rights and
remedies under the other Loan Documents; all sums expended by Beneficiary under
the terms of the Loan Documents, with interest thereon at the Default Rate; and
the Debt; provided, however, upon payment in full of the Debt, any remaining
proceeds of any sale shall be returned to Borrower.

 
- 16 -

--------------------------------------------------------------------------------

 

 
 
13.3           Authority; Power of Attorney. After entry upon the Trust Property
or appointment of a receiver, Beneficiary, said receiver, or other persons as
they may engage, may do any acts which Beneficiary or the receiver in its sole
discretion deems appropriate or desirable to protect the security of and
effectuate this Deed of Trust, such as (a) take possession and control of the
Trust Property and books and records; (b) exclude Grantor and its agents from
the Trust Property; (c) manage, preserve, maintain and make repairs and
alterations to the Trust Property; (d) enter into Leases, under terms as
Beneficiary may in its sole discretion determine, and (e) collect, receive and
sue for Rents and Profits, evict tenants or repossess property.
 
13.4           Occupancy After Foreclosure. Following foreclosure or if
Beneficiary, a receiver or trustee or anyone engaged thereby takes possession of
the Trust Property, at such party's election, Grantor and any Related Party
occupying the Trust Property shall become a day-to-day tenant, terminable at
will, at a rent per day equal to the higher of (a) any rent under a valid lease
with Grantor or (b) the fair value of the Trust Property occupied. Grantor may
be evicted by summary or other proceedings if it fails to surrender possession
upon termination of its occupancy.
 
13.5           Right to Cure; Payment of Expenses. Grantor grants Beneficiary
and its agents access to the Trust Property and a license to do all things
Beneficiary deems necessary to cure any Default, including to enter the Trust
Property to cure such Default (without thereby becoming liable to Grantor or any
other) and to advance funds and make such payments as Beneficiary in its sole
discretion deems necessary or desirable to protect and preserve the Trust
Property and its security interest. All advances made and all costs incurred by
Beneficiary in connection with the foregoing or any efforts to enforce any terms
of this Deed of Trust, whether or not any lawsuit is filed or a foreclosure is
commenced, shall constitute a portion of the Debt and be secured hereby, and
shall be due and payable on demand with interest at the Default Rate from the
earlier of the date on which (x) Beneficiary incurs such cost or (y) an-Event of
Default occurs until the date repaid to Beneficiary.
 
13.6           Grantor's Waivers. To the extent permitted by law, Grantor waives
all rights (a) of valuation, appraisement, stay of execution, reinstatement and
notice of election or intention to mature or declare due the Debt (except
notices specifically provided for herein); (b) to marshaling Grantor's assets,
including the Trust Property; (c) to assert counterclaims and statutes of
limitation as a defense to any action to enforce this Deed of Trust and periods
of redemption provided under Applicable Law; and (d) to claim or recover against
Beneficiary, or anyone acting on behalf or in the name of Beneficiary, for loss
other than arising from Beneficiary's gross negligence or willful conduct.
 
13.7           Submission to Jurisdiction; Waiver of Jury Trial. GRANTOR
VOLUNTARILY (a) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE
PREMISES IS LOCATED OVER ANY ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THE NOTE, THIS DEED OF TRUST OR ANY OTHER LOAN DOCUMENTS, (b) AGREES
THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT
OF COMPETENT JURISDICTION SITTING IN THE COUNTY IN WHICH THE PREMISES IS
LOCATED, (c) SUBMITS TO THE JURISDICTION OF SUCH COURTS, (d) AGREES THAT IT WILL
NOT BRING ANY ACTION OR PROCEEDING IN ANY OTHER FORUM, (e) WAIVES THE RIGHT TO A

 
- 17 -

--------------------------------------------------------------------------------

 

 
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON OR IN ANY WAY RELATING
DIRECTLY OR INDIRECTLY TO THE DEBT.
 
 
ARTICLE XIV. TRUSTEE
 
14.1           Trustee Fees. Grantor shall pay all reasonable costs, fees and
expenses actually incurred by Trustee and Trustee's agents and counsel in
connection with the performance by Trustee of Trustee's duties hereunder and all
such costs, fees and expenses shall be secured by this Deed of Trust.
 
14.2           Substitute Trustee. Trustee shall be under no duty to take any
action hereunder except as expressly required hereunder or by law, or to perform
any act which would involve Trustee in any expense or liability or to institute
or defend any suit in respect hereof, unless properly indemnified to Trustee's
reasonable satisfaction. Trustee, by acceptance of this Deed of Trust, covenants
to perform and fulfill the trusts herein created, being liable, however, only
for willful negligence or misconduct, and hereby waives any statutory fee and
agrees to accept reasonable compensation, in lieu thereof, for any services
rendered by Trustee in accordance with the terms hereof. Trustee may resign at
any time upon giving thirty (30) days' notice to Grantor and to Beneficiary.
Beneficiary may remove Trustee at any time or from time to time and select a
successor trustee. In the event of the death, removal, resignation, refusal to
act, or inability to act of Trustee, or in its sole discretion for any reason
whatsoever, Beneficiary may, without notice and without specifying any reason
therefor and without applying to any court, select and appoint a successor
trustee, by an instrument recorded wherever this Deed of Trust is recorded and
all powers, rights, duties and authority of Trustee, as aforesaid, shall
thereupon become vested in such successor. Such substitute trustee shall not be
required to give bond for the faithful performance of the duties of Trustee
hereunder unless required by Beneficiary. The procedure provided for in this
section for substitution of Trustee shall be in addition to and not in exclusion
of any other provisions for substitution, by law or otherwise.
 
 
ARTICLE XV. MISCELLANEOUS TERMS AND CONDITIONS
 
15.1           Miscellaneous.  (a) Notices. All consents, approvals, notices or
other communications hereunder shall be in writing and shall be deemed to have
been validly given (i) upon delivery if delivered in person, (ii) one (1)
business day after depositing the same with a reputable private courier service
or (iii) three (3) business days after depositing the same in the United States
mail and sent by registered or certified mail, return receipt requested, to the
addressee at its address on page one of this Deed of Trust or at such other
address as may hereafter be designated by such party.
 
(b)           Successors and Assigns; Joint and Several Liability. The terms
hereof shall bind Grantor and its successors and assigns and shall constitute
covenants running with the land and shall inure to the benefit of Beneficiary
and its successors and assigns, including any lawful holder, owner, pledgee or
participant of any of the Debt. Each Grantor hereunder is jointly and severally
liable to perform Grantor's obligations.
 
(c)           Severability. A determination that any provision of this Deed of
Trust is unenforceable or invalid shall not affect the enforceability or
validity of any other provision.

 
- 18 -

--------------------------------------------------------------------------------

 

 
(d)           Certain Terms. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein: (i) the terms
"Improvements," "Trust Property," and "Premises" shall be construed as if
followed by the phrase "or any portion thereof or interest therein," (ii)
"include" and similar terms shall be construed as if followed by the phrase
"without limitation," and (iii) words in the singular shall include the plural,
and vice versa.
 
(e)           Performance. All obligations of Grantor under the Loan Documents
shall be performed to the reasonable satisfaction of Beneficiary. All
statements, items, documents and any other information required hereunder to be
submitted to Beneficiary shall be in form and substance reasonably satisfactory
to Beneficiary, unless otherwise specifically provided.
 
(f)           Waiver; Discontinuance of Proceedings. An Event of Default cannot
be waived except in writing by Beneficiary. Beneficiary may cure any Event of
Default by Grantor hereunder without waiving the Event of Default remedied.
Neither Beneficiary's failure or delay in exercising any right or remedy upon
any Event of Default by Grantor hereunder shall be a waiver of such Event of
Default. Acceptance by Beneficiary of any payment in an amount less than the
amount then due shall not in any way affect the existence of an Event of
Default.
 
(g)           Governing Law. THIS DEED OF TRUST WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS
LOCATED WITHOUT REGARD TO ITS CONFLICTS. OF LAWS RULES.
 
(h)           Counting of Days. The term "business day" when used herein shall
mean a weekday, Monday through Friday, except a legal holiday or a day on which
banking institutions in the state in which the Premises are located and in New
York, New York are authorized by law to be closed.
 
(i)           Relationship of the Parties. The relationship between Grantor and
Beneficiary is that of a borrower and a lender only and neither of those parties
is, nor shall it hold itself out to be the agent or partner of the other party.
 
(j)           Cross Default. A Default hereunder is a default under the other
Loan Documents.
 
(k)           No Merger. The lien hereof shall not merge in fee simple title to
the Trust Property.
 
(1)           Rights With Respect to Junior Encumbrances. Without implying any
right to do so, any person or entity purporting to have or to take a junior
mortgage or other lien upon the Trust Property shall be subject to the rights of
Beneficiary to amend, increase, extend the term or supplement this Deed of
Trust, the Note or any of the other Loan Documents.
 
(m)           Fixture Filing. This Deed of Trust shall be effective from the
date of its recording as a financing statement filed as a fixture filing with
respect to all goods constituting part of the Trust Property which are or are to
become fixtures.

 
- 19 -

--------------------------------------------------------------------------------

 

 
(n)           Counterpart. This Deed of Trust may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which shall
together constitute one instrument.
 
(o)           Recording and Filing. Grantor will cause the Loan Documents and
all amendments thereto and substitutions therefor to be recorded and filed in
such manner and in such places as Beneficiary shall reasonably request, and will
pay all recording and filing Taxes and fees.
 
(p)           Entire Agreement and Modifications. This Deed of Trust and the
other Loan Documents contain the entire agreements between the parties relating
to the subject matter hereof and thereof and all prior agreements relative
hereto and thereto which are not contained herein or therein are terminated.
This Deed of Trust and the other Loan Documents may not be amended or terminated
orally but only by a written instrument or instruments executed by the party
against which enforcement is asserted.
 
THE FOLLOWING RIDERS ANNEXED HERETO ARE A PART OF THIS DEED OF TRUST:
 
 

 ❑ ACM Rider   ❑ O&M Plan Rider   ❑ Repair and Remediation Reserve Rider      
 ❑ Insurance Rider   ❑ Specific State Provisions Rider 
 ❑ Structural Repair   
           Reserve Rider

 
 
 
- 20 -

--------------------------------------------------------------------------------

 

 
IN WITNESS WHEREOF, Grantor has executed this Deed of Trust on the day and year
first written above.
 

 
GRANTOR:
     
WESTHOLLOW LANDMARK LP, a Delaware
 
limited partnership
     
By:               Landmark Westhollow, Inc., a Delaware
 
corporation, its sole general partner
     
By:                 /s/ Yisroel Gluck
 
Name:                 Yisroel Gluck
 
Title:                 President

 

 
 

--------------------------------------------------------------------------------

 

 
 
ACKNOWLEDGMENT
 
STATE OF ILLINOIS
COUNTY OF COOK
 
BEFORE ME, the undersigned, a Notary Public in and for said County and State, do
here's certify that Yisroel Gluck, the President of Landmark Westhollow, Inc., a
Delaware corporation, the sole general partner of Westhollow Landmark LP, a
Delaware limited partnership, personally appeared before me this day and
acknowledged the execution of the foregoing instrument on behalf of said limited
partnership.
 
GIVEN UNDER MY HAND AND SEAL OF THIS 22 day of October, 2003.
 
                     
                              /s/ Rhonda Allison
                                                                                                               
Notary Public     Rhonda Allison
My Commission Expires   8/18/04
 
 
 

 
 

--------------------------------------------------------------------------------

 

 
 
EXHIBIT A
 
Legal Description

 
 

--------------------------------------------------------------------------------

 

 
ACM RIDER
 
If the environmental report disclosed ACM's in the Trust Property:
 
Grantor covenants and agrees to institute, within thirty (30) days after the
date hereof, an operations and maintenance program (the "Maintenance Program")
designed by an environmental consultant, satisfactory to Beneficiary, with
respect to asbestos containing materials ("ACM's"), consistent with "Guidelines
for Controlling Asbestos-Containing Materials in Buildings" (USEPA, 1985) and
other relevant guidelines, and such Maintenance Program will hereafter
continuously remain in effect until the Debt secured hereby is repaid in full.
In furtherance of the foregoing, Grantor shall inspect and maintain all ACM's on
a regular basis and ensure that all ACM's shall be maintained in a condition
that prevents exposure of occupants to ACM's at all times. Without limiting the
generality of the preceding sentence, Beneficiary may require (i) periodic
notices or reports to Beneficiary in form, substance and at such intervals as
Beneficiary may specify, (ii) an amendment to such operations and maintenance
program to address changing circumstances, laws or other matters, (iii) at
Grantor's sole expense, supplemental examination of the Trust Property by
consultants specified by Beneficiary, and (iv) variation of the operations and
maintenance program in response to the reports provided by any such consultants.
 
Riders - 1

 
 

--------------------------------------------------------------------------------

 

 
O & M PLAN RIDER
 
If, prior to the date hereof, it was determined that the Trust Property contains
Lead Based Paint, Grantor had prepared an assessment report describing the
location and condition of the Lead Based Paint (a "Lead Based Paint Report").
If, at any time hereafter, Lead Based Paint is suspected of being present on the
Trust Property, Grantor agrees, at its sole cost and expense and within twenty
(20) days thereafter, to cause to be prepared a Lead Based Paint Report prepared
by an expert, and in form, scope and substance, acceptable to Beneficiary.
 
Grantor agrees that if it has been, or if at any time hereafter it is,
determined that the Trust Property contains Lead Based Paint, on or before
thirty (30) days following (i) the date hereof, if such determination was made
prior to the date hereof or (ii) such determination, if such determination is
hereafter made, as applicable, Grantor shall, at -its sole cost and expense,
develop and implement, and thereafter diligently and continuously carry out (or
cause to be developed and implemented and thereafter diligently and continually
to be carried out), an operations, abatement and maintenance plan for the Lead
Based Paint on the Trust Property, which plan shall be prepared by an expert,
and be in form, scope and substance, acceptable to Beneficiary (together with
any Lead Based Paint Report, the "O&M Plan"). If an O&M Plan has been prepared
prior to the date hereof, Grantor agrees to diligently and continually carry out
(or cause to be carried out) the provisions thereof.  Compliance with the O&M
Plan shall require or be deemed to require, without limitation, the proper
preparation and maintenance of all records, papers and forms required under the
Environmental Laws.
 
Riders - 2
 

 
 

--------------------------------------------------------------------------------

 

 
REPAIR AND REMEDIATION RESERVE RIDER
 
Contemporaneously with the execution hereof, Grantor has established with
Beneficiary a reserve in the amount of $481,875.00 (the "Repair and Remediation
Reserve") by depositing such amount with Beneficiary. Grantor shall cause each
of the items described in the Engineering Report and attached hereto as Schedule
I (the "Deferred Maintenance") to be completed, performed and remediated on or
before the expiration of six (6) months after the date hereof. So long as no
Event of Default has occurred, all sums in the Repair and Remediation Reserve
shall be held by Beneficiary in the Repair and Remediation Reserve to pay the
actual costs and expenses of completing the Deferred Maintenance. So long as no
Event of Default has occurred, Beneficiary shall, to the extent funds are
available in the Repair and Remediation Reserve, disburse to Grantor the actual
amount paid or incurred by Grantor in performing the Deferred Maintenance upon
(a) the receipt by Beneficiary of a written request from Grantor for
disbursement from the Repair and Remediation Reserve and a certification by
Grantor in a form as may be required by Beneficiary that the applicable item of
Deferred Maintenance has been completed in accordance with the terms of this
Deed of Trust, (b) delivery to Beneficiary of invoices or other evidence
satisfactory to Beneficiary verifying the costs of the Deferred Maintenance to
be reimbursed, (c) delivery to Beneficiary of a certification from an inspecting
architect or engineer acceptable to Beneficiary describing and verifying the
completed work and the value thereof and (d) delivery to Beneficiary of lien
waivers or other evidence reasonably satisfactory to Beneficiary showing that
all parties that furnished materials or labor to the Trust Property have been
paid in full. Beneficiary shall not be required to make advances from the Repair
and Remediation Reserve more frequently than once in any ninety (90) day period.
No interest on the funds contained in the Repair and Remediation Reserve shall
be paid by Beneficiary to Grantor. Grantor hereby grants to Beneficiary a
power-of-attorney to cause the Deferred Maintenance to be completed upon
Grantor's failure to do so in accordance with the terms and conditions of this
Rider, and to apply the amounts on deposit in the Repair and Remediation Reserve
to the cost of such completion but without obligation to do so. In the event
that the amounts distributed to Grantor pursuant to this Rider for the actual
costs of Deferred Maintenance are less than the amounts held in the Repair and
Remediation Reserve, upon completion of the Deferred Maintenance, any remaining
amounts shall be deposited into the Replacement Reserve to be held and applied
in accordance with the provisions of Article II of this Deed of Trust.
 
Riders - 3
 

 
 

--------------------------------------------------------------------------------

 

 
 
Westhollow Park Apartments
Reserve Chart
 
Item
 
Cost
 
Comments
Deferred Maintenance/Immediate Repairs (EMG Property Condition Report)
   
Concrete pavement.  Repair
  $3,000    
Roof leaks
  $500    
Metal guardrails. Replace
  $195,000    
Wood framed balconies
  $6,000    
Carpet
  $95,700    
Dishwasher
  $18,750    
Range
  $22,425    
Refrigerator
  $26,125    
Fan Coil Units
  $18,000    
Subtotal Deferred Maint./Immed. Repairs (EMG)
  $385,500    
Subtotal @ Required Reserve of 125%
  $481,875    

 

 
 

--------------------------------------------------------------------------------

 

 
 
Westhollow Park Apartments
Reserve Chart    
 
Item
Cost
Comments
Structural Report Immediate Repairs Estimate (NAC Structual Report)
 
Drainage Issues
$94,000   
 
Cracks located in brick veneers
$9,000   
 
Settlement of the slab
$4,000   
 
Underpinning of perimeter grade beam and the slab
$126,000   
 
Stairs or concrete walkway slab settlement
$13,000   
 
Overgrown trees
$500   
 
Miscellaneous apartment, pavement, and sidewalk repairs
$50,000   
 
Subtotal Structural Report Repairs (NAC)
$296,500   
 
Subtotal @ Required Reserve of 125%
$370,625   
 

 

 
 

--------------------------------------------------------------------------------

 

 
STRUCTURAL REPAIR RESERVE RIDER
 
Contemporaneously with the execution hereof, Grantor has established with
Beneficiary a reserve in the amount of $370,625.00 (the "Structural Repair
Reserve") by depositing such amount with Beneficiary.  Grantor shall cause each
of the items described in that certain structural engineering report and
attached hereto as Schedule II (the "Structural Engineering Report") entitled
Site Structural Survey, dated September 19, 2003 and prepared .by National
Assessment Corporation (the "Structural Maintenance") to be completed, performed
and remediated on or before the expiration of six (6) months after the date
hereof. So long as no Event of Default has occurred, all sums in the Structural
Repair Reserve shall be held by Beneficiary in the Structural Repair Reserve to
pay the actual costs and expenses of completing the Structural Maintenance. So
long as no Event of Default has occurred, Beneficiary shall, to .the extent
funds are available in the Structural Reserve, disburse to Grantor the actual
amount paid or incurred by Grantor in performing the Structural Maintenance upon
(a) the receipt by Beneficiary of a written request from Grantor for
disbursement from the Structural Repair Reserve and a certification by Grantor
in a form as may be required by Beneficiary that all of the Structural
Maintenance has been completed in accordance with the terms of this Deed of
Trust, (b) delivery to Beneficiary of invoices or other evidence satisfactory to
Beneficiary verifying the costs of the Structural Maintenance to be reimbursed,
(c) delivery to Beneficiary of a certification from an inspecting architect or
engineer acceptable to Beneficiary describing and verifying the completed work
and the value thereof, (d) delivery to Beneficiary of lien waivers or other
evidence reasonably satisfactory to Beneficiary showing that all parties that
furnished materials or labor to the Trust Property have been paid in full, and
(e) delivery to Beneficiary of an update to the Structural Engineering Report,
satisfactory to Lender in its reasonably discretion, indicating that the
Structural Maintenance has been completed and the Improvements contain no
additional structural defects. Beneficiary shall not be required to make
advances from the Structural Repair Reserve more frequently than once in any
ninety (90) day period. No interest on the funds contained in the Structural
Repair Reserve shall be paid by Beneficiary to Grantor. Grantor hereby grants to
Beneficiary a power-of-attorney to cause the Structural Maintenance to be
completed upon Grantor's failure to do so in accordance with the terms and.
conditions of this Rider, and to apply the amounts on deposit in the Structural
Repair Reserve to the cost of such completion but without obligation to do so.
In the event that the amounts distributed to Grantor pursuant to this Rider for
actual costs of the Structural Maintenance are less then than the amounts held
in the Structural Repair Reserve, upon completion of the Structural Maintenance,
any remaining amounts shall be deposited into the Replacement Reserve to be held
and applied in accordance with the provisions of Article II of the Deed of
Trust.
 
Riders - 4
 

 
 

--------------------------------------------------------------------------------

 

 
INSURANCE RIDER
 
Grantor shall, at Grantor's expense, maintain in force and effect on the Trust
Property at all times the following insurance:
 
(a)           Insurance against loss or damage to the Trust Property by fire,
windstorm, lightning, tornado and hail and against loss and damage by such
other, additional risks as may be now or hereafter embraced by an "all-risk" or
"special form" insurance policy. The amount of such insurance shall be one
hundred percent (100%) of the full replacement cost (insurable value) of the
Improvements (as established by an MAI appraisal), without reduction for
depreciation.  The determination of the replacement cost amount shall be
adjusted annually to comply with the requirements of the insurer issuing such
coverage or, at Beneficiary's election, by reference to such indices, appraisals
or information as Beneficiary determines in its reasonable discretion in order
to reflect increased value due to inflation. Absent such annual adjustment or at
Beneficiary's discretion, each policy shall contain inflation guard coverage.
Full replacement cost, as used herein, means, with respect to the Improvements,
the cost of replacing the Improvements without regard to deduction for
depreciation, exclusive of the cost of excavations, foundations and footings
below the lowest basement floor. Grantor shall also maintain insurance against
loss or damage to furniture, furnishings, fixtures, equipment and other items
(whether personalty or fixtures) included in the Trust Property and owned by
Grantor from time to time to the extent applicable. Each policy shall contain a
replacement cost endorsement and either an agreed amount endorsement (to avoid
the operation of any co-insurance provisions) or a waiver of co-insurance
provisions, all subject to Beneficiary's approval. The maximum deductible shall
be $10,000, except as specified otherwise.
(b)           Commercial General Liability Insurance against claims for personal
injury, bodily injury, death and property damage occurring on, in or about the
Trust Property or the Improvements in amounts not less than $1,000,000 per
occurrence and $2,000,000 in the aggregate plus umbrella coverage in an amount
not less than $2,000,000. Beneficiary hereby retains the right to periodically
review the amount of said liability insurance and to require an increase in the
amount of said liability insurance should Beneficiary deem an increase to be
reasonably prudent under then existing circumstances.
 
(c)           Boiler and machinery insurance (including explosion coverage), if
steam boilers or other pressure-fired vessels are in operation at the Trust
Property. Minimum liability coverage per accident must equal the greater of the
replacement cost (insurable value) of the Improvements housing such boiler or
pressure-fired machinery or $2,000,000. If one or more HVAC units are in
operation at the Trust Property, "Systems Breakdowns" coverage shall be
required, as determined by Beneficiary. Minimum liability coverage per accident
must equal the replacement value of such unit(s).
 
(d)           If the Improvements or any part thereof is situated in an area
designated by the Federal Emergency Management Agency ("FEMA") as a special
flood hazard area
 
Riders - 5

 
 

--------------------------------------------------------------------------------

 

 
("SFHA," i.e.; Zones A or V), flood insurance in an amount equal to the lesser
of (i) the minimum amount required, under the terms of coverage, to compensate
for any damage or loss on a replacement basis (or the unpaid balance of the Debt
if replacement cost coverage is not available for the type of building insured),
or (ii) the maximum insurance available under the appropriate National Flood
Insurance Administration program. The maximum deductible shall be $5,000 per
building or a higher amount as required by FEMA or other applicable law. Flood
insurance may be waived by Beneficiary if the Improvements are constructed above
the flood level and there is a Letter of Map Amendment from FEMA stating the
Improvements are no longer in an SFHA.
 
(e) During the period of any construction, renovation or alteration of the
existing Improvements which exceeds the lesser of 10% of the principal amount of
the Note or $500,000, at Beneficiary's request, a completed value, "All Risk"
Builder's Risk form or "Course of Construction" insurance policy in
non-reporting form, in an amount approved by Beneficiary, may be required.
During the period of any construction of any addition to the existing
Improvements, a completed value, "All Risk" Builder's Risk form or "Course of
Construction" insurance policy in non-reporting form, in an amount approved by
Beneficiary, shall be required.
 
(f)           When required by applicable law, ordinance, or other regulation,
Worker's Compensation and Employer's Liability Insurance covering all persons
subject to the worker's compensation laws of the state in which the Trust
Property is located.
 
(g)           Business income (loss of rents) insurance in amounts sufficient to
compensate Grantor for all Rents for existing tenants as evidenced by a current
Rent Roll for a period of twelve (12) months. For hotels, motels, health care,
and other property types without a standard rent roll, not less than eighteen
(18) months of debt service, taxes, insurance, and other fixed expenses shall be
the amount of business income insurance required. The amount of coverage shall
be adjusted annually to reflect the Rents or expenses payable during the
succeeding twelve (12) month period.
 
(h)           Earthquake insurance for properties located in earthquake zones 3
and 4 with Probable Maximum Loss ("PML") in excess of 20%, as determined by
seismic reports. The amount of coverage shall be based on the PML percentage
times the replacement cost up to the full replacement cost (insurable value).
Wind, sinkhole, and mine subsidence coverage shall be required for properties
located in areas prone to those geological phenomena. Maximum deductibles for
these types of coverages shall be the lowest deductible available in the area in
which the Trust Property is located.
 
(i)           Such other insurance on the Trust Property or on any replacements
or substitutions thereof or additions thereto as may from time to time be
required by Beneficiary against other insurable hazards or casualties which at
the time are commonly insured against in the case of property similarly situated
including, without limitation, environmental insurance, due regard being given
to the height and type of Improvements, their construction, location, use and
occupancy.
 
 
Riders - 6

 
 

--------------------------------------------------------------------------------

 

 
(j)           Insurance coverage against loss or damage to persons and property
by reason of any act of terrorism, to the extent such coverage is commercially
available.
 
All such insurance shall (i) be with insurers fully licensed and authorized to
do business in the state within which the Trust Property is located and which
have and maintain a claims paying ability rating of "A-" or better by Standard &
Poor's (or equivalent rating agency) or an "A:V" or better from A.M. Best, (ii)
contain the complete address of the Trust Property (or a complete legal
description), (iii) be for terms of at least one year, with premium prepaid, and
(iv) be subject to the approval of Beneficiary as to insurance companies,
amounts, content, forms of policies and expiration dates, and (v) include a
standard, non-contributory, mortgagee clause naming EXACTLY:
 
the Beneficiary as stated on Page 1 of this Mortgage, its successors and/or
assigns, ATIMA
c/o ORIX Real Estate Capital Markets 1717 Main Street
Dallas, TX 75201
 
(a) as an additional insured under all liability insurance policies, (b) as the
first mortgagee on all property insurance policies and (c) as the loss payee on
all loss of rents or loss of business income insurance policies.
 
Grantor shall, as of the date hereof, deliver to Beneficiary evidence that said
insurance policies have been prepaid as required above with original
certificates signed by an authorized agent of the applicable insurance companies
evidencing such insurance satisfactory to Beneficiary. Certified copies of such
policies must be delivered to Beneficiary within thirty (30) days of the date
hereof. Grantor shall renew all such insurance and deliver to Beneficiary
certificates and policies evidencing such renewals at least thirty (30) days
before any such insurance shall expire. Grantor further agrees that each such
insurance policy: (i) shall provide for at least thirty (30) days' notice to
Beneficiary prior to any policy reduction or cancellation for any reason other
than non-payment of premium and at least ten (10) days' notice to Beneficiary
prior to any cancellation due to non-payment of premium; (ii) shall contain an
endorsement or agreement by the insurer that any loss shall be payable to
Beneficiary in accordance with the terms of such policy notwithstanding any act
or negligence of Grantor or any other person which might otherwise result in
forfeiture of such insurance; (iii) shall waive all rights of subrogation
against Beneficiary; (iv) in the event that the Trust Property or the
Improvements constitutes a legal non-conforming use under applicable building,
zoning or land use laws or ordinances, shall include an ordinance and law
coverage endorsement which will contain Coverage A: "Loss Due to Operation of
Law" (with a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages; and (v) may be in the form of a blanket policy,
provided that, Grantor hereby acknowledges and agrees that failure to pay any
portion of the premium therefor which is not allocable to the Trust Property or
any other action not relating to the Trust Property which would otherwise permit
the issuer thereof to cancel the coverage thereof, would require the Trust
Property to be insured by a separate, single-property policy and the blanket
policy must properly identify and fully protect the Trust Property as if a
separate policy were issued for one hundred percent (100%) of Replacement Cost
at the time of
 
 
Riders - 7

 
 

--------------------------------------------------------------------------------

 

 
loss and otherwise meet all of Beneficiary's applicable insurance requirements
set forth in this Rider. The delivery to Beneficiary of the insurance policies
or the certificates of insurance as provided above shall constitute an
assignment of all proceeds payable under such insurance policies relating to the
Trust Property by Grantor to Beneficiary as further security for the Debt. In
the event of the foreclosure of this Mortgage, or other transfer of title to the
Trust Property in extinguishment in whole or in part of the Debt, all right,
title and interest of Grantor in and to all proceeds payable under such policies
then in force concerning the Trust Property shall thereupon vest in the
purchaser at such foreclosure, or in Beneficiary or other transferee in the
event of such other transfer of title. Approval of any insurance by Beneficiary
shall not be a representation of the solvency of any insurer or the sufficiency
of any amount of insurance. In the event Grantor fails to provide, maintain,
keep in force or deliver and furnish to Beneficiary the policies of insurance
required by this Mortgage or evidence of their replacement or renewal as
required herein, Beneficiary may, but shall not be obligated to, procure such
insurance and Grantor shall pay all amounts advanced by Beneficiary therefor,
together with interest thereon at the Default Rate from and after the date
advanced by Beneficiary until actually repaid by Grantor, promptly upon demand
by Beneficiary. Beneficiary shall not be responsible for nor incur any liability
for the failure of the insurer to perform, even though Beneficiary has caused
the insurance to be placed with the insurer after failure of Grantor to furnish
such insurance. Grantor shall not obtain insurance for the Trust Property in
addition to that required by Beneficiary without the prior consent of
Beneficiary, which consent will not be unreasonably withheld provided that (i)
Beneficiary is a named insured on such insurance, (ii) Beneficiary receives
complete copies of all policies evidencing such insurance, and (iii) such
insurance complies with all of the applicable requirements set forth herein.
 
Riders - 8

 
 

--------------------------------------------------------------------------------

 

 
SPECIFIC STATE PROVISIONS RIDER
 
With respect to the Trust Property which is located in the State of Texas,
notwithstanding anything contained herein to the contrary:
 
(a)           Instrument. This Deed of Trust shall be deemed to be and shall be
enforceable as a deed of trust, leasehold deed of trust, and financing
statement.
 
(b)           Foreclosure. Upon the occurrence of any Event of Default,
Beneficiary may request Trustee to proceed with foreclosure under the power of
sale which is hereby conferred, such foreclosure to be accomplished in
accordance with the following provisions:
 
(i)           Public Sale. Trustee is hereby authorized and empowered, and it-
shall be Trustee's special duty, upon such request of Beneficiary, to sell the
Trust Property, or any part thereof, at public auction to the highest bidder for
cash, with or without having taken possession of same. Any such sale (including
notice thereof) shall comply with the applicable requirements, at the time of
the sale, of Section 51.002 of the Texas Property Code or, if and to the extent
such statute is not then in force, with the applicable requirements, at the time
of the sale, of the successor statute or statutes, if any, governing sales of
Texas real property under powers of sale conferred by deeds of trust. If there
is .no statute in force at the time of the sale governing sales of Texas real
property under powers of sale conferred by deeds of trust, such sale shall
comply with applicable law, at the time of the sale, governing sales of Texas
real property under powers of sale conferred by deeds of trust. Trustee or his
successor or substitute may appoint or delegate any one or more persons as agent
to perform any act or acts necessary or incident to any sale held by Trustee,
including the posting of notices, and the conduct of sale, but in the name and
on behalf of Trustee, his successor or substitute.
 
(ii)           Right to Require Proof of Financial Ability and/or Cash Bid. At
any time during the bidding, the Trustee may require a bidding party (A) to
disclose its full name, state and city of residence, occupation, and specific
business office location, and the name and address of the principal the bidding
party is representing (if applicable), and (B) to demonstrate reasonable
evidence of the bidding party's financial ability (or, if applicable, the
financial ability of the principal of such bidding party), as a condition to the
bidding party submitting bids at the foreclosure sale. If any such bidding party
(the "Questioned Bidder") declines to comply with the Trustee's requirement in
this regard, or if such Questioned Bidder does respond but the Trustee, in
Trustee's sole and absolute discretion, deems the information or the evidence of
the financial ability of the Questioned Bidder (or, if applicable, the principal
of such bidding party) to be inadequate, then the Trustee may continue the
bidding with reservation; and in such event (1) the Trustee shall be authorized
to caution the Questioned Bidder concerning the legal obligations to be incurred
in submitting bids, and (2) if the Questioned Bidder is not the highest bidder
at the sale, or if having been the highest bidder the Questioned Bidder fails to
deliver the cash purchase price payment promptly to the Trustee, all bids by the
Questioned Bidder shall be null and void. The Trustee may, in Trustee's sole and
absolute discretion, determine that a credit bid may be in the best interest of
the Grantor
 
Riders - 9

 
 

--------------------------------------------------------------------------------

 

 
and Beneficiary, and elect to sell the Trust Property for credit or for a
combination of cash and credit; provided, however, that the Trustee shall have
no obligation to accept any bid except an all cash bid. In the event the Trustee
requires a cash bid and cash is not delivered within a reasonable time after
conclusion of the bidding process, as specified by the Trustee, but in no event
later than 3:45 p.m. local time on the day of sale, then said contingent sale
shall be null and void, the bidding process may be recommenced, and any
subsequent bids or sale shall be made as if no prior bids were made or accepted.
 
(iii)           Sale Subject to Unmatured Debt. In addition to the rights and
powers of sale granted under the preceding provisions of this subsection, if an
Event of Default is made in the payment of any installment of the Debt,
Beneficiary may, at Beneficiary's option, at once or at any time thereafter
while any matured installment remains unpaid, without declaring the entire Debt
to be due and payable, orally or in writing direct Trustee to enforce this Deed
of Trust and to sell the Trust Property subject to such unmatured Debt and to
the rights, powers, liens, security interests, and assignments, securing or
providing recourse for payment of such unmatured Debt, in the same manner, all
as provided in the preceding provisions of this subsection. Sales made without
maturing the Debt may be made hereunder whenever there is a default in the
payment of any installment of the Debt, without exhausting the power of sale
granted hereby, and without affecting in any way the power of sale granted under
this subsection, the unmatured balance of the Debt or the rights, powers, liens,
security interests, and assignments securing or providing recourse for payment
of the Debt.
 
(iv)           Partial Foreclosure. Sale of a part of the Trust Property shall
not exhaust the power of sale, but sales may be made from time to time until the
Debt is paid in full. It is intended by each of the foregoing provisions of this
subsection that Trustee may, after any request or direction by Beneficiary, sell
not only the Premises and the Improvements, but also the Equipment and other
interests constituting a part of the Trust Property or any part thereof, along
with the Premises and the Improvements or any part thereof, as a unit and as a
part of a single sale, or may sell at any time or from time to time any part or
parts of the Trust Property separately from the remainder of the Trust Property.
It shall not be necessary to have present or to exhibit at any sale any of the
Trust Property. Any sale of personal property made hereunder shall be deemed to
have been a public sale conducted in a commercially reasonable manner if held
contemporaneously with,. or as part of, and upon the same notice as required for
the sale of real property under the power of sale granted herein.
 
(v)           Trustee's Deeds. After any sale under this subsection, Trustee
shall make good and sufficient deeds, assignments, and other conveyances to the
purchaser or purchasers thereunder in the name of Grantor, conveying the Trust
Property or any part thereof so sold to the purchaser or purchasers with general
warranty of title by Grantor. It is agreed that in any deeds, assignments or
other conveyances given by Trustee, any and all statements of fact or other
recitals therein made as to the identity of Beneficiary, the occurrence or
existence of any Event of Default, the notice of intention to accelerate, or
acceleration of, the maturity of the Debt, the request to sell, notice of sale,
time, place, terms and manner of sale, and receipt, distribution, and
application of the money realized therefrom, the due and proper appointment of a
substitute trustee, and without being
 
Riders - 10

 
 

--------------------------------------------------------------------------------

 

 
limited by the foregoing, any other act or thing having been duly done by or on
behalf of Beneficiary or by or on behalf of Trustee, shall be taken by all
courts of law and equity as prima facie evidence that such statements or
recitals state true, correct, and complete facts and are without further
question to be so accepted, and Grantor does hereby ratify and confirm any and
all acts that Trustee may lawfully do in the premises by virtue hereof.
 
(c)           Receiver. Beneficiary, as a matter of right and without regard to
the sufficiency of the security for repayment of the Debt and performance and
discharge of the obligations hereunder, without notice to Grantor and without
any showing of insolvency, fraud, or mismanagement on the part of Grantor, and
without the necessity of filing any judicial or other proceeding other than the
proceeding for appointment of a receiver, shall be entitled to the appointment
of a receiver or receivers of the Trust Property or any part thereof, and. of
the Rents, and Grantor hereby irrevocably consents to the appointment of a
receiver or receivers. Any receiver appointed pursuant to the provisions of this
subsection shall have the usual powers and duties of receivers in such matters.
 
(d)           Inapplicability of Credit Code.  In no event shall the provisions
of Article 5069, ch. 15 of the Revised Civil Statutes of Texas (which regulates
certain revolving credit loan accounts and revolving triparty accounts) apply to
the loan evidenced by the Loan Documents and/or secured hereby.
 
(e)           Entire Agreement. THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS
EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY
AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDER-STANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND
MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO.
 
(f)           Maturity Date.The maturity date of the Note secured hereby is the
first day of November, 2008.
 
(g)           Notice of Indemnification. GRANTOR ACKNOWLEDGES THAT THIS DEED OF
TRUST PROVIDES FOR INDEMNIFICATION OF BENEFICIARY BY GRANTOR PURSUANT TO ARTICLE
VII.
 
 
Riders - 11
 

 
 

--------------------------------------------------------------------------------

 

 
 
SCHEDULE I
 
DEFERRED MAINTENANCE
 
(intentionally omitted for recording purposes)
 
 
Riders - 12
 

 
 

--------------------------------------------------------------------------------

 

 
SCHEDULE II
 
STRUCTURAL MAINTENANCE
 
(intentionally omitted for recording purposes)
 
 
Riders - 13
 

 
 

--------------------------------------------------------------------------------

 

 
INDEX OF DEFINITIONS
 
"ACM's" - ACM Rider
 
"Applicable Law" - Section 10.5
 
`Beneficiary" - Page 1
 
"business day" - Section 15.1(h)
 
`Buffer" - Section 5.3(b)(2)
 
"Claims" - Section 7.1
 
"Collateral" - Section 11.1
 
"Contracts" - Paragraph (v) of the granting clause
 
"Debt'- First paragraph of the Securing Clause
 
"Debtor Relief Law" - Section 12.1(f)
 
"Deed of Trust' '-Page Page 1
 
"Default" - Section 1.2
 
"Default Rate" - As defined in the Note
 
"Deferred Maintenance" - Repair and Remediation Rider
 
"Engineering Report" - Section 9.1(c)(v)
 
"Environmental Laws" - Section 3.1(a)
 
"Equipment" - Paragraph (iii) of the granting clause
 
"Event of Default'- Section 12.1
 
"FEMA" - Insurance Rider
 
"General Intangibles' - Paragraph (vi) of the granting clause "Grantor" - Page 1
 
"Hazardous Substances" - Section 3.1(a)
 
"Impound Account" - Section 1.2
 
"Improvements" - Paragraph (i) of the granting clause
 
 
Index-1

 
 

--------------------------------------------------------------------------------

 

 
 
"Lead Based Paint Report" - 0 & M Plan Rider
 
"Lease" - Paragraph (iv) of the granting clause
 
"Loan Documents" - Last paragraph of the granting clause "Maintenance Program" -
ACM Rider
 
"Major Lease" - Section 5.2
 
"Manager's Consent" - Section 6.1
 
"Maturity Date" - As defined in the Note
 
"Note" - First paragraph of the securing clause
 
"0 &MPlan" -0 & M Plan Rider
 
"PML" - Insurance Rider
 
"Permitted Materials" - Section 13.1(a)
 
"Premises" - Paragraph (i) of the granting clause
 
"Principal" - First paragraph of the securing clause "Related Party" - Section
9.4(e)
 
"Rent Roll" - Section 8.2
 
"Rents and Profits" - Paragraph (iv) of the granting clause
 
"Repair and Remediation Reserve" - Repair and Remediation Rider
 
"Replacement Reserve" - Section 4.1(a)
 
"Replacements" - Section 4.1(a)
 
"Requirements" - Section 1.5
 
"Reserves" - Paragraph (viii) of the granting clause
 
"Restoration'- Section 2.1(a)
 
"Sale" - Section 5.3(b)
 
"Systems Breakdowns" - Insurance Rider
 
"Tenant" - Paragraph (iv) of the granting clause
 
 
Index-2

 
 

--------------------------------------------------------------------------------

 

 
"Taxes" - Section 1.1
 
"Transfer" - Section 5.3(a)
 
"Transfer Fee" - Section 5.3(b)
 
"Trust Propert y" - First paragraph of the granting clause "Trustee" - Page 1
 
"UCC" - Section 11.1
Index-3
 
 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------